After years of limited expansion BankUnited Financial Corp. of Coral Gables, Fla., has opened four branches in nine months and hopes to keep up the pace into next year.
The problem, said Carlos Fernandez-Guzman, the $7.7 billion-asset company’s director of marketing, is that in the hyper-competitive South Florida banking market, desirable sites are few and far between.
But there is hope for BankUnited and other community banks looking to expand. Wachovia Corp. has said that when it buys SouthTrust Corp. early next year, it plans to close as many as 150 overlapping branches throughout its markets in the Southeast. The vast majority will be in Florida, where dozens of Wachovia and SouthTrust branches sit within a mile of one another.
“We are certainly looking at them as possibilities in our branch expansion strategy,” Mr. Fernandez-Guzman said.
Wachovia has not said which branches it would close or how the bidding would be conducted. Nor will it leave customers behind; it will sell only the bricks and mortar.
Still, with the cost of land so high and the number of prime locations limited, Florida community banks view the supply of empty branches coming to market as a windfall.
SouthTrust, which is No. 4 in Florida deposit share, and Wachovia, which ranks No. 2, occupy many of the “A” locations in the state — easily accessible corners in high-traffic areas. Small banks would much rather buy or lease such facilities than build on less attractive sites.
Moreover, many of the overlapping branches are in the most desirable markets, such as Broward and Pinellas counties. In Broward, just north of Miami, Wachovia has 77 branches and SouthTrust has 20. In Pinellas County, home to St. Petersburg and Clearwater, Wachovia has 49 branches and SouthTrust has 27.
Vince Elhilow, the president and chief executive officer of Fidelity Bankshares Inc. in West Palm Beach, said many banks in South Florida would be interested in bidding on the closed branches, because land costs there have skyrocketed.
“I was paying $700,000 five years ago for land, but because of the tremendous demand, things are at $1.5 million,” Mr. Elhilow said.
Just a week after the Wachovia-SouthTrust deal was announced, the $3 billion-asset Fidelity announced plans to build nine branches in the next year. And though the timing was just a coincidence, Mr. Elhilow said Fidelity plans to make a play for any branches that go up for sale in its market.
Of course, other retailers could bid on the branches, too, but Kenneth Thomas, a bank consultant in Miami, said he doubts many would be interested, because branches cannot easily be retrofitted.
“Bank branches are like bowling alleys in that respect” he said. “They can’t be used for much else.”
Wachovia and SouthTrust branches also overlap in the Atlanta area, the western Carolinas, and the Newport News, Va., area. In all there are 281 Wachovia and SouthTrust branches within a mile of each other.
This would not be the first time that Wachovia has shuttered branches after an acquisition. After the company, then First Union Corp., bought the old Wachovia three years ago, it closed 191 branches along the East Coast, including 33 in Florida. It sold those branches to American Financial Realty Trust of Jenkintown, Pa., which then leased or sold them off individually.
After the SouthTrust deal closes, Wachovia is expected to dispose of excess branches in a similar fashion.
Mr. Thomas said branch closures would also allow competing banks to pick up employees who will be let go when the branches close.
“Who better to get than ex-employees who already know the community?” he asked.
William Spute, the president of Equitable Bank in Fort Lauderdale, said his $147 million-asset bank is looking to expand in its current market of Broward County and into Boca Raton, in Palm Beach County. To get into Boca Raton, it would need people who know the market, he said.
“This is a tremendous opportunity, and in the shakeout we hope to pick up several sustainable relationships and, hopefully, some employees,” Mr. Spute said.
