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Source of Pride: The Puerto Rico Bank Invasion

The mainland U.S.A. operations of major Puerto Rico banks and their subsidiaries are experiencing a growth spurt and increasingly contributing to their island-based parent companies’ bottom lines.


January 10, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

The reach–and success–of Puerto Rico’s banks stateside are growing

A major stateside expansion of leading Puerto Rico banks is quietly taking place as they grow and become increasingly competitive.

The story of their expansion is one that holds the promise of helping other Puerto Rico businesses take the same leap.

In fact, some of the island’s leading banks with mainland operations are already active in helping Puerto Rico businesses gain a foothold on the mainland, particularly within the rapidly growing, 35-million strong stateside Hispanic market, now the largest minority group in the U.S.

Meanwhile, as a sign that this trend may intensify, several local banks that have yet to establish mainland operations now indicate that they are increasingly drawn to do so.


This year marks the 40th anniversary of Banco Popular’s first branch in New York. Its stateside subsidiary, Banco Popular of North America (BPNA), now includes 96 branches in the six states where more than 80% of the U.S. Hispanic population resides (New York, New Jersey, California, Texas, Illinois, and Florida).

After years of eyeing the success of Puerto Rico’s largest commercial bank (Popular), the island’s largest mortgage bank, Doral Financial Corp. (holding company of Doral Mortgage, HF Mortgage and Doral Bank), took a leap of its own in 1999 and established a subsidiary in New York.

"About five years ago, I could see that in order to keep growing we would need to be in the states," Doral Chairman of the Board and CEO Salomon Levis told CARIBBEAN BUSINESS.

Levis also saw that big New York banks were serving the market inadequately and recognized a need that Doral could meet through opening Doral Bank-New York (DBNY).

Levis points out that DBNY–while including the city’s burgeoning Hispanic population–targets the entire underserved New York community.

"We want to have a presence in all New York boroughs and our expansion plans call for 20 to 25 branches in the next five years," Levis indicated. DBNY’s first branch was located in midtown Manhattan.

While BPNA is the largest Hispanic bank in the U.S., Senior Executive Vice President and CFO Jorge Junquera points out that more than half the bank’s more than $4 billion in deposits are not from Hispanic clients.

"Being a Hispanic bank, per se, isn’t important if it’s not accompanied by high-quality service," Junquera told CARIBBEAN BUSINESS in a recent interview. "Our level of service has been the key to our success in every community."

In addition to BPNA, Popular has another smaller banking subsidiary, Banco Popular National Association, with branches in Orlando and Culebra.


2002 will be the year R&G Financial Corp. sets out to duplicate in Central Florida the highly successful mortgage and commercial banking model it has established in Puerto Rico. R&G’s purchase of Crown Bank–Central Florida’s fourth largest commercial bank in terms of deposits–is expected to close by April.

With assets of $647 million and deposits of $452 million reported as of September 30 of last year, Crown Bank has been registering solid growth in recent years. By backing Crown’s continuing expansion, building on its current client base and adding mortgage banking services to Crown’s offerings, R&G Chairman of the Board Victor Galan says the potential for further growth of its business in the region is enormous.

In fact, Galan told CARIBBEAN BUSINESS he plans to spend about half his time this year in Florida, in order to oversee the expansion effort. Galan said the development of Crown may include a brand name adaptation for the new subsidiary, such as R-G Crown, in order to symbolize the development as well as help attract the 400,000 strong and growing Puerto Rican community in Florida, which is already familiar with the R-G name.

Puerto Rico’s second largest mortgage banking firm, R-G Financial has owned a mainland mortgage-banking subsidiary, Continental Capital Corp., for two years now. R&G President Ramon Prats says Continental will also benefit from the acquisition of the sister subsidiary, as its team of loan officers expand into commercial lending.

Already, Long Island-based Continental is the New York area’s second largest originator of Farmers Home Administration/Veterans’ Administration (FHA/VA) mortgage loans. With additional operations in North Carolina and Florida, the subsidiary’s loan originations currently make up 7% of R&G Financial’s total mortgage-servicing portfolio.


With the creation of check-cashing subsidiary Popular Cash Express in 1998, BPNA redoubled its efforts to reach the nation’s vast unbanked Hispanic population.

In less than three years, Popular Cash Express has become the fourth largest check-cashing institution in the U.S. To date, Popular Cash Express has 97 offices in the same states where BPNA is located, along with a fleet of 52 mobile units that make rounds among factories and other workplaces.

According to Junquera, as business volume increases, some of the Popular Cash Express locations are likely to evolve into full service BPNA branches.

Another area where BPNA has shown impressive ability is in small business lending. BPNA is the eighth Small Business Administration (SBA) lender in the U.S.

In fiscal year 2000, BPNA accounted for 65.9% of Popular’s total loan growth.


First BanCorp, the financial holding company of Puerto Rico’s second largest commercial bank, this year doubled its ownership stake in Hollywood, Fla.-based Southern Security Bank Corp. from 5% to 10%.

In July, it also purchased a 5% stake in the creation of a new South Florida bank, Premier American Bank, based in Miami. FirstBanCorp Chairman of the Board, CEO, & President Angel Alvarez told CARIBBEAN BUSINESS that Premier American Bank is being constituted by leading South Florida businessmen.

Alvarez said FirstBanCorp plans to continue participating in the growth of both banks. Thanks in part to FirstBanCorp’s backing, Southern Security opened new branches last year in Boca Raton and Miami

Alvarez said that, for the time being, instead of acquiring a mainland institution outright, FirstBancorp has opted to increase its ownership stake in stateside banks


Florida-based UniBank is a wholly owned subsidiary of Empresas Fonalledas.

