GULF COAST 500: Capital Intensive

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Ten years ago, Naples was home to 10 community banks with assets under $1 billion. Today, there are just four.

Community banks in Naples in the last decade were either acquired in the economic boom or shut down by regulators in the bust. None has survived both cycles of the boom and the bust except Bank of Naples, which was formed in May 2000 and is now the oldest community bank headquartered in the city with $200 million in assets.

Directors plan to keep it that way. They raised $3 million in new capital last year and $7 million this year. They hope to raise another $6.8 million, according to filings with the Securities and Exchange Commission.

The bank already is well capitalized, but it's raising more money to protect itself against future loan losses and make new loans. “We're seeing light at the end of the tunnel and it's not a train,” says John “Jack” Tamblyn, the bank's newly appointed president and CEO.

Bank of Naples has suffered like every community bank in Southwest Florida whose bread-and-butter business is real estate lending. It lost $514,000 in the first quarter, more than the $458,000 it lost in the same quarter in 2009.

The bank's loan portfolio has been shrinking as executives work through the bad loans. Although the amount of real estate it owns has grown through foreclosures, bad loans and charge-offs were lower in the first quarter compared with the same quarter a year ago.

“The stuff you have in foreclosure takes so long to get through the courts,” Tamblyn says. “We think after the first of the year, we should start looking better.”

Tamblyn says he spends about 65% of his time working through problem loans, with the rest of the time focused on renewals and new business. He says some business has come from area banks that failed and were taken over by larger, out-of-town institutions.

Bank of Naples makes what Tamblyn calls “standard vanilla” loans. Real estate loans must include a building occupied by the owner, both for residential and commercial. He says the bank has also been making loans backed by the U.S. Small Business Administration. Most of the borrowers are local entrepreneurs and investors, he notes. How do you find creditworthy customers? “You go out and knock on doors,” Tamblyn says.

While Bank of Naples is selling foreclosed real estate at appraised values, the inventory of homes and commercial buildings continues to be significant. “All the inventory's got to go,” Tamblyn says.

Still, Tamblyn says the economy in Collier County is better than in neighboring Lee and Charlotte counties.

“This market is a little more vibrant,” says Tamblyn, who previously served as Lee County market president of Florida Community Bank, the Immokalee-based lender that was shut down by regulators on Jan. 29. “You've got more wealth down here.”

Still, Tamblyn says the bank plans to stick to traditional lending from its two offices and has no plans to start other businesses such as wealth management.

“Wealth management is very expensive to start,” he says. With its current strategy of conservative lending, Tamblyn says the bank could grow to $500 million in assets within five years. Once the economic recovery is firmly underway, it might expand to Lee and Charlotte counties, he says.

If Bank of Naples remains one of the last community banks after the crisis subsides, it's likely to have an edge for some time. Regulators aren't likely to let new banks start up. “It gives us a good advantage for survivorship,” Tamblyn says.

Tamblyn doesn't foresee the end of community banking in this cycle and says real estate will always be a big part of banking in Florida. “If you don't do real estate loans, you shouldn't be in banking in Florida,” he says.