In the year or so that BankUnited has hired lenders away from Florida rivals, its recruits have laid the foundation for a major branch expansion across the state.
The $11.3 billion-asset bank is preparing for rapid growth by building branches around the portfolios of the commercial lenders it has attracted. It recently moved into Orlando by snapping up lenders from SunTrust Bank, KeyBank and Regions Bank.
While BankUnited has sought regulatory approval to open six branches in South and Central Florida this year, that appears to be just a start. It envisions a dramatic expansion in the state's major markets in the next few years, with plans for 35 more locations.
Bankers and analysts are watching the Miami Lakes company because it is one of only a handful of large community banks with the financial backing to branch out aggressively in the recession-plagued Southeast.
"Most banks will identify a market's potential for the products that they have" and then open branches and hire employees to staff them, said Ken Thomas, an independent bank consultant and analyst in Miami. BankUnited, he said, instead has determined that "you can be in the right market but if you don't have the right person, it doesn't help."
The investors behind BankUnited, led by the New York banking titan John Kanas, who helped revive the company with $900 million in capital last year, are comfortable experimenting in the Florida market.
BankUnited was the first failed bank in this recession to be taken over by a private-equity group, when eight firms, including WL Ross & Co. of New York, acquired it from the Federal Deposit Insurance Corp. in May 2009. Since then, by reeling in experienced loan officers, the group has reshaped BankUnited from a legacy bank focused on wholesale business into a commercial lender.
As of June 30 BankUnited's commercial and industrial loans had increased by 225%, to $211.4 million, from a year earlier, according to the FDIC.
Though those loans accounted for only 5% of the $4.2 billion loan portfolio, that's triple the 1.6% level a year earlier, at a time when lending growth is rare.
"It's a lot more difficult to ramp up a bank today given the lending environment in Florida. It's very tough to get loans, and everyone is competing on them, too," Harlan Parrish, senior executive vice president of retail banking at BankUnited, said in an interview. "And talent can make up for a lot of those issues."
BankUnited has hired 300 employees since it was taken over. That includes Parrish, who joined BankUnited in June from BB&T. He said it plans to open at least eight branches by the end of the year, if regulators approve the expansion.
Half of those will be relocated BankUnited branches, allowing the company to focus on the commercial market, Parrish said.
Plans call for opening 15 branches in 2011 and another 20 in 2012. It currently has 78 offices in 13 counties in Florida.
Analysts caution that it will be tough to fuel an expansion through commercial lending in a state where the economy was built upon real estate. And the Florida real estate market's collapse has only increased competition for commercial loans, they said.
Yet given the history of BankUnited's chairman, Kanas, and how he "marched through Long Island" (as Thomas put it) building a commercial lending powerhouse at North Fork Bancorp. Inc., analysts said they're not surprised by this strategy, despite its risks in this market at this time.
"This is not Long Island or New Jersey," Thomas said. "There's only so much commercial business in Florida, but [Kanas] is hiring the right people."
Few other Florida-based banks have the ability or the capital for a similar branch-out strategy. Through mid-September, 15 branch applications had been filed with the Florida Office of Financial Regulation, compared with 62 filed through mid-September last year. Most of the other banks in the state healthy enough to expand are doing so by acquiring failed banks or through deals with healthy or ailing rivals.
Old Florida National Bank in Orlando said in August that it had agreed to acquire Mercantile Capital Corp., also in Orlando, with a goal of expanding into commercial lending, primarily small-business lending. The $373 million-asset bank also recruited some residential loan officers earlier this year to create a residential mortgage division within its headquarters.
Some familiar with Florida's banking market wondered why the capital-loaded BankUnited would spend a lot of money on a branch expansion in a state that remains a virtual flea market of existing branch bargains and whole-bank deals.
"If it's a new bank entering into a market, buying an existing branch may be easier to do rather than building from scratch," said Stanley Smith, a finance professor at the University of Central Florida in Orlando. "But it all depends on the bank and what they want to do in that market."
Today, existing branches are for sale in markets such as Tampa Bay, where BankUnited has four branches and has filed to open another this year.
BankAtlantic Bancorp Inc. of Fort Lauderdale said in its second-quarter earnings release that it was selling 19 branches and $400 million in deposits in Tampa from its banking subsidiary, BankAtlantic.
Parrish said BankUnited is well aware that it could pick up bargains in its target markets, but he said it is looking for the right fit in financials, employees and clientele. "If the branch has a whole different customer mix, it could take a number of years to get a payback," he said.
And with plenty of capital still to spend, BankUnited is weighing a host of expansion options, including acquisitions, Parrish said.
"There are opportunities all over the state," Parrish said. "If it's a good fit within the markets we want to be in, then we will look at those."