C1 Bank is gaining a toehold in the Miami area, but the institution will have to step carefully as it navigates its way around Biscayne Bay.
The St. Petersburg, Fla., bank announced late last month that it would buy the lease for U.S. Century Bank's branch along the 800 block of Brickell Avenue, among other real estate assets.
The asset sale was a bit of a consolation prize for Trevor Burgess, C1 Bank's chief executive. It followed the cancellation of C1 Bank's planned acquisition of the struggling $1.2 billion-asset U.S. Century.
Brickell Avenue is the primary artery through Miami's financial district. Besides serving as a business hub, Brickell is also lined with condominium buildings and high-end hotels.
"It is our Wall Street," says Ken Thomas, a bank consultant and economist who is based in Miami. Given Miami's role as an international hub, Thomas says that C1 Bank will have to be dexterous as it plots an expansion across the city.
"There is a lot of foreign money that flows through Miami and a lot of that happens on Brickell," Thomas says. "You just don't come to Miami like you would any other market. It is not like going into Oklahoma."
Calls to C1 Bank and U.S. Century were not returned.
"We are excited to enter the Miami-Dade market in such a positive way," Burgess said a press release issued late last month. "We'll hit the ground running with a great location on Brickell."
The deal does not involve any of U.S. Century's loans or deposits, making the transaction an unusual branch sale. (The Brickell branch had $17 million in deposits at June 30, according to data from the Federal Deposit Insurance Corp.)
A typical branch sale involves deposits, a pool of healthy loans and employees, says Scott Polakoff, an executive managing director of FinPro and a former acting director of the Office of Thrift Supervision.
Before letting C1 Bank expand into Miami, Polakoff says its regulators will want to know that Burgess' team is equipped to handle the complexities of banking in an international hub, with an emphasis on complying with the Bank Secrecy Act and anti-money-laundering laws.
Regulators "will want to know that they are very carefully prepared," Polakoff says. The regulators will "want to know growth plans."
C1 Bank's expansion into Miami fits squarely into two focal points for regulators, Polakoff says.
"As fewer banks fail, the whole notion of compliance is going to take center stage," Polakoff says. The Office of the Comptroller of the Currency has "specifically mentioned banks embarking on new services outside their normal area of business as a key regulatory risk."
Thomas says the role C1 Bank's compliance team will encompass more than simply placating nervous regulators.
"The bad guys know when there is someone new to town," Thomas says. "You really do need first-class compliance here."
As long as C1 Bank can properly prepare, Thomas says the bank should do well in Miami, which he says it is one of the nation's most-attractive banking markets.
"U.S. Century has a valuable franchise market with great locations … and Brickell is one of them," Thomas says. "The three counties of south Florida make up 40% of the state's deposits, and Miami-Dade is home to half of that stake."