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Local Banks Continue Aggressive Expansion To Florida

With its acquisition of Kislak National Bank, Banco Popular now boasts 18 branches in the Sunshine State. It follows R-G’s recent expansion to 29 branches and Unibank’s 10 branches. With its acquisition of Kislak National Bank, Banco Popular now boasts 18 branches in the Sunshine State. It follows R-G’s recent expansion to 29 branches and Unibank’s 10 branches. Local banks continue aggressive expansion to Florida


November 25, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

‘The Right Place At The Right Time’

Banco Popular has acquired the eight-branch Kislak National Bank in Miami, established a regional construction-lending unit as Puerto Rico real-estate developers strive to tap into the fast-growing Florida market.

It’s nonstop growth for local banks that already have a foothold in the Sunshine State. And with an ever-growing presence of Puerto Rico businesses in Florida, everything indicates we’ll be seeing more of our top financial institutions taking advantage of the opportunities of a large, rich new market.

Seeking a greater presence in the fast-growing South Florida market, Popular Inc.—the parent company of financial-services company Banco Popular de Puerto Rico—has acquired Kislak Financial Corp. and its wholly owned subsidiary Kislak National Bank, a commercial bank based in Miami.

With the acquisition of Kislak National Bank’s eight full-service branches in the Miami area, Popular will now operate a total of 18 branches in Florida with consolidated assets of approximately $1.5 billion. Kislak has between 75 and 90 employees.

Under the terms of the agreement, Kislak shareholders will receive cash for their shares in the aggregate amount of $158 million. The acquisition, which was unchallenged, has just received approval from the U.S. Securities & Exchange Commission and is expected to close during the first quarter of 2005.

In October, R-G Financial Corp. and its Florida subsidiary, R-G Crown Bank, reached an agreement to buy 18 of Alabama-based SouthTrust Bank’s branches, 15 of them in Florida. The deal brings the number of R-G’s branches in Florida to 29.

Industry sources told CARIBBEAN BUSINESS that FirstBank (as well as Banco Popular) is allegedly looking into acquiring Miami-based Unibank, a private federal savings bank with $500 million in assets, eight branches in South Florida, and two branches in the Orlando area. The sale price could be between $80 million and $100 million.

First BanCorp already has a minority ownership stake in Hollywood, Fla.-based Southern Security Bank and in Premier American Bank, based in Miami.

Local firm Empresas Fonalledas is a majority shareholder in Unibank’s holding company. Residential mortgages represent 45% of Unibank’s loan portfolio and commercial real-estate loans 30%, with the remainder composed of construction, business, and consumer loans.

Kislak, a sound acquisition

Jupiter, Fla.-based Weiss Ratings Inc. ranked Kislak as one of the best-run financial institutions in South Florida. The bank received a B+ rating for its strong capitalization and profitability and for having few nonperforming loans.

"We are very excited to welcome Kislak National Bank’s customers and employees to the Popular family," said Popular Chairman & CEO Richard Carrion. "Kislak has a long and proud history of serving individuals and businesses in the community."

Established in 1963, Kislak National Bank has $998 million in assets, $708 million in deposits, and $557 million in loans. Kislak operates eight full-service branches in Miami-Dade, Broward, and Palm Beach counties. It is one of the nation’s largest lenders to homeowners associations.

"We are very excited about the opportunities this presents to the South Florida communities. Our customer base will benefit from Popular’s emphasis on community banking, diversified product mix, and wide array of services for individuals and businesses," said Kislak Financial President Jonathan Kislak. "Popular’s Hispanic heritage will also be an important asset in serving South Florida’s thriving Hispanic communities."

Before the Kislak National Bank acquisition, Popular had only one branch in South Florida and nine branches in Central Florida. The acquisition followed the recent regulatory approval of the merger between Banco Popular and Whittier, Calif.-based Quaker City Bank.

Banco Popular North America, the U.S. mainland bank subsidiary of Popular Inc., now operates more than 100 full-service branches in California, Texas, Illinois, New York, New Jersey, and Florida. It has $40 billion in assets and ranks among the 30 largest bank-holding companies in the U.S.

"The Kislak acquisition marks an important step in our commitment to expand Banco Popular’s presence within our existing markets and meet the needs of our customers and communities as we continue our journey to become the premier community bank in the markets we serve," said Banco Popular North America President Roberto Herencia. "Also, this acquisition brings us closer to fulfilling our promise to continue growing our presence in the South Florida market by adding convenient locations and easier access to Banco Popular’s financial products and personalized service."

