It seems that everybody loves Florida these days, especially if by "everybody" you mean bank executives. We've seen companies ranging from Fifth Third
In order to continue its own growth plans, the company is turning to spending on marketing and expansion to build out its niche. Unfortunately, that's having an impact on results. Overall net income dropped sharply this quarter, hurt in part by a large earnings reversal at the Ryan Beck investment business, but certainly not helped by a 14% drop in net income at the bank operations.
At the bank, net interest income dropped 1%, non-interest income jumped 40%, and non-interest expense rose 24%. Put it all together and you have a pretty uninspiring performance in terms of efficiency and returns on equity. By the same token, though, management is not running the bank to maximize returns for today -- it's continuing to push a high-service model and de novo branch expansion, and both of those cost money.
The balance sheet, likewise, requires a little explanation. Year-on-year growth in average deposits was modest, but the bank continues to secure a large amount of attractively priced (that is, cheap) demand deposits. As for loans, that's where things get a little stranger. A drop in loan balances is typically a bad thing, but in this case, at least some of the decline comes from conscious decisions on the part of management to avoid riskier lending (like high-rise condos).
Last but not least, the company has yet to dispose of its Ryan Beck investment subsidiary. Though an IPO was in works, the poor results seen with the Cowen
All in all, this is a company (and a stock) that is going to require some faith and some patience. And while management's plans may ultimately result in a stronger bank, folks looking for more impressive near-term numbers should look elsewhere.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).