Cream Rising

By Mark Gordon
| 6:55 p.m. April 8, 2010
| 2 Free Articles Remaining!

Finance

Some Gulf Coast bankers, even ones that run banks launched before the bust, are doing the once unthinkable: They are talking about growth.

“Our bank is starting to grow,” Florida Gulf Bank President and Chief Executive Bill Valenti says of the Fort Myers-based institution. “We are sensing that there will be some opportunities out there.”

Several other Gulf Coast-based community banks have reported upticks in deposits, assets and even in an area recently left for dead: loans.

“Community banks, at least the ones that are still standing, are starting to grow again,” says Thomas Hodgson, president and CEO of Parrish-based 1st Manatee Bank. “[That's] in spite of themselves.”

It's more anecdotal and sporadic than a far-reaching trend, but it's nonetheless a blip of good news in an otherwise dismal banking climate on the Gulf Coast.

At of the end of 2009, 11 Gulf Coast-based community banks had Tier 1 risk-based capital ratios under 8% — the rate where regulators consider a bank to be potentially treading in dangerous territory.

The Business Review compared the Tier 1 risk-based capital ratios at local banks with each bank's exposure to the tumbling commercial real estate industry.
Commercial real estate is the looming threat to a healthy economic recovery, according to many bankers, brokers and industry experts.

Not surprisingly, the 11 banks with a Tier 1 risk-based capital ratio under 8% are heavily connected to commercial real estate. At least 30% of the portfolios in each of those institutions are made up of commercial real estate loans. Some, such as Englewood-based Peninsula Bank (64.5%) and Clearwater-based Old Harbor Bank (58.2%) are significantly overexposed in the industry.

However, just like there are 11 local banks with a Tier 1 risk-based capital ratio that is less than 8%, there are 11 institutions with a Tier 1 risk-based capital ratio of more than 15% — a surprisingly high number given the doom and gloom permeating the industry. That list includes two banks in Fort Myers, two in Plant City and one in Sarasota.

The data was compiled for the Business Review by Charlottesville, Va.-based research firm SNL Financial, which used 2009 year-end figures from the Federal Deposit Insurance Corp.

Capital needs
Most of the banks under 8% with weighty exposure to the commercial real estate industry face regulatory scrutiny of some kind while simultaneously working through capital shortages and troubled loan issues.

Some examples:

• Sarasota-based LandMark Bank of Florida received two letters of intent for capital infusions worth more than $6 million late last year.

LandMark, with $329.4 million in assets through Dec. 31, has been under regulatory agreement to raise capital. It had a Tier 1 risk-based capital ratio of 5.31% at the end of 2009, according to the FDIC.

In addition to that low ratio, LandMark has been heavily exposed to commercial real estate loans. A little more than 40% of its total loan portfolio is tied up in the industry, according to SNL.

Out of those commercial real estate loans, 12.23% are delinquent.

But LandMark President and Chief Executive Tom Quale is confident the bank's capital offering will serve two purposes: Satisfy regulators and assist the bank with its troubled loans.

• Naples-based Bank of Florida, which has $1.4 billon in assets spread through three Florida subsidiaries, is working under a prompt corrective action from federal regulators. The action calls for the bank to raise its capital levels by April 17 or face potentially being put into receivership.

Based on the analysis compiled by SNL, Bank of Florida could be in dire trouble.

The bank's two Gulf Coast-based subsidiaries, Bank of Florida-Tampa Bay and Bank of Florida-Southwest in Naples, have Tier 1 risk-based capital ratios of 3.76% and 2%, respectively.

Meanwhile, one-fourth of the commercial real estate loan portfolio at the Tampa operation is delinquent, according to SNL. The delinquency rate compared to total commercial real estate loans for Bank of Florida-Southwest is 22.5%.

Publicly traded Bank of Florida hopes to raise $52 million in a secondary stock offering, according to a recent Securities and Exchange Commission filing.

• Bradenton-based Horizon Bank is also working under a prompt corrective action. The publicly traded bank is in the process of raising capital to fend off that order while Horizon President and CEO Charlie Conoley simultaneously fights regulators on the amount of capital the bank should raise.

“We know we need capital,” Conoley says. “Our problem is we need to adhere to SEC regulations.”

At $200 million in assets, Horizon is one of the smallest Gulf Coast community bank with a Tier 1 risk-based capital ratio under 8% that also has heavy commercial real estate exposure. Indeed, Horizon's Tier 1 risk-based capital ratio at the end of 2009 stood at 5.10%, while 17.8% of its commercial real estate loan portfolio was delinquent, according to the SNL analysis.

• Finally, Fort Myers-based First Community Bank of Southwest Florida is in a relatively enviable position, at least compared to some of its peers with Tier 1 risk-based capital ratios that are less than 8%.

The primary silver lining in the bank's Tier 1 cloud is that while its amount of commercial real estate loans to total loans is high at 47.1%, its delinquency rate in that area — 2.4% — is surprisingly low.

To raise $7.5 million in capital, the bank's holding company, Southwest Florida Community Bancorp, plans to sell the remaining 38% of the stock it holds in Sanibel Captiva Community Bank. That institution is one of a small number of profitable community banks on the Gulf Coast.

Like Southwest Florida Community Bancorp President David Hall, Florida Gulf Bank's Valenti is in somewhat of an enviable position compared to his peers. And even better, his bank is raising capital because it wants to, not because it has to.

The nine-year-old bank is seeking $5.5 million in an effort that began March 22 and will continue through mid-May. Valenti had already received pledges worth $800,000 through late last month.

Florida Gulf Bank had $366.1 million in assets through Dec. 31, an increase of 9% over 2008, according to FDIC data. “We are seeing a good amount of new accounts,” says Valenti. “I'd like to think some of this is from a pick-up in the economy.”

In addition to that growth, the bank has an eye-popping low amount of commercial real estate delinquencies: Less than 1% of its total commercial real estate loan portfolio, according to the SNL analysis.

Valenti says his bank stayed away from risky land loans during the boom, which is one reason why its portfolio is cleaner than others. With that kind of history and the capital raise already underway, Valenti says his goal is to put the bank in a position to buy a troubled competitor.

“If that opportunity presents itself,” Valenti says, “we will buy.”