In December, Alan B. Levan, BankAtlantic Bancorp Inc.'s chairman and chief executive, said that he would work harder to gather deposits after citing a slowdown in growth during the previous six months.
On Tuesday the Fort Lauderdale, Fla., banking company reported that it opened 77,000 low-cost deposit accounts during the first quarter, 37% more than it did a year earlier.
On Wednesday analysts praised its success last quarter, but they stopped short of raising their first-quarter earnings estimates, citing concerns about BankAtlantic's investment banking and brokerage unit, Ryan Beck & Co. Inc., and higher marketing expenses.
The $6.5 billion-asset BankAtlantic, whose earnings report is due Monday, is known for its high marketing expenditure and has been dealing with a new entrant and fierce competitor in the Florida market: Commerce Bancorp Inc. of Cherry Hill, N.J., which acquired Palm Beach County Bank in December and has said it plans to build 10 to 15 branches in the Sunshine State this year.
The two companies had locked horns in 2002, when Commerce filed a trademark infringement lawsuit saying that BankAtlantic's attempt to emanate its style of retail banking was a little too close for comfort. The suit was settled in 2004.
Mr. Levan told American Banker in December that he viewed the $40 billion-asset Commerce's entry into Florida as a "declaration of war." In a press release issued Tuesday, he cited "expanded marketing and advertising initiatives," as well as the opening of six BankAtlantic branches in the previous 15 months with helping his company's first-quarter account growth.
In October BankAtlantic said it planned to spend about $5 million a quarter on marketing and advertising through 2006 and in an interview Wednesday Mr. Levan said the company spent an amount in line with those predictions last quarter. Asked to comment on Commerce as a competitor, he said, "Most of the large banks are here in Florida, and most [are there] through acquisition. We've actively competed with them as long as we've been around. Luckily for everyone here, Florida is a growing state, and there's enough for everyone."
The company's efforts to compete appear to be paying dividends. BankAtlantic's first-quarter account gains followed a 67.9% fourth-quarter jump in total deposit accounts from a year earlier. (In December, Mr. Levan had said he wanted to get his company's quarterly deposit growth back into the 30%-35% range; in previous quarters, he said the growth had been hovering in the 20%-25% range.)
On Tuesday, BankAtlantic said its net low-cost deposit balance growth rose 79% from the first quarter of last year, to $205 million. Low-cost deposits now represent 57.9% of its $3.97 billion deposit total.
"We're extremely pleased with our results for the quarter in our deposit gathering," Mr. Levan said Wednesday.
Jefferson Harralson, an analyst with Keefe, Bruyette & Woods Inc., wrote in a research note issued Wednesday, "We were hoping for $100 million in period-end low cost deposit growth, but the bank's promotions appear to be showing better than expected results." He also wrote that he had expected BankAtlantic to report that it opened about 66,000 accounts in the first quarter.
However, Mr. Harralson left his first-quarter earnings estimate at 13 cents a share, which is in line with other analysts' estimates, according to Thomson Financial.
"All said, while this quarter may still be weak, due to lackluster Ryan Beck results and high marketing expenses, the growth in low-cost deposits could give investors greater confidence that the expensive marketing campaigns will translate into superior growth over time," he wrote.
James C. Record, an analyst at Sterne, Agee & Leach Inc., kept his first-quarter earnings estimate at 12 cents a share, though he said the new accounts could lead to long-term gains.
"As new accounts typically take four to five months to fully fund, this quarter's results bode very well for the second and third quarters," he wrote in a research note released Wednesday.
Last month Mr. Record had upgraded BankAtlantic's shares to "buy," from "hold." At that time he wrote that he expected "2006 earnings to disappoint" but the company to post strong earnings growth next year and in 2008.
Shares of BankAtlantic, which have had a volatile run in recent times, rose 4.1% Wednesday. Mr. Levan conceded that his company's marketing expenditures have been a factor in the stock's volatility.
"I hope analysts see our longer-term strategy with this," he said.
