Knight Ridder/Tribune Business News

Oct. 11 — Freshly laid concrete is drying outside Bristol Bank President Pete Dunbar’s office, while he irons out contracts on data processing systems, orders stock certificates and interviews senior lenders in anticipation of the Coral Gables bank’s opening.

Across the county line, in Cooper City, newly hired Horizon Bank employees are booking mortgages out of cramped, unadorned temporary space, while President Tom Lunak anxiously awaits the delayed move to the new thrift’s just-completed Pembroke Pines headquarters.

Bristol and Horizon are just two of more than a dozen new banks and thrifts sprouting up in Broward, Miami-Dade and Monroe counties, as Florida rides the crest of a wave of new banks sweeping the nation.

Like the growth of new trees years after a forest fire, a surge in bank consolidation earlier this decade has bred a rush of new bank applications. Investors say they are taking advantage of a market ripe for the taking, where displaced or dissatisfied bankers and disaffected customers have converged, in an industry reveling in a run of record profits.

“It’s a good time to be a banker. It’s hard not to make money,” said David Barr, spokesman for the Federal Deposit Insurance Corp. “Banks are going on eight years of record profits, the economy is good so people want loans, people are repaying the loans, and who knows — five or six years down the road, a big bank may buy you out and you’ll hit the jackpot.”

Since 1997, Florida has led the nation with 47 new banks chartered through June, including 18 in the first half of 1999, alone. In Broward, Miami-Dade and Monroe counties, at least 13 new banks and thrifts have either recently opened their doors or applied for regulatory approval.

Among the open banks are Florida Savings Bank in Pinecrest; Home Federal Bank of Hollywood; Horizon Bank, which will soon move to Pembroke Pines; Key West Bank; Landmark Bank, in Fort Lauderdale; Sofisa Bank of Florida, in South Miami-Dade; and TransCapital Bank, in Hallandale.

Other proposed banks that have applied for charters but have not yet opened include Beach Bank, in Miami Beach; Bristol Bank; CoastBank in Fort Lauderdale; Coastal Community Bank in South Miami-Dade; OptimumBank.com, in Plantation; and United American Bank, in the Doral area of Miami.

Many are being organized by former board members and executives of local banks that were recently sold, who are duplicating — or reinventing — their blueprints for success:

United American’s chief organizer, for example, is Ernest Halpryn, who was chairman of Central Bank, purchased by BankUnited last year.

Florida Savings Bank was started by investors including Bernard Janis, the primary shareholder of Consumer Savings Bank, also sold to BankUnited last year.

OptimumBank.com is backed by the former majority owners of Suncoast Savings and Loan, including its chairman, Albert Finch. That bank was also sold to BankUnited, in 1996.

And TransCapital Bank was organized by the majority shareholders of Transflorida Bank, sold to Union Planters last year.

Other new or proposed banks are backed by a local Who’s Who of prominent, well-heeled, investors, attorneys, business people and real estate developers, who are banking on a strong return for their sizable investment:

Patricia Frost, wife of Ivax Chairman Phillip Frost; Stearns Weaver attorneys Gene Stearns and Alison Miller; and attorney Gilbert Haddad, for example, are among those backing Bristol Bank. Each is putting in nearly 10 percent or more, of the $6.5 million capital investment.

Attorneys Stephen Zack and Michael Kosnitzky; CPA Richard A. Berkowitz; former Mount Sinai Chief Executive Fred D. Hirt and former Jefferson Bank Chairman Arthur Courshon are among those behind Beach Bank.

Salomon Smith Barney executive Peter L. Bermont — who has also invested in Beach Bank; Heico Chairman Laurans Mendelson; and Firehouse Four co-owners Thomas Richardson and Augusto Vidaurreta are among those backing Horizon Bank.

Phillip Frost is a director of United American. And developer Charles E. Cobb Jr. is an organizer of Florida Savings Bank.

All the banks’ owners emphasize that their purpose is to fill a void in the community, bringing back personal attention to a business increasingly characterized by nameless, faceless service.

Across the board the new banks say their staff members will know their customers and call them by name.

