Florida – The bank failure state 

You’ve seen Florida described as the “Sunshine State.” Right now, Florida residents may feel like theirs is the “Bank Failure State.” In 2010, as the Sarasota Herald Tribune noted on Friday, Florida has lost 23 banks, and 39 in total since the start of the “Great Recession.” To put these figures in context, recall that to date the US has lost a total of 119 banks in 2010, and 259 in the last two years.

The most recent Florida bank failure was announced last Friday, when the Federal Deposit Insurance Corporation (FDIC) closed down Horizon Bank, a small community bank in Bradenton, FL.

Horizon had been in difficulties for some time, as its most recent disclosures to the Securities and Exchange Commission (SEC) demonstrate. The disclosures reveal that for much of 2009 and throughout 2010, the bank had “charged off a significant amount of commercial and real estate loans, placed additional loans into non-accrual, reclassified certain other loans, ” etc. to get its affairs in order.

These corrective measures are symptomatic of a financial institution weighed down by real estate loans gone bad. At the time of its closing, reports the Herald Tribune, Horizon was trying to raise “the $8 million needed to recapitalize and up to $20 million to start growing again.” The bank’s CEO, Charles Conoley, worked to stave off  a forced closure, the newspaper adds, but to no avail.

When you think of a community bank CEO like Mr. Conoley, what words come to mind? “Showman” probably isn’t one of them.

Mr. Conoley apparently tried to save Horizon Bank by working behind the scenes, by trying to convince regulators to give him enough time to raise the money necessary to restore the health of Horizon’s balance sheet. No flashy PR campaigns were waged to save Horizon.

Mr. Conoley probably didn’t think of appealing directly and publicly to Florida’s governor, or his local member of the House of Representatives, or to Florida’s two Senators, to take up Horizon’s cause.

And Mr. Conoley probably never thought of making an appeal directly to Larry Summers, President Obama’s chief economics advisor, or to the President himself, to come down and make their own assessment of the situation. Mr. Conoley probably didn’t think of accompanying this appeal with the release of a statement to media stressing the vital role that small community banks play in the US economy, especially in terms of making important initial loans to local entrepreneurs.

It likely never crossed Mr. Conoley’s mind to hold a Tea Party-style rally outside the bank, to draw attention to the apparent indifference of regulators to Horizon’s efforts to heal its balance sheet.

Mr. Conoley, by all indications a conventional community bank CEO, probably didn’t spend much time thinking about aggressive tactics of this sort.

But as the Great Recession grinds up more community banks into dust, other community bank leaders may find that they have to get more aggressive if they are going to keep their institutions open and stave off additional forced closures.

Community bank CEOs may not feel like natural showmen. They must adopt more showman-type tactics when making their case for delaying FDIC-led bank closures – unless that is, they want to end up like Mr. Conoley and Horizon Bank.

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Neil Hrab

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