On the crazy quilt of South Florida financial institutions, community banks occupy a prominent space among the scores of domestic and foreign-owned commercial banks, credit unions, online banks, savings and loan associations and other financial firms.
Traditionally, community banks were small, locally owned enterprises. That’s no longer the case. Florida’s 110 community banks come in different sizes — one with only a single main office, another with a network of 87 branches statewide. Some are owned by locals, others by foreign investors, and still others by international banks. Some are even publicly traded. And some are regulated by the federal government, some by the state.
Regardless of size, the 19 community banks in Miami-Dade County and six in Broward provide customers in their cities and counties with a full range of financial services, personal attention and rapid loan decisions that small business owners and individual clients often cannot obtain from giant national and international banks based outside the state. They generally focus on business customers.
“Community banks are embedded in the community, and their bankers have a deeper understanding of the community and its needs,” said Manuel Lasaga, clinical professor in the Department of Finance at Florida International University’s College of Business, a veteran bank executive and international banking expert. He is also president of StratInfo, a Miami-based economics and consulting firm.
“They provide more personalized services [than the big national banks] and more flexibility in structuring a loan. Loan decisions are made locally,” Lasaga said. “Community banks are also more committed to small business lending.”
This is especially true at times of financial stress, when banks with out-of-state headquarters may impose lending restrictions across the board, even when not all communities in their market areas are the same. These restrictions can strangle the supply of credit to small business.
Key role for community banks
“Not just in our state, but across the nation, they provide almost 50 percent of small business loans and around eight percent of agricultural loans,” said Drew J. Breakspear, Commissioner of the Florida Office of Financial Regulation, who spoke to the Miami Herald before he resigned on June 30. He also worked for many years in international banking and management consulting. “We have large and small farms in Florida, but when you’re a farmer living in a small town, the local community bank is essential. If you have to drive 25 miles or more to get to a bank, it makes life difficult.”
Some community banks are chartered and supervised by the federal government (Office of the Comptroller of the Currency, Federal Reserve system) and others are chartered and supervised by the Florida Office of Financial Regulation.
All community banks in Florida are members of the Federal Deposit Insurance Corp. (FDIC), which insures deposits for $250,000 per depositor per insured bank. This means that if the bank fails, deposits up to $250,000 or more are covered under FDIC limits and rules. The FDIC also supervises its member banks.
Traditionally, community banks in South Florida were small, locally-owned enterprises — like Miami’s Grove Bank & Trust, founded in 1926. These banks operated from one to a handful of branches and concentrated their services on business sectors and personal banking in their communities. Their customers typically include local businesses, local government plus individuals and small businesses from upscale neighborhoods and sometimes small businesses and individuals from lower-income sectors who felt they were not adequately served by big regional and national banks.
Today South Florida’s community bank sector still predominantly consists of small institutions, with fewer than 10 branches and assets of less than $1 billion. But it also embraces large regional and multi-regional commercial banks with more extensive branch networks and assets of $10 billion and more.
Locally owned Grove Bank & Trust now has five offices in Miami-Dade and more than $630 million in assets, according to recent figures from BauerFinancial Inc., an independent research firm based in Coral Gables that analyzes and rates banks and credit unions.
Bank assets include deposits, government securities and cash and are one indicator of a bank’s size.
Doral-based U.S. Century Bank is one of the large, locally-owned community banks and ranks as one of the largest Hispanic-owned commercial banks in the state.
Founded in 2002, Century has 13 branches (12 in Miami-Dade and one in Broward), 181 employees and more than 15,000 clients, the bank said. For the first quarter of 2018, the bank reported assets of $1.1 billion, total loans of $802.9 million and a net profit of over $2 million, all up from the same period a year earlier.
“We’ve grown because I truly believe we are a leader as to customer service, product delivery and innovation,” Luis de la Aguilera, U.S. Century Bank’s CEO, told the Herald. “We pay close attention to the services our clients need and have developed a robust product offering.”
The company, he said, has invested in new technology to lower transaction costs and has hired the best people to work with key clients — small businesses, entrepreneurial ventures and start-ups — on a personal level. Century can make credit decisions much more quickly than the large banks, and this is important for entrepreneurs who need loans to grow their businesses, he said.
U.S. Century Bank has recovered from serious problems threatening its solvency — bad real estate loans and a lack of capital — that appeared during the financial crisis, de la Aguilera said. The bank obtained $65 million in new capital in 2015, diversified its loan portfolio, and improved its asset quality.
