'Capitalism at Its Finest'

'Capitalism at Its Finest'

banking by Janet Leiser | Senior Editor

Small- and medium-size companies are benefiting from increased competition among Tampa Bay area banks for their business now that the housing market has slowed.

It's good news for companies and maybe not-so-good news for bankers: Intense competition between banks is heating up as lenders try to make up business lost in the housing market slump.

I've never seen the market as competitive as it is right now, says A. Gerald Divers, president of the Bank of Tampa.

And he has 45 years of experience as a banker.

Christopher Smaridge, vice president of commercial lending at BayCities Bank, St. Petersburg, says: For our industry, it's capitalism at its finest. Competition between banks is providing borrowers with probably some of the best service available.

With a robust housing market for several years, Smaridge says, There were a lot of ways for banks to make loans. It was great. It was outstanding.

Companies not associated with the financial services industry also benefited from the boom, including manufacturers of building supplies, from concrete to steel to heating and air conditioning parts, Smaridge says. Now they're also suffering from the housing slowdown.

Competition among banks is likely to intensify more over the next year and a half to three years, Smaridge says, as banks put money made during the housing boom to work elsewhere.

There'll be a big push for operating companies, Smaridge says, such as medical manufacturers. We have to redeploy those dollars. If you're a bankable company in this market, I can't imagine a better situation.

Century Bank

John O'Neill, president and chief operating officer of Century Bank, based in Sarasota, says banks have to look elsewhere to continue to grow.

At Century Bank, however, the bank exceeded its goal of obtaining $50 million plus in residential loans in the first two months of 2007, O'Neill says, adding: I'm sure there are a lot of companies that didn't make their goals in the first 60 days of the year.

Increased competition means banks are making better offers to credit-worthy companies, O'Neill says, adding: I'm sure banks are reducing rates and shaving points to save the deals.

To meet its residential lending goals, Century Bank expanded its geographic reach beyond its Sarasota, Venice and Bradenton market. Century Bank now has a commercial lender and loan officers in Palm Beach County, plus Jacksonville and Tampa.

Divers says his bank has never been strong in residential lending, it has always focused on professionals and businesses.

It has affected other banks more, Divers says. We have noticed a lot more competition from other banks. De novo banks are also having to deploy their capital.

While Bank of Tampa hasn't lost customers, Divers says, We're finding it more difficult to attract new relationships.

He says he expects the housing slump to affect larger banks that are more attuned to selling products than building relationships.

Most of the competition will be the small banks against the large, Divers says. We're not really in the same business anymore. At the big banks, lenders are really sales people. The person who sells the loan doesn't usually make the decision on the loan and probably won't service the loan.

Some people like that, Divers adds. They just want the best rate. Others really want a relationship so they have a financial partner.

Century Bank's O'Neill agrees there's increased competition from new state chartered startups.

On this boulevard in Sarasota, there's a de novo bank to the west and one to east, O'Neill says, referring to Sabal Palm and Insignia banks.

REVIEW SUMMARY

Companies. BayCities Bank, Century Bank and Bank of Tampa.

Trend. Competition heats up as bankers try to continue to grow with a down housing market.

Key. Community bankers push relationships over the products of larger banks.

New banks rise up

Increased competition among Gulf Coast banks can also be attributed to de novo banks popping up over the past five years.

From Tampa Bay to Collier County, 33 groups filed applications to start a state chartered bank since 2002.

The first bank to have an application accepted by the Florida Office of Financial Regulation in 2007 was Florida Shore Bank of Venice. The group of organizers, whose application was accepted Feb. 9, has hired James F. Kuhlman as president and chief executive officer.

Not unexpectedly, the most de novo applications in recent history were filed in 2005 at the peak of the Florida housing boom.

In 2006, 10 of the 21 de novo banks seeking to organize were from the Gulf Coast. Only six of the 25 that filed applications in 2005 were on Florida's west coast. In 2004, six of the 16 that filed applications were located between Collier and Pasco counties.

De Novo Applicants

2005

Hillcrest Bank, Naples

American Momentum Bank, Tampa

Preferred Community Bank, Fort Myers

First American Bank of Florida, Naples*

Flagship Community Bank, Clearwater

Commerce Bank of Southwest Florida, Fort Myers

2006

Anderen Bank of Tampa Bay, Clearwater

GulfShore Bank, Tampa

1st Manatee Bank, Parrish

NorthStar Bank, Tampa

CNLBank, Southwest Florida, Bonita Springs

USAmeriBank, Largo

Insignia Bank, Sarasota

Central Bank, Tampa

Sabal Palm Bank, Sarasota

Shamrock Bank of Florida (formerly Gulf Coast Bank) Naples

Source: Florida Office of Financial Regulation, Division of Financial Institutions. *Application was withdrawn in 2006.