Call forward

With all the attention focused on large new banks jumping into Florida, Fifth Third Bank's significant presence on the Gulf Coast has been somewhat overlooked.

That's partly because its executives have been busy fixing problem loans from the development bust and there's been turnover in the corner office. But David Call, who began his appointment as president and chief executive officer of Fifth Third Bank's South Florida operations on Oct. 13, says he's seeing some signs of improvement.

Two weeks into his job, Fifth Third acquired the four branches of Freedom Bank in Bradenton. Although Freedom was a relatively small acquisition, it was an indication the bank is beginning to recover from its big push into Florida in early 2005 when it bought Naples-based First National Bankshares of Florida at the peak of the market. At the time, First National had about $5.3 billion in assets and 77 branches from Orlando to Tampa, Sarasota, Naples and Fort Myers.

Fifth Third is still living with the huge First National acquisition. Holding company Fifth Third Bancorp's latest quarterly earnings report makes 27 references to Florida, usually in an unfavorable light with laggard Michigan. For example, 25% of the bank's commercial loans in Florida were not earning interest as of March 31, up from 16% a year ago and the highest of any of its markets including Michigan and its home state of Ohio.

When he arrived in Florida after a stint as president and CEO of Fifth Third's Ohio Valley operations, Call says he was spending 85% of his time working on problem loans. Now, he says he spends half his time doing that and the other half seeking new business. That's because he sees the region's economy stabilizing, not dipping back into recession. “We're not seeing a fall at this point,” Call says.

Call acknowledges the bank's overexposure to commercial real estate.

“We have too much of it,” he says. But he says property values stabilized last quarter and investors have started acquiring some parcels that Fifth Third had taken back, though Call is most worried about the overabundance of empty retail space. Fifth Third suspended homebuilder and developer lending in the fourth quarter of 2007 and new commercial non-owner occupied real estate lending in the second quarter of 2008.

The challenge has been that managing problem loans takes more resources. Call says in good times loan officers can handle 50 clients, but in bad times they can only manage 15 because problems are so much more labor-intensive. “We're taking action, identified the problems and we're ahead of the game,” he says. “We are hiring people.”

Call says he doesn't foresee a tidal wave of distressed commercial properties swamping the market, however.

“You're going to see an orderly disposition of assets,” he says. Buyers so far have included individuals, equity investors and existing borrowers who have found new capital.

A real estate recovery may not take hold until 2012, Call estimates. In the meantime, he says there are opportunities in areas such as international banking and health-care lending. “Those two alone are game changers,” he says.

Geographically, Fifth Third is seeking to boost its presence in the Tampa Bay region, Orlando and Jacksonville. Call says there may be opportunities to grow through acquisitions, like it did with the Freedom purchase. “Everyone is stepping up and working together,” he says.