As a sign of the bank’s improved performance, BauerFinancial, the rating agency, raised its two-star rating (“problematic”) three years ago to four stars (“excellent” financial health).
Today’s BankUnited born from the ashes of a failed bank
BankUnited is the largest independent Florida-based bank, and last year was rated by the Federal Reserve at the 50th largest commercial bank in the U.S. by assets.
A publicly traded company, Miami Lakes-based BankUnited has 1,800 employees, (950 in Miami-Dade), 87 branches in Florida (including 22 in Miami-Dade, 22 in Broward and 15 in Palm Beach) and five branches in the New York metropolitan area.
For the first quarter of 2018, the bank reported assets of $30.4 billion, total deposits of $22.2 billion and net income of $85.2 billion, all higher than the first quarter of 2017.
While some bankers reject the notion that a very large institution like BankUnited could be considered a community bank, Rajinder P. Singh, the bank’s president and CEO, pointed to some basics.
“We’re really a South Florida bank — that’s our center of gravity and that’s where most of our branches are located,” Singh told the Herald. “We’re a bi-regional bank, but we have the soul of a community bank. Our sweet spot is small business and mid-market companies. This is a people business, and we have the ability to enlist good people to help you build a business.”
BankUnited is a large commercial and community bank with operations in Florida and the New York area, he said. Key to its success is knowing its clients well and keeping in close touch with them. And even though BankUnited is a large commercial bank, it does not have the huge bureaucracies of the mega-banks and can make decisions much more quickly.
Rating agency BauerFinancial assigned BankUnited its highest, five-star rating (“superior”) as of year-end 2017.
Today’s BankUnited N.A. grew out of the failure of BankUnited FSB (Federal Savings Bank), a savings institution, in 2009. This was one of the largest bank failures in the U.S. that year.
The FDIC took over the old BankUnited FSB and later the same year, new private investors purchased the bank. One of the investors was Wilbur Ross, currently the U.S. Commerce Secretary, who formerly specialized in buying distressed companies. Ross and his firm, WL Ross & Co., are no longer shareholders.
The new owners and management kept the bank’s headquarters and main operations in Florida, where BankUnited enjoys widespread name recognition. They reformed every aspect of the bank and remade the institution into a premier commercial bank, Singh said.
Why are customers attracted to community banks?
A husband-and-wife team who own and run different companies in Miami-Dade and Broward counties switched their banking business from big banks to U.S. Century Bank.
“A community bank like Century is all about the customer,” said Jimmy Knips, owner of The Christmas Palace stores in Miami Lakes and Fort Lauderdale and LED Are US, a supplier of LED commercial and industrial lighting. “You’re not just a number. We’re growing and we need credit decisions quickly. I can pick up the phone and get the CEO. At the big banks I worked with before, they were slow and uncooperative.”
Knips’ wife, Vilma Vilariño, owns and runs the Las Vegas Cuban Cuisine restaurants, a family business. “We moved our business and personal accounts from big banks to Century over a period of years because of the personal attention we received,” she said. “Small businesses can grow faster with this kind of banking relationship. They work hard for small businesses like ours. We didn’t receive that kind of service from the large banks.”
Consolidation to continue in banking sector
Failures during the Great Recession and a longstanding trend in U.S. bank consolidations have worked to reduce the number of banks operating across the U.S., as well as in Florida.
For example, the Federal Reserve Bank of St. Louis charted the decline of commercial banks (including community banks) from 14,400 at the end of the first quarter of 1984, to 7,422 in the first quarter of 2006 (before the financial crisis began) to 4,852 at the end of March 2018.
Former Commissioner Breakspear of the Florida Office of Financial Regulation told the Herald that there were 307 operating banks in Florida (both national and state charted) at the end of 2008, a number that had fallen to 127 by the end of March 2018. Some of these were failures that merged with other banks.
The FDIC reported that there were 75 bank failures in Florida between 2000 and the end of 2017, and 94 in Georgia. These two states lead the nation in bank failures.
“Typically, the FDIC takes over a failed bank, arranges a merger and moves all the accounts to another bank,” Breakspear said. “This is often a seamless operation and customers can sometimes access their accounts at the acquiring bank after a few days.”
Many community banks disappear because of acquisitions, are placed on watch by regulators or fail and are taken over by other banks.
