MANATEE -- Manatee, Sarasota and the rest of Florida still have some struggling banks that can't seem to pull themselves out of the mire of non-performing real estate loans on the books since the mid-2000s.
A report released Monday by a banking analyst says Florida has 92 of these banks out of an estimated 2,000 nationwide that really have no option but to try to sell themselves.
A "buyers' market" for banks is shaping up in Florida, according to industry adviser Invictus Consulting Group LLC.
"These banks have low interest margins and poor profitability, so they don't have a lot of options and probably should sell," said Invictus CEO Kamal Mustafa. Stress tests on 92 banks in Florida by Invictus showed they should be sold, the report said. Those banks have an aggregate book capital of $6.1 billion.
In Manatee-Sarasota, Bank of Commerce is still struggling to recover its standing from several years of battling a raft of non-performing real estate loans left from the housing collapse. The bank, with a zero star rating by Bauer Financial, has been aggressively trying to raise capital through a stock offering of 14 million shares at $1 each, but the bank is still under an FDIC consent order to raise more capital.
Local bank consultant Frank Knautz agrees there are few options open for institutions he calls "zombie banks."
"A large number of Florida banks were critically injured in the recession, but survived the threat of closure by regulators," Knautz said. "These banks -- with capital ratios typically hovering around 3 percent -- adapted survival strategies enabling them to stay open,
but severely damaged their future earning power."
The banks shed their loans to shrink the asset size of the bank and inflate capital ratios. But the short-term fix has diminished their value, he said.
"The inability to acquire earning assets without adversely impacting capital ratios makes it nearly impossible for banks in this 'must sell' category to generate new earnings," Knautz said. "These same injured banks may also have damaged their franchise value by selling branch locations, reducing valuable staff and alienating customers by way of low deposit rates or inability to lend. In essence, there is very little of value to purchase."
Banks in Florida and Southwest Florida in particular were especially hard hit in the recession because of their reliance on real estate loans, Mustafa said.
"Other states were more diversified in their portfolios and rebounded," he said.
The Invictus report also identified other banks that are healthy enough to buy up struggling banks, but predicts there isn't enough capital to rescue all 92.
"Florida has a significant shortage of in-state purchase capacity, as measured by free capital and relative to local banking industry needs," Mustafa said.
Florida banks considering a sale should do so now while the market is more agreeable, Mustafa said.
Knautz said the longer these banks languish, the more difficult it will become to attract investment capital or acquisition interest.
But he said dozens of the banks are not attractive to buyers.
"Lack of capital, decimated manpower and branch networks, an eroding customer base and retained earnings in the negative tens of millions make it nearly impossible for these critically injured banks to earn their way back to health," he said. "Yet it is unlikely these banks will be closed as they continue to retain just enough capital to retain their charters."
Bank of the Ozarks is one of the newest banking institutions in the Southwest Florida market and one with a healthy enough bottom line to consider future acquisitions. The bank purchased Horizon bank's assets from the FDIC when that bank failed in September 2010. In a loss share, transaction Bank of the Ozarks paid $150.4 million.
Bank of the Ozarks is looking to expand its footprint, says Susan Blair, executive vice president, who says the bank "has accumulated a sizable war chest of capital in recent years through retained earnings."
"We have bankers dedicated to looking at opportunities for additional FDIC assisted acquisitions or traditional bank mergers and acquisitions," she said.