At recently opened Key West Bank, it’s even guaranteed. If a teller forgets to use the customer’s name, the customer can take a quarter from a jar at every teller stand, said President and Chief Executive Phil Hogue.

And at Bristol Bank, each customer will be introduced to the entire staff when they open an account.

People like Kevin Deuel, president and owner of the Miami import/export firm Agramericas, say they are open prey to the service lure.

“I look for a local bank that can take care of my business, where there’s somebody I can talk to,” said Deuel, who has lost his personal contacts due to repeated mergers, and plans to take his business to Bristol Bank. “When I find that, that’s where I open my account. That’s what I want.”

At the same time, the new banks promise that they are creating institutions for the long haul — although some reluctantly admit that they would have to consider offers to sell in the future.

Banking experts predict that within a decade, many of the new banks will have merged with larger banks. A sale can provide an exit strategy allowing investors to cash out at about 2.5 times book value.

Banks controlled by a handful of investors are most susceptible to sales offers, experts say, while those that plan to go public at least offer shareholders another means of cashing in their shares.

“Every bank will say it’s here for the long run to serve the community,” said Miami banking analyst Ken Thomas. “But in reality, in most cases, the investors are looking at it purely as a business opportunity where they can invest in a start-up bank, and they can hopefully sell out in five to 10 years down the road, and profit from it.”

Richard Hunt, chairman and chief executive of Kendrick Pierce & Co., a Tampa investment banking firm specializing in the financial services industry, already sees the mergers across the horizon.

“They’ll all be sold in seven to 10 years,” said Hunt, who has worked on nearly 100 new bank applications, including 18 in Florida during the past five years. “That is the plan.”

And if the past is any prediction of the future, a Federal Reserve Bank study shows that of the banks chartered during the mid-1980s, nearly 50 percent have been sold to date. Another 25 percent failed as the economy faltered, and just 25 percent remain independent today, said Robert DeYoung, senior economist for the Federal Reserve Bank of Chicago.

Opening a bank is not for the weak, impatient or faint of heart. Heavy regulatory and capital barriers bar entry to only those willing to go through a rigorous and lengthy approval process that can easily stretch beyond two years. Business plans, market studies, investors and key executives must all pass regulatory muster.

Not only do regulators look into the character and profile of the owners and managers, but also their ability to prop up the bank if profits sag.

Banks are required to open with at least $5 million in capital, though most typically raise $6 million to $10 million, through a private placement. At least one proposed local institution, CoastBank, expects to raise $15 million through a private offering. And another proposed bank, Coastal Community Bank, has turned to the public market, launching an initial public offering to raise $10 million.

Some banks and thrifts, including Home Federal Bank of Hollywood, TransCapital Bank, and Horizon Bank, are establishing themselves as sub-chapter S corporations, eliminating double taxation. Rather than pay corporate income taxes, the bank divides its profits — or losses — among shareholders, to apply to their personal income taxes.

Raising capital, however, can be an agonizing process for any bank, and particularly for sub-chapter S corporations, which are limited to 75 shareholders — thereby raising the amount of money required of each investor.

“The two hardest things are finding an excellent management team and putting the investors together,” Hunt said. “The trend we’re seeing now as opposed to a year ago is that the director pool out there — the available pool for directorships — is becoming pretty thin, statewide.”

In fact, some bank organizers find the process just too cumbersome, or their investors lose interest or opt for other investments before the regulatory process is complete. Others fail to win regulatory approval and withdraw their applications.

The Floridian Bank, for example, which was proposed for Miami, withdrew its application in July 1997, seven months after receiving approval. Hunt, who represented the bank, declined to discuss the reasons.

Bank applications tend to come in waves, affected not just by merger activity, which leads to the availability of personnel and branch locations, but by the economy. Regulators say the current surge, in fact, may be hitting its peak, as markets become saturated.

Last decade, the number of new bank charters peaked in 1985, at 439. The number started dropping after that, and with the Savings and Loan crisis, low stock prices and increased regulation in the early 1990s, new bank charters lost their allure, said Keith Leggett, senior economist with the American Bankers Association in Washington, D.C. By 1993, only 68 charters were granted nationwide.

