What may be the fastest-growing start-up in banking history has no plans to take a breather.
The year-old Great Florida Bank in Miami, which already has $500 million of assets and six branches, is raising a whopping $96 million in a private placement that chief executive Mehdi Ghomeshi plans to use to open 10 more branches this year, substantially increase its lending limit, and perhaps even expand beyond its Miami market.
And though one investor says the bank is emphasizing growth over profit, Mr. Ghomeshi insists that the South Florida economy is healthy enough to support the bank's lofty ambitions.
"The market has allowed us to grow much faster than we anticipated, and now we are looking to further expand our market and our customer base," he said in an interview this week.
Not that his goals were ever modest.
Before the bank opened for business in June 2004 it raised $50 million - among the most ever for a start-up. And Mr. Ghomeshi expects Great Florida's assets will top $5 billion by its fifth anniversary.
Though it has plenty of capital, Mr. Ghomeshi said it needs more so it can triple its legal lending limit to $40 million and serve larger borrowers.
Another goal is to add branches quickly so that Great Florida can attract more core deposits and lower its funding costs.
At March 31, 27% of its deposits were brokered certificates of deposit - well above the average of 4.6% at commercial banks with $500 million to $1 billion of assets. Mr. Ghomeshi, is eager to lower that ratio. Also, more than half of its deposits - 63% - are uninsured jumbo CDs.
"In Miami-Dade and Broward counties you cannot go after customers in a major way until you have a good distribution of offices, and we think that these additional offices will take care of that," said Mr. Ghomeshi, who is also Great Florida's president.
Plans for the 10 branches to open this year were briefly delayed as a result of Federal Deposit Insurance Corp. concerns about deficiencies in Great Florida's Bank Secrecy Act compliance, concerns probably raised by all its unusually large deposits. But Mr. Ghomeshi said that the FDIC finished its exam earlier this month and then gave Great Florida the green light. The next branch opening will be Monday.
All 10 will be in Miami-Dade and Broward counties, but Mr. Ghomeshi hopes to expand into the Palm Beach and Naples areas next year. Great Florida would like to acquire a bank in either market, he said.
"We will pursue both strategies," Mr. Ghomeshi said, referring to buying and building. "But we are really looking for a good acquisition opportunity in these markets."
He said that the $96 million of new capital should sustain the bank for at least two years, or until it reaches $2 billion of assets.
Jim Grishaw, a senior consultant in the Orlando office of Professional Bank Services Inc. of Louisville, said that most start-ups hold secondary offerings between their third and fifth years. And though the amounts vary, he said he has never seen a secondary offering as large as Great Florida's.
But with all the investor interest in Florida, he said Great Florida should have no problem raising the money.
Still, Mr. Ghomeshi said that capital can take a bank only so far. He said it's more important to bring in talented people who are driven and well connected. Great Florida started with 35 employees and has hired about 85 more, recruiting from regional and community banks, including some of Mr. Ghomeshi's former employees at BankUnited Financial Corp. in Coral Cables, where he was CEO from December 1998 to April 2002.
Mr. Ghomeshi, 49, did not give a specific reason when he resigned, though some speculated it was health-related.
He is credited with cleaning up BankUnited's mortgage operations and establishing the $9.1 billion-asset company's commercial and private banking divisions.
Under Mr. Ghomeshi, Bank-United's return on asset and return on equity ratios doubled to 0.86% and 10.79%, respectively, while its efficiency ratio dropped from 55.8% to 47.2%. Before joining BankUnited he had been the South Florida president for NationsBank Corp. (now Bank of America Corp.) after it acquired Barnett Banks Inc. of Jacksonville, where he had worked for 17 years.
Kenneth Thomas, a Miami-based bank consultant and an investor in Great Florida, said that Mr. Ghomeshi has an outstanding track record, which helped the bank raise so much money when it started out. Consequently, he said he is surprised at Great Florida's emphasis on growth.
"I envisioned a different type of bank with the top guy being who he is - one a little more balanced between growth and profitability," Mr. Thomas said. "But this bank is tilted full throttle towards growth. Yes, it's America's fastest-growing new bank, but you can't sustain that without some profit."
Greater Florida lost $1.6 million in the first quarter, but Mr. Ghomeshi said it would report an operational profit for the quarter that ended June 30. Growth is the main focus now, but that could change, he said.
"We don't want to grow the bank for the sake of growing," he said. "And we are watching the economy and the interest rate environment, as well as the real estate market, and if we feel that there are some problems, we will definitely slow our growth."
