Back into the cape

Few places in the country felt the foreclosure crisis as hard as Cape Coral.

The city in Lee County consistently ranked among the top five areas with the highest rate of foreclosure during the downturn following the mad frenzy of housing speculation of the boom. For example, in August 2010, as many as one in 67 homes in the area was in foreclosure, according to RealtyTrac.

But as bad as the housing collapse was, Cape Coral remains promising because of its availability of land. Considered a bedroom community to Fort Myers, Cape Coral is the third-largest city in Florida by landmass, with 122 square miles crisscrossed by nearly 400 miles of canals. It is four times bigger than Miami and three times the size of Boston.

Now, lenders are coming back to the city. For example, Achieva Credit Union opened two branches in Cape Coral last year and Preferred Community Bank opened one in July.

It's a surprising turnaround for an area devastated by the recession, but no shock to longtime Florida residents who have seen their share of boom and busts. The area holds promise because only half of the lots in the city have been built upon in its 50-year history. Cape Coral has just more than 150,000 residents and it could accommodate 400,000 people.

What's more, property values have stabilized and even increased lately, giving bankers confidence that their collateral is safer than it was when prices spiraled upward during the boom.

For example, according to data compiled by Koffman & Associates Century 21 Sunbelt, the median price of an existing waterfront Gulf-access home rose nearly 3% in July to $344,000 compared with July 2013 and significantly higher than $270,000 in July 2009.

Community bankers return
The housing crisis devastated community banks in Cape Coral and throughout the region. In 2007, there were two banks headquartered in Cape Coral: Community Bank of Cape Coral and Riverside Bank of the Gulf Coast. Together with other banks based in Lee and Collier counties, they operated 12 of 49 branches in that city.

But the end of last year, there were no banks headquartered in Cape Coral and no Lee- or Collier-based bank had any branches in the city. That left only the super-regional and national banks such as Bank of America, Fifth Third Bank, IberiaBank, Regions Bank and Wells Fargo Bank to split the nearly $2 billion in deposits in Cape Coral, according to the FDIC.

“That is the first time in recent history that it's the case,” says Brenda O'Neil, chairman and CEO of Preferred Community Bank, a Fort Myers-based bank. “The Cape has always been historically heavily banked with community banks. The downturn took all those opportunities away for those consumers.”

So O'Neil opened a branch of Preferred Community on Del Prado Boulevard in July. “It seems there's a deficit in the market and we found an opportunity to fill the void,” she says. “We see the Cape as an excellent opportunity.”

In particular, O'Neil says housing values have recovered. “We're seeing a lot of requests for primary homes,” she says. In addition, she says there are opportunities to lend to small businesses that cater to Cape residents.

O'Neil isn't the only one to venture back into Cape Coral. Tara Murphy, senior vice president of sales and service for Achieva Credit Union, came to the same conclusion more than a year ago. Achieva opened two new branches in Cape Coral last summer, located strategically in Publix-anchored shopping centers.

“When I first started meeting with local officials, they said they had lost a lot of their community banks,” Murphy recalls. The absence of community banks was obvious: “It seemed like a perfect place.”
Cape Coral's recent history didn't worry Murphy. “We were well aware that they had been hit by the economic downturn,” she says.

Murphy says she hired Cape Coral residents to staff both branches, including branch manager Tiffany Yoder. “You'll find that when you're talking to Tiffany and others, they are so dedicated to the success of Cape Coral,” she says.

Mortgage brokers in Cape Coral report being busy, too. Brian Fulton, vice president of Robert P. Tomasso Mortgage Company Inc., says he knows when a new upward cycle is coming: headhunters try to recruit mortgage brokers away to work for growing banks. “We're all getting solicited once or twice a week,” he chuckles.

“More lenders are coming because there's money to be made,” says Fulton. In the 21 years he's been doing business in Cape Coral, Fulton says he made more loans in 2013 than any year, including at the height of the boom in 2005.

Large banks never left
Despite the housing collapse and the tsunami of foreclosures, many of the super-regional and national lenders never left Cape Coral. Indeed, there are 44 bank branches in Cape Coral today compared with 49 branches in 2007, according to the FDIC.

“We feel very good about lending in the Cape,” says David Call, South Florida president and CEO of Fifth Third Bank, which has maintained five branches in Cape Coral. “The Cape's one of our best markets when it comes to the size of a branch.”

Call says he's encouraged by the stabilization of real estate values. “When we get an appraisal back, it's not all over the board,” he says. “We're getting consistent results and values, which tells us the market has stabilized.”

Cincinnati-based Fifth Third is making business loans in the Cape, too, including recently to a software company and a health care business. Both companies have seen their revenues triple in one year, he says. “There are companies that are recovering very strongly,” he says.

The recovery in faraway northern states has freed up retirees to move to Cape Coral and buy a home, says Mike Babair, senior vice president with Louisiana-based IberiaBank, which acquired Cape Coral branches during the downturn. “There's a tremendous pent-up demand,” he says.

IberiaBank recently added well-known Cape Coral entrepreneur and electrical contractor Wayne Kirkwood to its local board. Kirkwood is also the former chairman of Community Bank of Cape Coral.
In addition, rising real estate values are pushing renters to buy homes. “People see that prices are going up and they're trying to get in on that,” says Michelle D'Auria, mortgage lending manager for IberiaBank Mortgage in Lee and Collier counties.

D'Auria says she sees evidence of recovery in her own neighborhood in the northern part of Cape Coral. “There are fewer for-sale signs, new construction and homes are in better condition,” she says.

EXECUTIVE SUMMARY
Industry. Banking Trend. Banks are tiptoeing back into areas devastated by foreclosures. Key. The recession left a banking vacuum in hard-hit areas.