The tombstone was about to be ordered for downtown Tampa's Florida Bank. That's how close it was to joining dozens of failed financial institutions toppled by the real estate collapse and Wall Street meltdown.
Florida Bank had grown briskly in the go-go years of the housing bubble. But the bank buckled when inflated real estate values began plummeting in 2007. Troubled loans soared, and the bank's legally required cushions of capital withered.
Frantic bank examiners, watching the industry falter nationwide, responded by slapping many struggling institutions with formal enforcement orders demanding draconian survival tactics. Cut expenses. Fix bad loans. Raise more capital. Overhaul business practices. Replace management. And do it all yesterday.
"Zombie banks" and "The Walking Dead" became common industry nicknames for struggling institutions unable to find a way to revive. Seventy Florida banks went under.
By 2010, Florida Bank hit bottom. Consumer watchdog Bauer Financial branded it with a 0 star rating, the worst possible measure of health on a 5-star scale. The end seemed inevitable.
Saving a troubled bank is tough enough in a good economy. It's a small miracle during an economic gut punch like the Great Recession.
Well, here's the story of one such miracle.
Seasoned banker Susan Martinez, a veteran of AmSouth, Regions and other area institutions, was enjoying retirement when she got a call in 2010 from a colleague who was a director and investor in Florida Bank.
The bank might just be saved if the right team could be put in place.
"I said 'No' 10 times," Martinez says, refusing to get involved in what sounded like a thankless task. But she eventually agreed just to pay a visit to Florida Bank.
She did not bother to examine its financial predicament. She wasn't interested in past details of what had gone so wrong, so fast. But she liked the people. So much so that she came aboard in late 2010, just as the bank's portfolio of troubled loans — many made to overstretched commercial real estate and land developers running for the hills — spiked to a whopping $150 million.
What was left of Florida Bank's past management was doing the best it could.
Appeasing demanding bank examiners. Searching for more capital. Trying to calm employees and customers as bad publicity increased. Desperately searching for new ways to increase the bank's liquidity to avoid a dreaded cash crunch.
As Florida Bank floundered, other banks were closing their doors. Horizon Bank in Bradenton had gone under in the fall of 2010. It was followed soon by Tampa's Progress Bank, Cortez Community Bank in Brooksville and Tampa's First Commercial Bank of Tampa Bay.
There was no time for rehearsal.
Martinez acted swiftly. She created an executive team of Gary Ward as the money guy, John Garthwaite as the credit risk officer and fixer of loans, and Kim Buchanan as the administrative head. They met almost every day at a four-seat table in Martinez's office overlooking Jackson Street, hunting for solutions to a financial predicament with seemingly no answers. With no time for games, the meetings were brutally honest.
Martinez told her team the bank had to find a way to cut $500,000 a month.
"Everyone looked at Susan like she was crazy," recalls Ward, who had worked with Martinez at other banks.
"Their mouths fell open," Martinez says, laughing, "but we had to get through that."
It was just one example the quartet of bank executives shared of the intense pace and extreme goals Martinez set to try and save the bank. If they did not hit all their goals, they hit many, they acknowledged, even if at first they thought it impossible.
Martinez pursued another strategy many struggling banks never dare to consider. In March of 2011, federal regulators issued a formal enforcement action against Florida Bank with a long laundry list of fix-it-or-else demands.
Rather than treat bank examiners and regulators as some distant government enemy, she traveled to the Federal Reserve Bank in Atlanta, to Tallahassee to visit state regulators, and ultimately to Washington, D.C.
It was there where Martinez managed to get the bulk of the multiple regulatory agency folks in one room. The mission? To hash out face-to-face precisely what Florida Bank needed to do to make every regulator happy with the bank's plan to raise new capital. Otherwise, the bank could have been nibbled to death by individual agencies' separate nitpicking.
"Getting them all in one room was key," Buchanan recalls.
Florida Bank front-burnered the enforcement order's demands, delivering on the regulatory must-do list often in advance. Martinez kept up calls and emails with the regulators, so they felt in the loop on what was happening in Tampa. The regulators apparently liked what they saw and bought the bank more time.
Month after month, it was a balancing act. If Florida Bank resolved a bad loan by taking a discounted payment, the loss was subtracted from its capital position. Weaker capital made regulators more nervous and potential investors wary.
To ease the pressure, Florida Bank sharply downsized. It shrank from a high of $900 million in assets to $500 million. It closed three of its 16 branches. And it let go 70 people, reducing to a more affordable 115 employees.
A series of money raisings occurred, from a rights offering from existing investors to a federal emergency loan known as the Troubled Asset Relief Program (TARP) that let the U.S. Treasury purchase difficult-to-value assets from struggling banks.
By early 2014, first the state and then the feds removed their legal and enforcement actions. And by last summer, Martinez and her team found breathing room when new capital was found and the TARP loan was paid back at a substantial discount. The bank then chose to take a big quarterly loss to write down more bad loans.
The bank now has produced profits for a couple of quarters in a row.
Florida Bank's rare resurrection is the result of some key ingredients. A good fix-it team in the four executives who bonded in an intense quest to make the bank a survivor. A strong corporate board of directors that — unlike some other community bank boards — did not blink under pressure and throw in the towel.
Garthwaite, the credit risk officer who worked at Florida Bank before Martinez arrived, offers another reason. "One thing I take away from this is the importance of a sense of urgency," he says. "It proved to be critical. It may be the difference maker that separated this bank from others" in similar plights.
Indeed. In candid moments, bank regulators will say that too many banks that get into trouble lack that sense of urgency to right their ships. It is often their undoing.
Martinez says a bank in dire straits must not only set a blistering pace for recovery but learn to run with it day after day.
"It can be exhausting but it is the only way," Florida Bank's CEO says. "Stay positive. I cannot imagine coming in and trying to work through this believing you are going to fail."
Robert Trigaux can be reached at [email protected]