As an example, Weston-based Florida Community Bank (FCB) was set up in 2010. Its parent company, publicly-traded FCB Financial Holdings, also headquartered in Weston, took over eight failed Florida-based banks from the FDIC, including Peninsula Bank, Cortez Community Bank and First Peoples Bank, as a base for the new enterprise.
Earlier this year, it acquired Floridian Community Bank (Davie). So since 2010, nine banks have left the scene, becoming part of FCB.
Through its strategy of acquisitions and organic growth, FCB has become one of the largest banks in the state, with over $11.7 billion in assets, profits of more than $40 million (for the first quarter of 2018) and over 700 employees.
BauerFinancial gave FCB its top, five-star rating (“superior”) as of year-end 2017.
In April, media reports said the bank’s parent was studying a possible sale. FCB did not respond to a Herald request for comment.
Plans for a new community bank in Broward
Despite the continuing trend in bank consolidations, two veteran bankers are proposing a new community bank for Broward and Palm Beach counties headquartered in Hollywood, assuming the Office of the Comptroller of the Currency approves their charter application.
If successful, this would be the first new community bank to open in Broward since 2009.
“We see a niche for a community bank to meet the needs of smaller businesses in Broward and Palm Beach counties, because large banks are less willing to lend to them. They are more labor intensive and less profitable,” said Joe Dorsey, a banking veteran who was a top executive at Community Bank of Broward until it was acquired by Stonegate Bank in 2015.
“We already have substantial commitments in our goal of raising about $22 million in capital, all from local individuals with long-standing ties to the community,” said Jim Afflerback, who was executive vice president for operations at Regent Bank for 21 years, until it was also acquired by Stonegate in 2016.
“As larger banks continued to acquire smaller community banks one by one, we recognized the need for a new community bank to service Broward and Palm Beach counties,” Dorsey said.
If the bank obtains approval from the OCC and the FDIC, Dorsey will be the president and CEO and Afflerback the COO. They plan to open late this year, and eventually add branches in other parts of Broward and in Palm Beach County. The name of the proposed bank will be Coastal Community Bank N.A.
“Just seven years ago, there were 17 community banks in Broward,” Dorsey said. “Soon there will be only six headquartered here. Former customers reach out to us every day and tell us how frustrated they are with their banks. We’ll be offering the full range of banking services, and when you call, we’ll answer the phone. And we’ll know who you are. It’s our personal service that will make us stand out.”
Broward has almost 60,000 businesses and Palm Beach nearly 50,000, he said. Both counties have high growth, expanding economies and small businesses that want personal attention, professional service and prompt decisions from bankers who live and work in their communities.
Winter Park National Bank in Winter Park opened last year, the first new bank in Florida since the financial crisis. Aside from the promoters of the new Coastal Community Bank, there is at least one more application for a new bank charter in the state.
While consolidation among banks in Florida and throughout the U.S. will continue, community banks will survive and remain important players, experts say. And the entire banking system is much safer than it was before the financial crisis due to new regulation and tougher oversight.
During the crisis, “We lost over 100 banks in the state, but those that remain are much better capitalized and efficient,” said Miami-based Kenneth H. Thomas, president of Community Development Fund Advisors. He is an expert on banking and finance who was a consultant to federal banking authorities and a longtime finance lecturer at The Wharton School. “The strong and best capitalized banks made it through the financial crisis, and are stronger now and acquiring other banks,” Thomas said.
Community banks will survive “by serving unmet banking needs at a reasonable price that other banks do not want to serve.”
Thomas also noted that South Florida will continue to attract new banks and encourage expansion of existing financial institutions. It is the capital of Latin America, he said, the economy and population are expanding, the region attracts huge retail deposits. Moreover, South Florida is a center for international business and trade finance, as well as for wealth management.
While FIU’s Lasaga sees several strengths in region’s community banks, he also points to weaknesses such as:
▪ Their relatively smaller size limits their opportunities for cost economies, as well as the size of the loans they can make.
▪ Their scope of products and services is narrower than for large banks.
▪ They face higher relative costs associated with regulatory demands.
▪ Some are locked in a geographical area and can’t diversity the risk of their loan portfolios across broader areas.
▪ Investment in technology is essential, as brick-and-mortar banking is replaced by online.
▪ Profit margins have not recovered fully from the financial crisis.
