BankAtlantic Bancorp. president Jarett S. Levan made clear Wednesday that his company would not change its aggressive expansion strategy, despite slower deposit growth at the Fort Lauderdale, Fla., banking company.
He also reiterated that a public offering for its investment banking arm, Ryan Beck & Co. Inc., is not entirely off the table but said that for now the unit would focus on "a priority," regaining profitability.
Ryan Beck and BankAtlantic's banking operations have grown fast in recent years but have hit roadblocks in recent quarters. Ryan Beck's revenue growth failed to keep pace with expense growth, and slower deposit inflows have been an issue at the retail bank.
But during his presentation to a conference in New York sponsored by Friedman, Billings, Ramsey & Co., Mr. Levan said the $6.6 billion-asset company would keep building branches at a brisk pace. It opened five last year and 16 this year, for a total of 86, and plans 24 more next year, including four in Orlando, a new market for the company.
Mr. Levan said he plans to maintain the accelerated expansion pace. "We believe strongly in our model," he said, which focuses on longer branch hours and customer convenience, echoing a strategy employed by Commerce Bancorp Inc. in Cherry Hill, N.J., which entered Florida this year.
"We have looked at acquisitions, and we will continue to entertain acquisitions," Mr. Levan said, though he called deals too pricey.
The company's deposit growth has lagged expectations in recent quarters. Deposits fell 0.5% in the third quarter from a year earlier, to $3.7 billion. However, core deposits, excluding money market funds and certificates of deposit, grew 5%, though this fell short of its historical core deposit growth rate of 20% to 30%. "It's very important for us to return to those numbers," Mr. Levan said.
BankAtlantic increased spending on advertising and promotion last year to improve deposit growth and deflect potential competition from Commerce, he said. And in the third quarter these costs rose 55.7%, to $10.3 million. Revenues were up 6.5%, to $180.4 million, driven almost equally by net interest and noninterest income, but expenses grew 19.1%, to $132.4 million.
Analysts have criticized the company's strategy and expenses in recent months, and some said they would rather see it scale back branch openings to focus on profitability. Laurie Hunsicker, the Friedman Billings analyst who follows BankAtlantic, told American Banker in October that the CEO "is seemingly ignorant of what shareholders have been asking for." She rates BankAtlantic shares "underperform."
It would be hard for BankAtlantic to reduce the pace of branch openings without a change in strategy, said Anthony Polini, an analyst at Soleil Securities Corp. who has a "hold' rating on its shares. He did suggest that BankAtlantic try to build its commercial banking business to diversify. "We are not very upbeat about the company's prospects," he said.
Ryan Beck reported a $4.8 million loss in the third quarter. Mr. Levan said he expects the broker to return to profit in the first quarter, but Mr. Polini said it would probably produce red ink again after that. Like many analysts, he said he believes that a Ryan Beck sale or IPO is near, perhaps as soon as early spring.
