Face Off: Painting a picture of the current state of the banking industry

Face Off: Painting a picture of the current state of the banking industry

2022-11-23T12:13:17-05:00November 23rd, 2022|Banking & Finance, Miami|

Writer: Jerrica DuBois 

2 min read November 2022 — As the economy experiences change and national issues, like inflation and rising interest rates, persist, leaders in the banking sector continue to adapt to the shifting landscape. Lloyd Devaux, president and CEO of Sunstate Bank, and Brian Hagan, Florida market president of First American Bank, shared their thoughts with Invest: on the current state of the banking sector and navigating the challenges that the industry faces.

 

How would you assess the current state of the banking industry in South Florida currently?

Lloyd Devaux: Bank acquisitions have continued, so the number of banks is down. The stock market turned a little bit when the correctionstarted a few months ago, so that slowed down acquisitions because the banks usually buy with stock. Lending has been slower, but still okay. The residential real estate market went crazy as more people moved to Florida to get out of some of the other higher tax states, so inventory of houses is low, and prices are up. That said, with inflation being so high and interest rates going up, I expect to see the economy slow down. We still have a shortage of inventory in housing and real estate, but this market is also leveling off.

 

 

Brian Hagan: It is challenging because we just came out of a period of very low margins. Interest rates and deposit rates were very low and bank margins industry wide were strained. There are growth opportunities as always but you have to be careful about where you extend your capital because there are risks emerging as well. 

 

 

 

What challenges has the significant influx of people to South Florida presented? 

Devaux: There are several challenges today due to high inflation and increasing interest rates. However, it is most likely just a transition period. We could see an entirely different economy in the next year or two, perhaps a deeper recession or maybe just a soft landing, depending on the impact that the rapidly increasing interest rates have on inflation and the job market.

One of the biggest challenges is affordable housing. Rents have gone up 30% to 40%. Affordable housing in South Florida has been an issue for a number of years, but it has gotten much worse because of inflation and with so many people relocating to the area. Additionally, there is just not a lot of land left to develop more housing.

Hagan: The demand for housing has made housing unaffordable for a number of people and, of course, in Miami, we are always concerned about commute times and the transit system. There are additional strains that lead to rising costs, which make it difficult for many of our customers and employees to live and work here. If this continues, it would become a very significant concern.  

What is the role of the bank as we go through this transition period?

Devaux: Community banks like Sunstate Bank enable small businesses and consumers. They provide small businesses with the capital they need to grow and create jobs. They help consumers buy homes, get married, go to college, put a child through college, etc. That’s what banks do. We provide capital, and we create opportunities that grow communities.

We could see the economy start slowing down some. Lending is already slowing down as interest rates increase, and especially for banks in the residential mortgage business. Our role is to make sure that people and businesses have access to the capital they need.

What is your analysis of employee burnout in the industry?

Hagan: It is a real problem and the solutions are tough. Our senior leaders stay in touch with their teams regularly and provide an atmosphere of support and encouragement. The engagement and culture are important to us and are most easily conveyed in person but how we combat the burnout is by being flexible about work-at-home options. Our challenge is to continue our engagement and culture-building while providing this flexibility. We have to find the balance between the two.  

For more information, visit: 

https://www.sunstatefl.com/ 

https://www.firstambank.com/