Florida Banking Industry Update
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Second Quarter 2013 Florida Banking For additional information or Industry Update inquiries, please contact: Benjamin C. Bishop, Jr. Chairman (904) 354-5573 [email protected] David W. Jackson, Jr. President (704) 332-2032 [email protected] Commentary W. Allen Rogers II Vice President-Corporate Finance Operating Results (704) 332-2032 [email protected] Capital Markets Errol Parsons Associate Mergers & Acquisitions (904)354-5573 [email protected] Banks in Florida & Asset Quality Ratios Robert Dunlap President of Ewing Loan Advisors (904)354-5573 [email protected] Ben C. Bishop, III President of Ewing Real Estate, Inc. (904)354-5573 bbisho [email protected] Allen C. Ewing & Co. 50 North Laura Street, Suite 3625 Jacksonville, FL 32202 200 South Tryon, Suite 700 Charlotte, NC 28202 www.AllenEwing.com Allen C. Ewing & Co. Industry Update – 2Q13 TABLE OF CONTENTS Florida banks followed the national trends of improved performance. In 2008-2009, most Florida banks reported losses, but in 2013 most will report positive earnings. In the second quarter, the median ROA of Florida banks increased from .36% to .41%, NPAs/assets declined from Commentary Page 2 3.76% to 3.40%, but the median NIM remained at approximately 3.50%. Pre-tax income increased primarily Florida Bank Operating Results Page 3 from the dramatic decline of loan loss provisions and reduced NPA administrative expenses and not from Capital Markets Page 4 increased NIMs and/or greater revenues. Florida Bank Regional Results Page 5 With the beginning of positive earnings, bank stock prices and M&A valuations are beginning to reflect the earnings of a bank rather than the past focus on balance sheet Florida Bank M&A Page 6 values such as capital adequacy, loss reserves, and tangible book value (“TBV”). In addition to the positive FDIC-Assisted Transactions Page 6 benefits of a return to positive earnings, the earnings of most banks will be sheltered from income taxation for Price / TBV Data Page 7 many years by the accumulation of NOLs over the past five years. 100 Largest Florida-Based Banks Page 8 The charts on page 7 reflect the increased market 50 Largest Out of State Banks in Florida Page 10 valuations of publicly traded bank stocks and the premiums awarded by the markets to banks with higher Florida’s Largest Publicly Traded Stocks Page 11 capital ratios and low NPAs/assets ratios. Florida Loan Loss Provisions Page 11 Beginning on page 15, the chart of Texas Ratios of Florida banks reflects the improvement of the State’s 191 banks Florida Bank Texas Ratios Page 15 as the number of banks with a Texas Ratio over 100% has declined from 50 in second quarter of 2011 to 27 at the end of the second quarter of 2013. Banks with Texas Ratios less than 25% have increased from 57 in the second quarter of 2011 to 74 in the second quarter of 2013. The FDIC has only closed 2 Florida banks in the first half of 2013 versus 8 in the year 2012, and 26 in the year 2010. COMMENTARY The primary challenge to community banks since the SECOND QUARTER 2013 beginning of the recession in 2007-2008 has been maintaining regulatory capital adequacy. The challenge going forward will be the generation of quality assets and Quoting from the most recent FDIC quarterly report, earning an acceptable level of profits to attract capital and the nation’s banking industry continues to improve as pay dividends. Notwithstanding the current economy, more than 90% of the nation’s banks had positive net well-capitalized, publicly-traded banks with increasing income in the first quarter of 2013. Loan loss earnings and large trading markets for their shares will provisions fell to pre-2008 levels, and only 16 perform very well. Similarly, well-capitalized, private institutions were taken over by the FDIC in the first banks with adequate reserves, low NPAs, and increasing half of 2013 compared to 28 institutions in the first half earnings will command higher M&A values. As indicated of 2012. The positive improvements were generated in the table of page 8, the consolidation of banks in Florida by the industry, notwithstanding the fact that net continues as the State now has 24 banks with $1 billion in interest margins (“NIM”) remained at approximately assets and the larger publicly traded community banks are 3.27% which is the lowest level since 2006. This