Dade county federal credit union

Many banks with ambitions to grow in the southern United States, or in Latin America, have found that a presence in South Florida is a key piece of the strategy. There are billions of reasons to do banking business here.

The offices of domestic banks and savings institutions in South Florida had deposits totaling $111 billion--or 42 percent of the total deposits in the state of Florida--as of June 30, 2003, the latest date for which the Federal Deposit Insurance Corp. (FDIC) has such data. And that figure has been fast growing: Deposits in Miami-Dade, Broward and Palm Beach offices grew by $10 billion in the 12 months from mid-2002 to mid-2003.

In order to capture that growing base, bank after bank has extended its branch network across the tri-county area. At the same time, consolidation has been the trend, with larger institutions swallowing up smaller ones. Hence, despite the $10 billion in deposit growth from 2002 to 2003, the total number of bank offices in South Florida grew by just seven during the same period, incrementally expanding the three counties' count to 1,398 offices--still nearly one-third of all bank offices in the state of Florida. One result of that has been the growth of average deposits by about $20 million per branch during the last five years.

The lack of rampant branch growth doesn't mean that banks aren't expanding across South Florida, says Evan Rees, president of Union Planter's operations in Broward and Palm Beach counties. Rees points to the increased popularity of automated teller machines and online banking. "There's a lot of people that never go into a bank office and do everything electronically," says Rees. "And that number is increasing."

So is the scope of South Florida operations at many financial institutions. As more businesses operate throughout South Florida, instead of in just one of the three counties that make up the region, banks here have pursued prospects across county lines. In South Florida, "we are just following the customer," says Rees, who himself lives in Miami-Dade and works in Broward. "The regional banking business is great."

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The impetus for regionalism in banking is also driven by economies of scale. Like any other business, if you are trying to advertise a retail presence, marketing costs go down with each new location. Consolidating backroom operations, which can serve all three counties, adds to the cost savings per transaction.

In a related marketing vein, larger institutions with nationally known brands like Bank of America, Citibank, Union Planters, Wachovia and Washington Mutual have emerged as dominant regional depositories, partly because their names are known to South Florida residents who have recently moved here from other states.

Some ambitious financial institutions rooted in South Florida also take a regional approach. This year, for example, Miramar-based Eastern Financial Florida Credit Union will increase to 16 from 12 the number of branch offices it operates in South Florida. The new offices will open in the Kendall and Doral sections of the Miami area, in Pembroke Pines, and in Boca Raton--the credit union's first branch in Palm Beach County.

"We're shooting for the four offices this year and the likelihood is we'll add another two next year," says Mark Holmes, marketing director of Eastern Financial, which began as an exclusive service for employees of defunct Miami carrier Eastern Airlines. It is now one of Florida's largest credit unions, with $1.8 billion in assets and more than 185,000 members.

Smaller financial institutions that lack a regional branch network to gather South Florida deposits often cross county lines anyway, via regional lending. Consider the experience of Miami-based Total-Bank, a domestic institution with $550 million in assets and 13 offices in Miami-Dade County.

"Although we don't have branches in Broward or Palm Beach," says Mark Silverstein, TotalBank's senior vice president for retail banking and marketing, "some of our commercial lending activities in South Florida extend up to those areas."

While most banks in South Florida are organized by county for the sake of administrative convenience, county lines are beginning to blur for some. One innovative approach has been taken by BankUnited. With $8 billion in assets, it is now Florida's largest home-grown bank, but it uses a "granular" strategy for its organization, says executive vice president for marketing Carlos Fernandez-Guzman.

"We are taking a micro-market approach, grouping branches that serve similar markets based on lifestyle as much as geography," says Fernandez-Guzman. One organizational unit, for example, consists of three branches that are not close to each other, but serve condo retirees. Another grouping serves small business. "We try to group them into micro markets that are managed like the old unit banks. This cuts across county lines," he says. "We have a northern county-line market with branches in Aventura, Hallandale and Hollywood, which are very similar markets."

In the international banking sector of South Florida, doing business "in the region" often means loan-making and deposit-taking to and from the foreign sources that surround South Florida in concentric circles. "Central America, the Caribbean, parts of South America--it all ties into this market," says Dennis Nason, senior partner of financial services executive search firm Nason & Nason. "Looking at regionalism from a financial standpoint, these link to South Florida. We are the most important commercial center for the region."

Coral Gables-based International Bank of Miami, for example, is a federally chartered and regulated U.S. bank that has gotten about half of its deposits from foreign citizens, from such countries such as Brazil and Venezuela. Its name has local appeal, too, especially "if you are a foreign national and you are relocating to Miami," says Al Valdes, chairman, president and CEO of the 40-year-old institution.

But in Greater Miami, where there seems to be a bank office representing almost every major country in Europe and Latin America, no single institution has a lock on the banking business of foreign nationals who reside here. Foreign banks with Miami-area offices have a competitive edge only in catering to customers born in the countries where the banks are headquartered, says Valdes. "They do a good job serving people from their home countries."

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Attracting deposits can be easier than investing the money, of course. For Total-Bank and others, residential mortgage lending has grown fast in recent years, but higher interest rates "may create a slowdown," Valdes says. Putting money to work in trade finance has been difficult, meanwhile, because economic weakness in Latin America "presents a challenge."

Some banks set up shop across South Florida mainly to take deposits and lend the funds elsewhere in the United States. Alabama-based Colonial BancGroup, for example, just expanded its presence in Florida and expects to use its fattened Florida deposit base to help fund commercial lending in Dallas and Atlanta. Colonial recently acquired P.C.B. Bancorp and its four banking subsidiaries, including Premier Community Bank of South Florida, based in Fort Lauderdale.

"We're really focused on Florida both as a long-term growth market and a deposit-taking environment," said Sarah H. Moore. Colonial's executive vice president and chief financial officer, at an April 27th investment conference. "They're so rich in deposits, and it's growing every day. We're really focusing our retail efforts in the state of Florida, building out that franchise, so we can fund our earning-asset growth in the Atlanta and Dallas markets."

Some bankers based in South Florida, however, are taking the lead in regional economic development by creating more lending opportunities in their own backyards. "The better you make your community, the better it's going to be for your bank." says Rees, who is this year's incoming chairman of the Greater Fort Lauderdale Chamber of Commerce.

"We want to be the voice of business," Rees says, especially with respect to state legislative initiatives. Unlike the factions of South Florida. "the northern part of the state looks out for each other. So when we go to Tallahassee, it can't be: Dade wants this, and Broward wants that, and Palm Beach wants something else."