Even in a market as fiercely competitive as Florida, Orion Bancorp Inc. stands out.
The Naples company has more than doubled its assets since 2004, to $2 billion, and for two years running the Jacksonville investment bank Allen C. Ewing & Co. has rated it the state's top-performing community bank.
Ben Bishop, Allen C. Ewing's chairman, said that unlike other banking companies, Orion has not generated its rapid growth at the expense of its financial performance.
As of March 31 it had a return on equity of 19.07%, well above the average of 12.92% for banking companies in its asset class, according to Federal Deposit Insurance Corp. data. Its return on assets was 1.67%, well above the average of 1.39%. Its efficiency ratio was 41.71%, well below the average of 56.39%.
"They've enjoyed fabulous earnings, and at the same time they have enjoyed one of the higher growth rates in the state," Mr. Bishop said. "We didn't pick them" for Allen C. Ewing's rating as the top community bank by performance ratios. "They earned it."
But will Orion's success last? Its portfolio is heavily concentrated in construction and development loans - particularly those for single-family home construction - and regulators are growing increasingly wary of banks with high commercial real estate exposure.
In early January the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC, and the Office of Thrift Supervision proposed guidelines that would require banks with high concentrations of commercial real estate loans to step up risk management, tighten underwriting policies, and potentially hold more capital.
At the same time economists have identified early signs of a possible slowdown in the Florida housing market.
"The slowing pace of home sales and growing inventory levels from a year ago suggest that marketing times may lengthen, potentially leading to slower price gains in 2006," the FDIC said in its most recent Quarterly Banking Profile. And a study released last month by National City Corp. and the consulting firm Global Insight Inc. reported that Naples - where Orion has five of its 16 branches - is the most overvalued housing market in the country.
But Jerry Williams, Orion's president and chief executive officer, said it has been making commercial real estate loans for a long time and understands how to manage the collateral.
"I feel strongly that we have strong systems in place and strong management in place," he said. "It's not something that I worry about."
The company has not charged off any of its construction and development loans in at least 15 years, according to FDIC data.
Mr. Williams also said that loans on single-family developments are less risky than those on office buildings and strip malls.
"The state of Florida picks up 1,000 people a day, and they have to live somewhere," he said. "That's why we like the housing side."
Mr. Bishop said he is also confident that Orion's good fortunes will continue.
Naples' housing market may be overvalued, but Collier County, where Naples is located, and the neighboring Lee County are "two of the fastest-growing counties in the state both in terms of population and deposits," he said.
Eight of Orion's 16 branches are located in the two counties. It also has five in the Florida Keys and three in Sarasota.
Location is not all Orion has going for it, according to Mr. Bishop. "By virtue of being a local and independent bank, they have an edge over the big guys that are based in Atlanta and Charlotte."
He acknowledged that Orion may have to begin limiting its commercial real estate portfolio and raise capital after regulators finalize their guidelines, and that doing so could slow its growth and lower its returns.
However, "I doubt it would put them in serious trouble," Mr. Bishop said. "So maybe they'll have an 18% ROE. Nobody will cry - that's wonderful."
According to the proposed guidance, regulators would consider a bank highly concentrated in commercial real estate lending if its commercial real estate loans equaled or exceeded 300% of its capital, or if its loans for land, land development, and construction equaled or exceeded 100% of capital.
Orion would be considered highly concentrated in commercial real estate by both those measures. As of March 31 its commercial real estate loans equaled 717% of its capital, and its loans for land, land development, and construction equaled 511% of capital. The construction and development loans on its books increased 84% from a year earlier, to $888 million at the end of the first quarter.
Given its rapid growth and the demands on its capital - its 113% loan-to-deposit ratio is way above industry averages - Mr. Bishop said he would expect Orion to go public at some point.
But Mr. Williams said one major reason Orion has been successful is that, as a private company, it does not have to use resources to comply with the Sarbanes-Oxley Act and other regulatory requirements.
"It sounds like a lot of heartburn," he said.
And even though he gets regular calls from parties interested in buying his company, Mr. Williams said he has no plans to sell.
Orion "was not built to flip," he said. "It's been independent for 22 years."
