By Dick Hogan
The ranks of Southwest Florida's banks are thinner but stronger than they were a year ago, with many of the weak ones taken over by regulators or healthier rivals.
Now the survivors are leaner - and meaner when it comes to approving loans to the area's financially beaten-down homeowners and businesses.
That's the picture that emerged from the third-quarter reports submitted to the Federal Deposit Insurance Corp. a week ago by all federally chartered banks.
At the end of the third quarter on Sept. 30, the numbers for banks based in the county were strikingly different from those a year ago: $108.1 million total bad debt from real estate-backed mortgages compared to $736 million a year earlier.
That was due in large part to the collapse of the two banks with the most bad debt: Naples-based Orion with $277.3 million and Immokalee-based Florida Community with $191.3 million. They were closed by state and federal regulators and their assets mainly dealt to other banks.
On the opposite end of the spectrum, Fort Myers-based Finemark National Bank & Trust was awarded a rare five-star rating in September by Coral Gables-based BauerFinancial, which provides financial information and research on the banking industry. Finemark had no bad debt on its books for the third quarter, the only bank in Lee or Collier that could say that. Lee County Clerk of Court records show only one foreclosure since the bank was established in February 2007. Joseph Catti, president and CEO of Finemark, said the bank didn't dodge the bullet by staying away from real estate-backed loans. "A significant part of our loan portfolio is secured with real estate," he said, but Finemark succeeded by choosing its borrowers carefully. "We know the people we loan money to really well," he said. "We're not doing anything new or different than we've ever done, but it really is doing business with people we've been able to develop deep relationships with versus loaning money to people on a transactional basis."
Elmer Tabor, owner of Wonderland Realty in Cape Coral and formerly board chairman of Riverside Bank of the Gulf Coast, said that in the absence of that level of trust, it's a hard sell to get a bank to finance a house.
Recently, Tabor said, he had clients who tried to get 50 percent financing for a second-home purchase. "They can't get it done." Ironically, he said, some loans are still being made by banks for federally guaranteed mortgages in which the buyer needs to borrow as much as 97 percent of the cost. "We're lending money to people who can't afford housing," he said.
Gary Tice, president and CEO of Naples-based First National Bank of the Gulf Coast, which opened last year, said that, from a lender's point of view, "I think the real issue with all banks today is their requirement for superior credit quality" for borrowers. "I don't think any bank wants to be bitten again by some of the mistakes that we made. I think we're more cautious than we used to be." Besides more pressure from regulators to preserve capital, Tice said, it's simply hard to find a solid citizen in the Naples or Fort Myers area who's looking for a loan these days. "We've got a lot of unemployment in both those areas. Businesses are not expanding as they have in the past," he said. He's optimistic about the future of the real estate markets, and thinks prices have largely stabilized. Collier is improving somewhat faster because, unlike Lee, it didn't get stuck with a huge inventory of unsold homes built during the boom that collapsed in 2006, Tice said.
Karen Dorway, president of BauerFinancial, said recent data show there are signs nationwide that the banking industry may be doing better. "Profitability is better, capital ratios are better, delinquent loans are down, although repossessions are up," Dorway said. But there are still few new banks being started up, she said, although "we have seen some activity with banks expanding their geographical reach." It's a change from the past two years when things were "pretty much dead," Dorway said. "I think the outlook is starting to be more toward the future. The focus for the last couple of years has been hunkering down." But even if there's a turnaround imminent, she said, foreclosure-plagued Lee and Collier shouldn't expect to see much in the short term. "Florida's still a very tough market," Dorway said. "It's going to take quite a bit of time to turn things around."