August 21, 2014

Report: Florida's Banks and TARP

Take It or Leave It?: Time will tell which banks made the right choice in seeking TARP funds -- or avoiding them.

Mike Vogel | 7/1/2009

Strings Attached


To receive TARP money, financial companies must restrict executive pay and comply with rules on corporate governance, such as allowing shareholders a non-binding “say-on-pay” vote on executive pay. In Florida, Seacoast Banking, CenterState Banks of Florida and TIB Financial all held say-on-pay shareholder votes this year. The CEOs of the Florida-based banks who took TARP funds say they’re too small to run afoul of most of the strings the federal government attaches to TARP funds, including the “golden parachutes” for departing executives that have raised congressional and public ire toward some large-bank recipients. “Community banks don’t have that problem. I have yet to receive the first million in bonuses,” says Fernando Capablanca, CEO of Union Credit Bank in Miami.

Impact on Florida

 Donald Phillips

Good luck calculating TARP’s impact on lending in Florida — big banks and small banks alike mix their TARP funds into their overall assets, so it’s all but impossible to say whether a given loan is being made with TARP money. The complaint nationally — that the big banks aren’t lending out the money they got through TARP — is echoed in Florida. Donald Phillips, managing director of Phillips Development & Realty, a Tampa apartment developer who organized a TARP forum in Tampa earlier this year, goes so far to claim that the big banks have “redlined” Florida. Worse, he says, they’re calling business loans even when borrowers can keep up interest payments. “A year and a half ago they were taking us fishing,” Phillips says. “Now they’re feeding us to the sharks. Most of the damage is being done by very large banks.”


Charles Conoley, CEO of Horizon Bank, says he can put TARP money to work lending in Manatee County, but he’s still waiting for an answer on the bank’s application for $4.8 million.
Not so, the banks respond. Wells Fargo reports that just its business banking division, catering to companies with $3 million to $15 million in annual sales, made $101 million in loans through April in Florida alone while its small-business banking division in Florida made $27.6 million in loans. Bank of America spokeswoman Nicole Nastacie says her bank has no Florida figures but “we clearly are lending.” Bank of America reported that nationally the bank made $183.1 billion in mortgages, commercial loans, consumer, home equity, small-business and other lending in the first quarter.

Local banks say demand for loans has fallen as in any recession. Banks can leverage every dollar of capital 10 to 14 times. So theoretically, the $223 million in TARP funding that went to Florida-based banks should be translating into $2.2 billion to $3.1 billion in lending in the state.

But that’s not necessarily new lending. Some banks are holding the money as a safety cushion or putting it into loan loss reserves. That’s allowed some to keep up their normal lending pace but not expand.

And here’s a troubling stat for any business in need of a loan: The combined market share of the 18 Florida banks that accepted TARP funds is just 1.44%. Phillips says he’s noticed smaller banks are aggressively going after business but says they lack the lending capacity for large loans. “We’re trying to fly F-18 fighters on a (Piper) J-3 Cub fuel allocation.”

Tags: Banking & Finance

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