Finance in Florida
Florida-based banks are ripe for mergers
The number of Florida-based banks is down by 60% since 2007.
Recent months have seen the acquisition of at least three more Florida-based banks by larger regional players, underscoring both the attractiveness of Florida banks to outsiders — and the difficulty of growing a Florida-headquartered institution into one of those regional or national players.
Florida counted 308 banks based here in 2007 as the Great Recession hit. There are now 125. “For banks, it was a depression, especially for community banks,” says Benjamin C. Bishop Jr., chairman of Allen C. Ewing & Co. in Jacksonville. The days of regular Florida bank failures are over, but Florida still is averaging 15 to 20 mergers a year.
The industry says the costs of complying with new regulations are driving the acquisitions. Those administrative costs, bankers say, are onerous for smaller institutions that lack the economies of scale enjoyed by regional and national banks. Meanwhile, lending by the smaller banks is crimped because compliance costs divert money they could otherwise use as reserves to underwrite loans. “For every $100,000 we spend on compliance, that’s $1 million less that we can lend in the community,” says Alex Sanchez, CEO of the Florida Bankers Association.
Bottom line: Banks with less than $500 million or under $1 billion in assets — depending on whom you talk to — find it too difficult to make money.
A rollback by the Trump administration and Congress of some of the regulatory burden has helped keep small banks profitable, but often not profitable enough to fund new growth. “The small banks have been kind of stuck. They can’t grow,” Bishop says.
Another factor motivating small-bank stockholders to sell: They haven’t seen any return on their investment in the 11 years since the recession, Bishop says. They’ve gone without dividends, and, because shares in the small banks often aren’t listed on public exchanges, they haven’t been able to cash out.
Some acquisitions have been intrastate: Stuart-based Seacoast Banking acquired First Green Bank this year, and City National in Miami acquired Total- Bank. But plenty of out-of-state suitors also are looking to boost their market shares in one of the nation’s largest and fastest-growing economies. “Everybody wants to be here,” Sanchez says.
For example, Mississippi-based First Bancshares acquired Monticello-based Farmers & Merchants and Tallahasseebased Sunshine Community this year. New Jersey’s Valley National acquired Clearwater-based USAmeriBank this year.
Says Bishop, “The Florida economy is still extremely attractive from a banking point of view to banks that can take advantage of it. The out-of-state banks have been pouring into Florida in the last five or six years. The banks that have decided to sell and have decent market share can sell at a nice profit.”
— Mike Vogel