Last year, after four consecutive years of growth, the number of new charters rose to 218. And 125 have been granted during the first half of this year, alone.

In fact, as a percentage of the total banks operating, the current total is on par with the mid-1980s peak, said DeYoung, the Federal Reserve economist.

“They are definitely filling a market void — kind of like Mom’s home cooking in a sea of fast food places,” said Gerald Celente, director of Trends Research Institute in Rhinebeck, N.Y., and author of Trends 2000.

Florida is among the nation’s most desirable banking markets, analysts say, because of its fast-growing population and rich deposit base. After years of mega-mergers, more than 80 percent of the state’s deposits are now held by out-of-state banks and thrifts. NationsBank, based in Charlotte, N.C., is the largest bank in the state, with 24 percent of the deposits statewide, and First Union National Bank is second, with 17 percent.

Those banks and others nearly as large can offer various advantages, such as serving large corporate customers, offering multiple products and providing vast ATM networks.

But despite the predominance of major banks, and the plethora of other regional and community banks, investors of the new banks appear unafraid of the competition.

“To be successful, we don’t have to peel away much of their business,” said Michael Kosnitzky, chairman of Beach Bank’s organizing committee, “We just have to have the dissatisfied few.”

Moreover, backers of each bank and thrift argue that their bank serves a particular community. Many have a specific niche, such as real estate or small business lending. And all tout their service, which they say will set them apart.

“Everybody looks at the banking industry and says it’s impersonal and sterile,” said Robert Bonnet, president of Florida Savings Bank. “People aren’t interested in how big [the bank] is or how many departments it has. They want to be treated like an individual and not a number.”

New bank organizers say they also have an advantage over many of their competitors because their systems are not only Y2K ready, but more technologically advanced.

Horizon’s checking account system, for example, allows employees to scan a customer’s driver’s license, photo and signature right on the computer screen, simplifying a teller’s customer identification.

Bristol’s documents will be input into a computer, making them easier to access, and eliminating the need for the costly storage of paper and microfiche.

And most of the banks open right off the bat with Internet banking.

At the same time, they can serve as a throwback to earlier days.

Florida Savings Bank, for example, offers passbook savings accounts, which are popular with children, Bonnet said. And bank employees even pick up deposits at Mary Mabjeesh’s restaurant, two miles from a bank.

“They’ll do anything to help you out and make it convenient,” said Mabjeesh, owner of The Muffin Tin.

Nevertheless, organizers of new banks will admit it’s not as easy as opening their doors and watching customers parade in.

Most banks don’t expect to post their first profit until after 18 months to two years.

To boost business, new banks and thrifts will often start out with above-average deposit rates and lower fees than their competitors. And their officers spend a lot of time making the rounds of community events, local school functions and Rotary Club luncheons.

New banks generally open with 10 to 14 employees, including a president, chief financial officer, senior lending officer, head teller, and platform lending, administrative and teller staffs.

Several months before opening to the public, a bank’s president and chief financial officer are already on the payroll, handling myriad preparations. The pre-opening process, executives say, can be more difficult than actually running a bank.

At two months and counting until opening day at Bristol Bank — the next to open in Miami-Dade or Broward — hundreds of details must be attended to. And more than $1 million will be spent — on salaries, construction, computers, software and furniture — before the first customer walks in the door.

Dunbar, a former Citibank executive who met bank investors Stearns and Brian McDonough 2 1/2 years ago on a Lake Forest, Ill., golf course, has been overseeing preparations since June.

Amid the rattle of jackhammers, he works out of an office he shares with Chief Financial Officer Jasper Eanes, formerly CFO at BankAtlantic, who was hired in mid-July.

As construction progresses, Dunbar plans to turn his focus to hiring and training the rest of the staff and overseeing delivery of the systems, so everything will run smoothly on opening day.

“The hardest hurdles are behind us,” he said. “Now it’s just coordination.”

(c) 1999, The Miami Herald. Distributed by Knight Ridder/Tribune Business News.