In addition, these banks could benefit from outsourcing certain services — like foreign exchange — to larger banks. They should also study expanding to a high-growth area like Orlando, work to develop new business in international trade and train personnel in new technology.
Some of the banks discussed in this article have already taken these steps.
Nonetheless, Lasaga said, these banks are resilient. “I think community banks in South Florida have a very good outlook thanks to the health of the economy.”
What is a community bank?
“There’s no hard and fast definition of community banks,” said Miami-based Kenneth H. Thomas, president of Community Development Fund Advisors, an expert on banking and finance, consultant to federal banking authorities and a longtime lecturer in finance at The Wharton School.
“The most common definition is under $1 billion in assets, but that has been expanded greatly in recent years to include community banks like City National Bank of Florida, which is now over $10 billion.
“A big advantage of a community bank is that you can run into a top officer or even the president at Publix or at a fair or some local event, instead of getting on a plane to New York City or San Francisco or Charlotte to try to see these top people.”
Bank assets refer to loans, government securities, cash and other items, and represent one measure of institutional size.
Drew J. Breakspear, who was commissioner of the Florida Office of Financial Regulation until he resigned June 30, has a broader view of community banks. “I’d say all of them are community banks,” the commissioner, whose office oversees more than 120 banks chartered in Florida, told the Herald. “We don’t say, ‘This is a community bank and this is not.’”
Regardless of size, experts agree that a community bank’s core functions are knowing their communities’ needs, forming close banking relationships with local business owners and residents, providing commercial and real estate loans to small businesses and personal or mortgage loans to individuals. The also provide online banking, checking and savings accounts, credit cards, ATMs and other services.
Small community banks, often with only a few branches, traditionally have been established by local investors in Florida to supply loans and other financial services to the city or county where they’re located and help grow their economies.
These commercial and consumer banks work in areas where businesses want a close relationship with their bankers and need prompt decisions on loans and other transactions.
They circulate money in a particular area: Deposits made by customers in Miami-Dade are used to finance local businesses and personal loans, rather than sent to a big bank’s headquarters in another state to make multimillion dollar loans to corporate America.
In sparsely populated agricultural areas, a locally owned community bank is often the only financial institution in town.
Big national banks – like Wells Fargo, Chase and Bank of America – don’t call themselves community banks but assert that they also pay attention to small individual and business customers all over the country, assigning part of their loan portfolios to these clients. They stress their contributions to local communities, pointing to the many loans they make in each city to finance local projects.
A 1977 federal law, The Community Reinvestment Act, encourages banks to grant prudent loans in the communities where they operate, including low- and moderate-income areas, with stress on credit for affordable housing.
The Federal Deposit Insurance Corporation (FDIC), which insures individual depositors for at least $250,000, in the past said that community banks had assets of less than $1 billion, but now says that figure can go as high as $10 billion.
Some community banks are owned and managed by local people who want to promote economic growth in the cities and counties where they operate. Others are publicly traded or are owned by other financial institutions but nonetheless focus on local and regional economies.
They are all commercial banks that provide traditional financial services within a specific geographical area, like Miami-Dade or Broward counties. They may have one branch (their main office) or more.
Community banks in Florida are chartered and regulated either by the federal government (Office of the Comptroller of the Currency, the Federal Reserve system) or by the Florida Office of Financial Regulation.
In addition to providing protection for individual depositors, the FDIC also supervises its member banks. As of the end of March 2018, the FDIC insured deposits at 5,606 commercial banks and savings institutions nationwide, including the 124 FDIC-member banks operating in Florida as of year-end 2017.
Other banking institutions operating in Florida include credit unions, online banks, savings and loan associations (S&Ls) and investment banks.
—JOSEPH A. MANN JR.
Here are some community banks in Miami-Dade, Broward
A sample of community banks in Miami-Dade and Broward counties, their assets and headquarters. (In banking, assets refer to loans, government securities, cash, etc. and are one measure of a bank’s size.)
City National Bank of Florida (CNB)
Miami (owned by Bci, a Chilean bank)
Florida Community Bank (FCB)
U.S. Century Bank
Grove Bank & Trust
International Finance Bank
American National Bank
Hollywood (owned by National
Bank of Canada)
West Miami (recently acquired by Sunstate Bank)
Plus International Bank
Sources: Data from BauerFinancial (As of March 31), SEC documents and bank websites. Figures are rounded.