low now trading at premiums of TBV. The number of banks NIM is being created by the replacement of maturing, based in Florida is now below 200 and the number is likely higher-yielding assets by lower-yielding assets which to continue downward as a result of FDIC takeovers and reflect the Federal Reserve’s “easy money” policies. mergers of healthy banks. The future challenge to the banking industry if the current “easy money” policies continue will be the -Benjamin C. Bishop, Jr. generation of quality diversified loans. Chairman 2 Allen C. Ewing & Co. Industry Update – 2Q13 FLORIDA & SOUTHEASTERN BANK OPERATING RESULTS RETURN ON AVERAGE ASSETS EFFICIENCY RATIO Annualized Median Median (Tax equivalent ratios) 0.70 0.65 88.0 0.60 0.60 85.5 0.56 86.0 0.60 84.1 0.51 83.3 82.8 82.8 0.50 0.45 84.0 0.41 (%) 82.0 0.40 0.34 0.34 0.36 (%) 80.0 Ratio 0.30 77.7 78.0 76.0 ROAA 0.20 75.2 75.4 76.0 74.6 Efficiency 0.10 74.0 0.00 72.0 ‐0.10 70.0 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Florida Southeast Florida Southeast TANGIBLE EQUITY / TANGIBLE ASSETS NPAs / ASSETS Median Median (Government guaranteed NPAs not included) 11.00 6.00 10.23 10.10 10.16 9.96 9.85 9.85 9.91 (%) 5.00 10.00 9.59 9.61 9.71 4.35 4.41 4.33 3.76 (%) 4.00 Assets 3.47 3.49 3.30 3.21 9.00 3.02 2.75 Tang. 3.00 Assets / / 8.00 2.00 NPAs Equity 7.00 1.00 Tang. 6.00 0.00 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Florida Southeast Florida Southeast NET INTEREST MARGIN LOAN LOSS PROVISIONS Median of the 191 Florida Based Banks Totals and Average for 191 Florida Based Banks 5.0 250,000 1,400 4.27 4.24 4.16 4.07 4.07 (%) 1,200 4.0 200,000 ($000) ($000) Yield 1,000 3.0 3.59 3.60 3.55 3.45 3.52 150,000 800 Provisions Provisions 2.0 Equivalent 600 Loss Loss 100,000 Tax 1.0 Loan 400 Loan 0.75 0.0 0.68 0.65 0.58 0.55 50,000 200 2Q12 3Q12 4Q12 1Q13 2Q13 Total Average 0 0 Net Interest Margin (FTE) (%) Yield on Earning Assets (%) Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Cost of Funds (%) FL Statewide Loan Loss Provisions Average Loans Loss Provisions NOTE: Florida results based on 191 banks. Southeast states include Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. 3 Allen C. Ewing & Co. Industry Update – 2Q13 CAPITAL MARKETS CAPITAL OFFERINGS OF SOUTHEASTERN BANKS INTEREST RATES Banks with Assets less than $5 Billion & Not Issued Under TARP June 30, 2013, December 31, 2012, and June 30, 2012 Senior Debt Sub Debt 06/30/13 12/31/12 06/30/12 YTD 2013 TruPS Federal Funds 0.07 0.09 0.09 Pref Stock Common Stock Prime Rate 3.25 3.25 3.25 2012 6 Month T Bill (BEY) 0.10 0.11 0.16 1 Year Bill (BEY) 0.15 0.16 0.21 3 Year T Note 0.66 0.36 0.41 2011 5 Year T Note 1.41 0.72 0.72 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 10 Year T Note 2.52 1.78 1.67 ($ in millions) 30 Year T Bond 3.52 2.95 2.76 (In Thousands) 2011 2012 YTD 2013 1 Month LIBOR 0.19 0.21 0.25 Senior Debt $5,450 $10,000 $0 3 Month LIBOR 0.27 0.31 0.46 Sub Debt $13,729 $20,247 $0 TruPS $0 $0 $0 6 Month LIBOR 0.41 0.51 0.73 Pref Stock $537,710 $640,516 $153,697 1 Year LIBOR 0.69 0.84 1.07 Common Stock $1,052,675 $378,336 $237,300 NOTE: Southeast states include: Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia PRICE / TANGIBLE BOOK RATIO YIELD CURVE January 1, 2013 – June 30, 2013 June 30, 2012 – June 30, 2013 150.0 3.0 143.9 145.0 2.5 140.0 2.0 (%) Yield 135.0 1.5 Treasury 1.0 130.0 0.5 125.0 0.0 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr 30 Yr 120.0 Jan Feb Mar Apr May Jun FL Banks 06/30/13 12/31/12 06/30/12 NOTE: Florida Banks include: BKU, CCBG, CBF, CSFL, EVER, FUBC, SBCF, and SGBK. 4 Allen C. Ewing & Co. Industry Update – 2Q13 FLORIDA- BASED BANK REGIONAL RESULTS SECOND QUARTER 2013 PERFORMANCE VS SECOND QUARTER 2012 PERFORMANCE Financial Ratios are Medians (%) – Dollars in Millions ($MM) Panhandle 2Q‐13 2Q‐12 Northeast 2Q‐13 2Q‐12 East Central 2Q‐13 2Q‐12 No. of Banks 17 18 No. of Banks 10 11 No. of Banks 28 29 Aggregate Assets $5,790 $5,884 Aggregate Assets $22,284 $19,323 Aggregate Assets $10,652 $10,772 Equity/Assets 9.79 9.77 Equity/Assets 8.45 7.62 Equity/Assets 10.28 10.29 ROAA ‐0.03 ‐0.06 ROAA 0.16 0.11 ROAA 0.44 0.33 NPAs/Assets 4.48 6.70 NPAs/Assets 5.88 7.49 NPAs/Assets 4.50 5.01 Texas Ratio 25.81 48.46 Texas Ratio 57.27 74.41 Texas Ratio 26.09 26.02 Net Interest Margin 3.57 3.52 Net Interest Margin 3.44 3.48 Net Interest Margin 3.66 3.66 North Central 2Q‐13 2Q‐12 No.