While several competitors have been concentrating on cleaning up loan portfolios, Great Florida Bank in Coral Gables has been busy opening branches.
Since early last month the $1.9 billion-asset Great Florida has opened seven small branches in Miami-Dade, Broward, and Palm Beach counties, increasing its network in the deposit-rich area to 28.
Mehdi Ghomeshi, its chairman, president, and chief executive, said the expansion has been in the works for more than a year and was not timed to take advantage of the much-publicized woes of two large competitors: BankAtlantic Bancorp Inc. of Fort Lauderdale and BankUnited Financial Corp. of Coral Gables, which have about 130 branches in the three counties.
Still, industry analysts said Great Florida's timing could not have been better. BankAtlantic in particular had been adding branches but has curtailed its expansion recently to reduce costs.
"No one else" is opening branches, said James Schutz, an analyst with Sterne, Agee & Leach Inc. "The market is still growing, and the other banks are wrapped up looking inward and fixing up their portfolios. And if you don't have those problems, expanding makes sense."
Great Florida calls its new branches "solution centers." They are smaller than traditional branches — to keep operating costs low — and they feature the increasingly popular concierge service instead of teller lines.
The bank initially intended to begin opening the branches in late 2006, but those plans were put on hold when Great Florida received a cease-and-desist order from the Federal Deposit Insurance Corp. in November 2006 for not complying with the Bank Secrecy Act.
Among the things, the order instructed the bank, which had expanded rapidly in its short history, not to open more branches without the FDIC's blessing.
As part of its compliance with the order, Great Florida said that last year it created a 15-employee department — at a cost of $3 million — to deal directly with anti-laundering and other BSA-related issues.
Though the cease-and-desist order remains in place, the bank petitioned the FDIC about six months ago to allow it to build the branches, and the regulator gave its permission.
"Obviously, I can't speak for the FDIC, but I presume they were satisfied with the progress we have made to allow us to open them," Mr. Ghomeshi said.
Like most Florida banks, Great Florida has reported an increase in nonperforming loans as housing construction has stalled. On March 31 it had $29 million of nonperforming loans, or 1.57% of its total assets, compared with $21.5 million, or 1.19% of the total, at the end of the fourth quarter and $9.4 million, or 0.58% of the total, a year earlier.
However, the bank's net chargeoff ratio dropped 4 basis points from a year earlier, to only 0.02% of total loans outstanding as of March 31.
Great Florida's problems seem to be less severe than those of some other banks in the state. Mr. Ghomeshi said that his bank has $23.8 million of loss reserves, or 1.8% of its loan total — a level higher than that of most banks.
He also said that Great Florida, which he founded in 2004, has been profitable for nine straight quarters, despite the difficult operating environment.
It earned just $69,000 in the first quarter, but, as Douglas B. Rainwater, an analyst with Janney Montgomery Scott LLC, put it, "Sixty-nine thousand looks pretty good when other banks are writing off billions."