Apollo Bank in Miami lifted off last year, boosting the size of its loan portfolio by 25 percent after the portfolio shrank by 10 percent in 2010. Richard H. Dailey, Apollo’s president and chief executive officer, said management actually had bigger expectations for 2011.
“The loan portfolio grew a little bit slower than we had budgeted,” Dailey said, citing a scarcity of qualified, motivated borrowers. “We’ve been actively looking, but sometimes they’re just difficult to find.”
Apollo’s increased extension of credit reflects a broader uptick in lending last year. A Daily Business Review survey of 40 community banks in South Florida shows that their combined loans totaled $28.1 billion at the end of 2011, up 2.7 percent from a year earlier but down 3 percent from the end of 2009. The Review survey shows that among 40 banks based in Miami-Dade, Broward and Palm Beach counties, 21 increased their loan portfolios last year.
The survey also revealed shifts in demand for different types of loans. Growth in commercial real estate loans and commercial and industrial, or C&I, loans offset a sharp decline in bank financing for construction and land development. Residential mortgage loans outstanding at the banks in the survey were almost unchanged last Dec. 31 from a year earlier.
Apollo’s loan portfolio stood at $118 million on Dec. 31, about $25 million more than a year earlier, due to increased lending to owners of commercial real estate, among other factors.
“This year we feel we can grow another 25 percent,” Dailey said. Among the bank’s likely sources of increased lending this year are commercial and industrial borrowers with existing but largely unused lines of credit from the bank.
“We’ve got a significant amount of lines of credit that we think are going to get used this year and beyond,” he said.
Getting bigger isn’t easy for small financial institutions. Community banks based in South Florida have faced increasing competition in the last four years from new arrivals to the area’s banking market. These include several major domestic banks, including Wells Fargo and JPMorgan Chase, as well as private equity groups that have acquired large banks based in South Florida, among them BankUnited in Miami Lakes and Capital Bank in Miami.
But community banks in South Florida also gained some commercial customers that had been rejected by large banks operating under new ownership, or by small banks with too little capital.
“I see all the banks from outside South Florida coming here as a great opportunity for community banks, because without advertising, our bank is growing steadily,” said Guillermo Diaz-Rousselot, president of Continental National Bank in Miami.
While many of its competitors have retrenched in the credit market, Continental gradually increased its loan portfolio each year from 2008 through 2011 and held $174 million at the end of last year, up $33 million from four years earlier. Now the bank wants to boost the size of its loan portfolio at a more robust pace as the economy recovers from recession.
Continental has taken a conservative approach to lending because, “the last four years have been murder. We have been holding back a little,” Diaz-Rousselot said. “Now we are starting to expand.”
By summer, the bank plans to open a limited-service branch inside a Navarro pharmacy in the Kendall area, which could lead to the opening of a full-service stand-alone branch nearby.
Stonegate Bank in Fort Lauderdale increased its loan portfolio last year to $586 million as of Dec. 31, from $410 million a year earlier, in part by picking off customers that left impaired lenders.
“We feel like this is a great time to pick up new clients. There are still some banks that aren’t doing a lot,” said David Seleski, president and chief executive officer of Stonegate.
construction, land loans
Though bank lending for construction and land development generally is depressed, Stonegate expanded that part of its loan portfolio to $60 million at the end of last year, up from $50 million a year earlier.
“Most banks are absolutely terrified of construction. … A lot of lenders have gotten out of construction lending entirely,” Seleski said. “That’s been a good little niche for us. We expect that when category is going to continue to grow this year.”
Some community banks struggle to increase their loan portfolios because payoffs and charge-offs of troubled loans are offsetting the volume of loan originations and extensions.
One of them is Ocean Bank in Miami. It has about $2 billion of loans on its books, down 16 percent from a year ago, and, “within that, there is a little over $200 million of non-performing loans,” said Terry J. Curry, chief operating officer and executive vice president of Ocean Bank.
“We’re trying to move that down as quickly as possible,” he said. “That’s part of the reduction in loans, getting rid of the non-performers and the borderline credits. We’re going to continue to do that.”
Ocean Bank also has surrendered some opportunities to lend money because the borrowers demanded lower interest rates. “It’s very competitive out there for good loans,” Curry said. “If it’s a very strong credit, we try not to lose it on a pricing issue. If it’s a less strong credit, and the pricing is low, we’re just not going to put ourselves out there. We have had to back off of some deals because we felt we just couldn’t do that pricing.”
Commercial real estate lending to owners of shopping centers, apartment buildings and warehouses has been a growth business for many community banks. One of them, Terrabank in Miami, increased its total loans to $164 million at the end of last year, $20 million more than a year earlier, with almost all of the growth coming from commercial real estate lending.
Antonio Uribe, president of Terrabank, said he expects the bank to increase its loan portfolio another 15 percent to 20 percent this year. Uribe said the loan growth would be faster if Terrabank had fewer loans of pre-2009 vintage classified as delinquent or non-accrual, which the bank is trying to move off its books.
“Our classifieds are not where they should be,” he said. However, loans extended by Terrabank since late 2008 and early 2009 represent “basically, a healthy portfolio. We don’t have a need for a capital injection. We’re making money, and we’re going to grow organically.”
Residential mortgage lending is a big business in community banking. The Review survey of 40 South Florida-based banks shows their residential loans secured by one- to four-family properties totaled $9.5 billion last Dec. 31, more than their $9.2 billion of commercial real estate loans outstanding on the same date. Yet the home loan volume was essentially unchanged from a year earlier.
Banks that have stepped up their home loan businesses include City National Bank of Florida. The Miami-based institution has increased its residential mortgage lending in recent years to diversify its loan portfolio and reduce its financial exposure to the commercial real estate sector.
Jorge Gonzalez, chief executive officer of City National, said about 30 percent of the bank’s loan originations are now residential mortgages, even though the bank historically has been inactive in the home loan market. City National is getting about a third of its lending business from commercial real estate finance and another third from commercial loans to small- and medium-size businesses.
“What would be new to City National would be primarily the residential,” Gonzalez said. Prior to 2009, the bank “was pretty much a commercial real estate-focused institution. And what we’ve done today, given the environment, both economically and from a regulatory standpoint, we want to be more diversified.”
TotalBank in Miami also has expanded into residential mortgage lending, which accounted for some of the growth in its total loan portfolio to $1.3 billion as of Dec. 31, from $1.1 billion a year earlier.
The bank created a residential mortgage lending department about three years ago, and it has been “a real driver of growth over the last couple of years,” said Jorge Rossell, chief executive officer of TotalBank. “Our residential loan portfolio right now is over $200 million.”
Rossell said his lending team also has picked up some commercial borrowers from other banks unable or unwilling to serve them.
“There are several banks that are not lending, so we’ve taken advantage of that,” he said, citing increased regulatory burdens on small banks. “With all these new regulations coming in, it’s going to be tough, especially for small banks, to keep alive. At the end of the day, it has been very difficult for them to make money.”