Edison Lights

REVIEW SUMMARY
Company. Edison Bancshares
Industry. Banking
Key. Conservative lenders will survive the recession.
By the Numbers. Click here for a detailed look at Edison National Bank's performance.

Real estate lending is the bread-and-butter business of community banking in Florida.

So consider this nightmare: The average price of a home in the Cape Coral-Fort Myers area has fallen nearly 42% over the last five years and the region consistently ranks among the top in the nation for foreclosures.

What's becoming abundantly clear is that only the best-managed community banks in places such as Fort Myers will survive the real estate collapse.

If their peers are correct, Geoffrey and Robbie Roepstorff's Edison National Bank in Fort Myers will be among the handful of community banks left standing on the Gulf Coast when this is over. The Florida Bankers Association recently named the husband-and-wife team Bankers of the Year.

What's so remarkable is that despite the carnage in the banking and real estate industries, Edison National Bank has been profitable every year through the downturn including 2009. Only in 2010 has the bank started to post losses and even those are small relative to their peers. What's more, the bank's capital hasn't been depleted by soured loans and the privately held bank's principal investors have the resources to inject more money if needed.

The key to the Roepstorffs' success isn't how they're managing during the recession, but how they managed the bank during the boom. Unlike many rivals, Edison remained a conservative lender that didn't plunge into risky development and speculative construction loans. The bank didn't overpay for deposits, it didn't pay lending officers on commissions for new loans and it resisted building expensive branches.

While all these things were clearly the right choices in retrospect, they weren't easy to do during the real estate boom. “We were being left in the dust,” Robbie Roepstorff recalls. “There were banks making unconscionable profits.”

It's not that the Roepstorffs were averse to making bold moves. Besides staking their family's future on Edison Bank, they expanded to the barrier island of Sanibel and were the first bank in the country to form a subchapter S corporation in 1997, passing its profits and federal income tax liabilities to shareholders.

But when it came to making loans, the Roepstorffs made clear they didn't lend based on the value of the collateral alone. They only lent to borrowers with strong cash flows and the character to pay those loans back. While they missed out on a lot of business during the boom, it's what's saved them now.

“The secret to their success is that Geoff is a very good lender,” says Bill Valenti, president and CEO of Florida Gulf Bank in Fort Myers. Like Edison, Florida Gulf Bank didn't jump into risky lending during the boom the way most rivals did. “They risked their life savings, but they didn't try to reach for the moon.”

“They weren't out-there gunslingers,” says Charles Idelson, a longtime banker in Fort Myers who is now president and CEO of Investors' Security Trust. “They could've made a lot more money.”

Clearly, the industry wishes they had more people like Roepstorffs to promote. “Not all banks are the same and that message gets lost,” says Pamela Ricco, executive vice president and chief operating officer of the Florida Bankers Association.

But community banks that can weather the downturn and emerge in the recovery will have a superior advantage because much of the competition will have disappeared. Regulators will ensure that economic moat remains wide for because it's unlikely they'll approve any new community banks for some time.

Married to the bank

The state banker's association says Edison is the only couple-run bank in Florida. Geoffrey Roepstorff, 57, is CEO and senior lender and his wife, Robbie Roepstorff, 58, is president.

While many people can't imagine working with their spouse, the Roepstorffs complement each other's skills well because they have well-defined roles at the bank. “I'm bringing in the business and he'll have the final say on the loan,” says Robbie of her husband. “When he makes a decision, it's final.”

Not that everything is always smooth. “A lot of times we don't agree,” Robbie Roepstorff says. But they're able to get along despite the fact that they work and live together. “She is, hands down, my very best friend,” Geoffrey Roepstorff says.

When he was a young child, the Roepstorffs' son, Matthew, asked his parents: “Is that all you talk about, the bank?” Realizing that he was listening in to their conversations, the Roepstorffs developed a secret code so they could discuss bank matters at home without worrying about little ears. “It's 24/7,” says Robbie Roepstorff.

For her part, Robbie Roepstorff keeps up a brutal schedule of community endeavors, ranging from the board of trustees of Florida Gulf Coast University to the Foundation for Lee Public Schools and the Lee County Industrial Development Authority. Geoffrey Roepstorff is more reserved. He prefers talking to customers one-on-one and isn't a regular on the rubber-chicken circuit.

The Roepstorffs are quick to give their employees credit for the bank's success and point to the fact that no one has titles on their nameplates. “They know Geoff and I have put our whole lives in this bank,” Robbie Roepstorff says. “We're not looking at retirement anytime soon.”

Staying out of trouble

Banks often get in trouble because their boards of directors are eager for growth and size that could pay off big when the bank is eventually sold. “It starts with your directors, because directors push the bankers,” says Geoffrey Roepstorff.

For example, during the real estate and banking boom earlier this decade, banks were building branches as fast as fast-food restaurants. When Roepstorff analyzed the feasibility of adding more branches, directors agreed that land had gotten too expensive and backed off. Edison now still has the same number of branches it has had before the recession: Three.

The Roepstorffs say Edison could have easily become a bank with $500 million in assets, more than double the $200 million it has today. But it didn't chase deposits with interest-rate teasers and it never paid commissions to loan officers or outside brokers for questionable loans. “We have never bought our customers,” says Robbie Roepstorff.

“They've always stuck to their knitting,” says Harlan Parrish, who competed with Edison when he was in charge of Colonial Bank's operations on the Gulf Coast. “They had opportunities to take on more risk, either by building branches or with development loans,” says Parrish, now senior vice president of neighborhood banking for Miami Lakes-based BankUnited.

Edison paid a price for not participating in lucrative loans during the real estate boom. “We missed a lot of those profits,” says Robbie Roepstorff.

But the Roepstorffs had experience on their side. “We kept blinders on,” says Robbie Roepstorff, holding up her hands to the side of her face.

Robbie Roepstorff began her career as a teller at First National Bank of Florence in March 1974, her hometown in Alabama. Geoffrey Roepstorff, whose father started First Bank of Marco Island with $250,000 in capital, went to work as a bookkeeper at the First National Bank of Sebring in 1973. His starting salary was $425 a month.

Their banking careers winded along the path that many bankers take as institutions got bought and sold. The Roepstorffs worked for large and small banks over two decades and through economic ups and downs, both ending up as executives at Heritage National Bank in Fort Myers in the mid 1990s. They married in 1993, three years after Robbie Roepstorff lost her first husband in a car accident, a banker who worked for Geoffrey Roepstorff's father.

When Heritage was sold to SouthTrust Bank in 1996, some of the directors asked the Roepstorffs to form Edison Bancshares, the holding company for Edison National Bank. They included longtime Fort Myers banker David DuVall, Howard Sheridan and Daniel Dosoretz.

Sheridan and Dosoretz built Fort Myers-based Radiation Therapy Services into the largest operator of radiation centers in the country. The company went private in February 2008 in a $1.1 billion deal that netted its founders —including Dosoretz and Sheridan — $234 million, according to public filings.

Clearly, with shareholders like Dosoretz and Sheridan, access to capital isn't a problem if the real estate recession continues to drag on. The Roepstorffs say there's “excess capital” at the holding-company level they can use for additional cushion if needed.

The next challenge for community bankers will be increased government regulations, especially in how banks account for loans to distressed borrowers. “We're taking the conservative approach because of the regulatory environment,” says Robbie Roepstorff.

For now, though, Roepstorff says real estate valuations have stabilized. The difficulty is finding creditworthy customers and the bank's loan portfolio hasn't grown over the past year.