Is it finally safe for Florida bankers to crawl out of their vaults?
Evidence is mounting that banks statewide are not only past the recessionary blues, but more are starting to enjoy a new era of prosperity.
Profits are up sharply, the number of problem banks has shriveled and Florida is far removed from its darkest days just two years ago when it led the country with 29 bank failures.
In an analysis released Thursday, ratings agency Bauer Financial Inc. said the percentage of Florida banks it recommends as financially strong jumped from 21 percent a year ago to 31 percent in the first quarter of this year.
"What we're seeing is bankers being able to shift more to being bankers and less to being problem solvers," said Bauer president and director of research Karen Dorway.
"When you're dealing with so many problem loans to work through, that's just a drain on resources — not only financially but also on employee time to go out and make loans and get new business. … Small businesses are seeing more opportunities now because there are more banks looking to lend to new customers."
With 37 percent of banks statewide still listed as at least relatively weak (down from 40 percent a year ago), Florida isn't out of the woods yet, Dorway said. "But we're certainly headed in the right direction that the workout will keep working out."
Among other signs of encouragement:
• Nearly midway through 2012, only three Florida banks have failed (including two in the first few weeks of the year). Compare that with last year, when Florida had 13 bank failures or 2010 when the state led the country with 29 failures.
• The state's 222 banks made a combined $174 million in profits in the first quarter, reversing a $77 million fourth-quarter loss. Only 27 percent of banks lost money in the first quarter after nearly half lost money for the full year of 2011.
• Bauer, which uses a five-star rating to assess banks' financial strength, says the number of "zero stars," or severely troubled banks, has fallen from 39 to 30 this past year. Only one of the 30 — Heritage Bank of Lutz — is in the immediate Tampa Bay area.
• Credit unions look even healthier. Bauer Financial puts the "recommended" stamp on 78 percent of Florida's credit unions; only 3 percent are cited as troubled and problematic, down from 7.5 percent a year earlier.
Florida's recovery is tethered to a broader, national comeback of the banking industry.
In the first quarter of this year, bank profits nationwide totaled $35.3 billion, the best performance in nearly five years. Moreover, only 16 banks failed in the first three months, the lowest tally since the end of 2008.
Looking ahead, bank capital is near record levels, and the FDIC's list of troubled banks has fallen to 772, the fewest since the end of 2009.
But greater banking stability doesn't necessarily translate into better customer deals or improved access to credit.
That's partly because lending requirements are still stringent. So even though there is more competition among banks, they're often battling for the same high-credit customers.
"It's like the old days: The people who don't need a loan can get them, but the people who really need them can't get them," said Miami economist and bank consultant Ken Thomas.
Banks remain under pressure from shareholders and regulators to improve their bottom line, Thomas said, and if they can't do it through loans that means more pressure to raise fees and service charges, often in subtle ways.
"You have to be very careful" as a bank customer, he said. "When you see a bank with many branches, they pay for it, how? With higher fees."
Another troubling issue keeping down loan volume: The demand side of the equation hasn't rebounded yet.
"Certainly a successful business today is going to have more banks they can talk to than a year ago (but) unfortunately loan demand is still rather tepid," said Sam Davis, president and chief operating officer of Tampa-based American Momentum Bank. "Borrowers are not moving forward with robust expansions. They're being pretty conservative."
American Momentum, with more than $1 billion in assets and 24 branches in Texas and Florida, has been well-capitalized enough to purchase several banks in recent years.
But even with improved profits, the purge of problem loans is still going on for many.
"Many banks are still on the ledge," Davis said. "It will take many quarters of increased capital to build up … before they are jumping back in."
Alex Sanchez, president and CEO of the Florida Bankers Association, thinks the contention that banks weren't lending throughout the recession was overblown. Credit-worthy customers always had access to loans, he maintains.
Sanchez said he remains wary about turmoil in Europe, the roiling stock market and the effect of federal regulation on stifling community banking. Nevertheless, he agrees the litany of stronger banking news has been encouraging.
"As our economy improves, the banks are a reflection of that. If people repay their loans, banks can make more loans," he said.
"No one is screaming, 'Happy days are here again,' but there's no question things are getting better."
Jeff Harrington can be reached at firstname.lastname@example.org or (727) 893-8242.