When Empresas Fonalledas bought the bank’s sole Miami branch seven years ago, UniBank’s deposits were below $4 million, and annual profits barely surpassed $100,000.

Today, the bank has nine branches throughout South and Central Florida, with deposits, as of this past Sept. 30, of $365.3 million and profits exceeding $4 million. "For the past couple of years our growth has been double digit," UniBank President Raul Ason told CARIBBEAN BUSINESS.

Ason said superior service and determination to reach out to the entire community have been the key factors driving UniBank’s growth.

"The problem with many big banks is that they’re impersonal," Ason observed. "UniBank clients, especially among the older population which is a big [market] segment in Florida, value the friendliness and level of personal attention we offer."


DBNY is moving forward with aggressive expansion plans.

Three months ago, DBNY opened its third branch, located in the Astoria section of Queens.

DBNY President Robert Reiner says the bank’s success has far exceeded expectations. "We filled a void in the community by providing a personal approach, competitive rates, and unsurpassed service, including longer opening hours than anybody else," Reiner said.

This month, DBNY is launching a marketing and advertising campaign to promote its new branches. At about $1 million in terms of average investment per branch, DBNY will invest about $25 million over the next five years and aims to employ approximately 400 people (DBNY currently employs 60). Expanding the bank beyond New York is not in Doral’s plans, at least for now, Levis said.

With $220 million in assets and $156 million in deposits, DBNY contributes 4% in annual revenue to Doral Financial Corp., and Levis expects this to increase to 20% in five years.


After years of growth through expansions and acquisitions, BPNA is now completing what Junquera termed a "necessary process" of uniformity and centralization to improve the efficiency of its network. An important part of this process was the July 2001 inauguration of a national call center in Orlando, Fla.

Popular has had to restructure some of its efforts and make strategic alliances to compete effectively.

Last year, after determining that its volume and growth projections in the intensely competitive stateside credit card market didn’t justify continuing to go it alone, BPNA sold its credit card portfolio to a national consumer finance company that was looking to reach the Hispanic market. Through the arrangement, BPNA continues to market its cards, but account operations are managed externally.

A similar situation with BPNA’s mortgage loan operations led the bank to enter into an agreement last year with Cendant Mortgage, one of the nation’s top mortgage lenders. Junquera explained that Cendant, which brings strategic relationships with leading realtors Century 21, Coldwell Banker, and ERA to the partnership, also expects to benefit from Popular’s growing strength in the Hispanic market.

Another continental subsidiary of Popular Inc. is Equity One, a diversified consumer lending institution formed in 1989 and acquired by Popular in 1991.

With loans and assets now exceeding $2 billion each, Equity One has a network of 136 offices in 30 states.

Including Equity One, Popular subsidiaries have a presence in 33 of the 48 contiguous states.


According to Oriental Financial Group CEO and President Jose Enrique Fernandez, Oriental looked at several stateside banking opportunities, but so far is focusing on local growth.

"Through our website––we actually have stateside clients," Fernandez said. However, as for physical presence, Oriental is currently limited to a New York investments office that it established three years ago, headed by Carlos Gonzalez.

Westernbank has also held off so far on stateside expansion plans. Last year, Westernbank President and CEO Frank Stipes told
CARIBBEAN BUSINESS that while the bank is seriously considering entering the stateside market, it would probably wait until the bank reaches $7 billion in assets. Westernbank currently has $5.1 billion in assets.

Westernbank CFO Freddy Maldonado said that Westernbank expects to be in a position to expand stateside within the next two to three years.

Another local financial institution, BankTrust, has not ventured beyond Puerto Rico’s shores, except for some limited business through its international banking entity.


After four decades of operations, the assets, deposits, and loans of Popular Inc.’s stateside subsidiaries are $5.5 billion, $4.6 billion, and $4.5 billion respectively–comprising 20% to 25% of the corporation’s totals in each category. As Junquera told CARIBBEAN BUSINESS, in view of slower island-based business growth due to the company’s already thorough market penetration, Popular's stateside subsidiaries are expected to contribute an even greater chunk of overall growth in the years ahead.

R&G and Doral are moving in the same direction. In the case of R&G, the combined assets of its Continental Capital Corp. and Crown Bank subsidiaries assets make up nearly 20% of the company’s total assets. Continental’s 2001 loan production of $375 million contributed approximately 15% of total R&G loans.

Whether it’s Popular, R&G, Doral, or First Federal, all of the bankers with stateside banking interests who were interviewed by CARIBBEAN BUSINESS are enthusiastic about the progress of their respective operations, and expect their moves on the mainland to increasingly fuel growth in the future.

All this comes as no surprise to Financial Institutions Commissioner Antonio Faria. "Puerto Rico’s banking industry is at the cutting edge of the evolution of the financial services industry in the U.S.," Faria says proudly. "Our bankers are conservative and creative at the same time, and their success doesn’t surprise me one bit."

He added that in addition to their continuing stateside expansions, he expects local banks to also step up their presence in Caribbean Basin countries in the years ahead.


AS OF SEPT. 30, 2001

Banco Popular North America  $5.4 billion
Banco Popular Natl. Assn. $40.8 million
Continental Capital (R&G) $485 million
Crown Bank (R&G) $647 million
Doral Bank New York $220 million
Equity One (Popular) $2.0 billion
UniBank $402.5 million

AS OF SEPT. 30, 2001

Banco Popular North America 6 states 96
Banco Popular Natl. Assn. 1 state 1
Continental Capital Corp. 3 states 5
Crown Bank (R&G) 1 state 14
Doral Bank New York 1 state 3
Equity One (Popular) 33 states 136
Popular Leasing 11 states 11
UniBank 1 state 9

This Caribbean Business article appears courtesy of Casiano Communications.
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