November 26, 2014

2009 Industry Outlook

Banking & Finance 2009

'The Good Years in Banking are Over': Financial institutions will be watching pennies as the industry shakeout lingers.

Mike Vogel | 1/1/2009
“We’ve got some mortally wounded banks for sure,” Bishop says, but he expects nothing close to the 1,000 failures that came nationally in the 1988-91 savings and loan debacle.

The real estate collapse and credit crisis has reshaped Florida banking dramatically with the nation’s four largest banks, all partially nationalized, in the retail banking market here for the first time. After the October banking revolution, Wells Fargo, through its Wachovia purchase, and JPMorgan Chase, through its Washington Mutual buy, joined Bank of America and

Citibank, whose Florida presence is largely in the southeast part of the state. “We’re in a banking situation that’s totally changed overnight,” Thomas says.

Meanwhile, at tiny Horizon (three branches, $210 million in assets), Conoley sees encouraging signs. Problem loans seem to have peaked. Horizon has applied for $4.8 million from the federal bailout as easy capital. At 5% per year, it’s cheaper than what the bank would have to fork over to raise a similar amount.

Commercial and commercial real estate loan demand is higher at Horizon than in the past three years, some of it coming from good customers of failed banks “happy to find anybody who will talk to them about a loan,” Conoley reports. He’s opening a branch in Brandon this year.

“We think ’09 is going to be a lot better,” he says. “We’re more of a traditional bank, and the traditional became the unusual, and I think we’re going to go back more to the traditional.”

Bank Profits hard to come by

In 2005 and 2006, before the subprime market exploded, the 18 largest publicly traded bank holding companies based in Florida earned an average return on assets of .86% and an average return on equity of 9.53%. During the first half of 2008, the 17 surviving banks earned an average .39% return on assets and 4.10% average return on equity. Only six were profitable:

Holding Company Assets Profit Return on Avg. Equity* Non- Performing Assets
Capital City (Tallahassee) $2.7 billion $12.1 million 8.09% 1.80%
Optimum Bank (Fort Lauderdale) $252 million $818,000 7.19% 1.06%
Horizon Bancorp. (Bradenton) $210 million $539,000 8.47% 2.07%
Center State Banks (Winter Haven) $1.2 billion $2.6 million 3.43% 1.07%
First Community (Pinellas Park) $482 million $707,000 3.76% 1.91%
Stonegate Bank (Fort Lauderdale) $287 million $290,000 1.39% 0.79%
*annualized Source: Allen C. Ewing & Co.

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