Why South Florida?

Banco Popular has been operating nine branches in Central Florida for six years. According to Chandler Peterson, Banco Popular North America’s executive vice president of community banking, the institution thought the South Florida market would be an important complement.

"We’ve had a very successful branch in Miami for the past three and half years, with more than $50 million presence in that branch. That’s one of the things that influenced us to expand in South Florida. The South Florida market has a particularly good fit with Banco Popular, a pretty good equity in the market for us," said Peterson.

The Miami branch and its staff will become part of Banco Popular’s South Florida region once the Kislak acquisition is finalized. Peterson expects the branch to become the institution’s anchor in South Florida.

Banco Popular, he added, had considered several institutions for acquisition over the past few years, until finding in Kislak the perfect partner for its expansion into South Florida.

"Kislak has a very good reputation in South Florida. It has a presence in competent markets where we see value. It has a community focus, a retail focus, a small-business focus, and a real-estate focus," said Peterson. "There’s really a good synergy between the focus of that bank and that of our bank. Kislak has a tight management team." Kislak National Bank’s president, Larry Flowers, will remain with the bank and will take charge of Banco Popular’s South Florida operation.

"The timing of the Kislak acquisition was really an issue of Banco Popular establishing the Miami branch first to get our feet on the ground, understand the market, and then find the right partner to bring in and drive our expansion in South Florida," added Peterson.

Before being acquired by Banco Popular, Miami-based Kislak had an expansion plan that called for adding three to seven new branches over the next three years, said Flowers. "When we began our conversations with Banco Popular, we put the expansion plan on hold so it could become an expansion plan of Banco Popular," he said.

Why now?

Concurrently with Kislak’s acquisition, Popular established a construction-lending unit for South Florida, a region thriving with housing and commercial construction development. Prisa Group Inc.’s Federico Stubbe, Interlink’s Freddie Sanchez, construction firm Desarrollos Metropolitanos, and shopping-center developer Vadim Nikitin are some of the Puerto Rico-based developers allegedly pursuing projects in Florida.

"The timing of the acquisition was critical, because we started discussions with Kislak at the same time we started discussions with Sonia Olarte, one of the premier construction-lending bankers in the South Florida market," said Cesar Medina, Banco Popular North America’s senior vice president of credit risk. "As things happened, the preliminary agreement with Kislak was announced the same day Sonia started with us."

Olarte is head of Banco Popular’s construction-lending unit for South Florida. Although on the job for only two months or so, she has already put in place key elements such as her staff. "Sonia has been able to put together a team of six people over the past 60 days," said Peterson. In addition, she has generated $500 million in business, equivalent to approximately 800 new housing units, in the Miami-Dade and Broward areas.

Medina sees the Kislak acquisition and Olarte’s appointment as components of a two-pronged approach to the market. "Kislak’s merger will give us a much firmer foothold in South Florida as well as a presence in the business of lending to condo associations," he said. "Through Sonia, we will be able to address the needs of the market from the commercial real estate and construction development points of view, two areas that are enjoying significant growth in this market."

That Banco Popular has opened a construction-lending unit in South Florida doesn’t mean the region will become the hub for construction lending for Banco Popular North America or for Banco Popular of Puerto Rico, noted Peterson.

"We have very successful construction-lending groups in several of the six markets in which we operate [California, Texas, Illinois, New York, New Jersey, Florida], though, admittedly, we have been making a concerted effort in South Florida," said Peterson. "It will be an important part of our Florida region, and we expect to work very closely with our colleagues and customers in Puerto Rico."

What Banco Popular is doing in Florida, added Peterson, is providing yet another outlet for its Puerto Rico customers. "We are ready to hit South Florida as yet another market for Banco Popular. We are providing another venue for very important Banco Popular de Puerto Rico customers, who will have another source of financing for their projects in the South Florida market," he said.

The Florida and Puerto Rico markets, said Peterson, are connected in many ways. "There is quite a migration of Puerto Ricans to Florida, not just professionals but also businesses that are continuing to expand their operations—very successful businesses that are now part of the opportunities in Central and South Florida," he said.

Growth opportunities

Olarte said there are many opportunities in Florida, especially in South Florida, where construction financing is going mainly to residential developments, though the commercial market is very strong as well. She noted that South Florida’s construction and commercial real-estate markets have been booming in the past few years, but there’s still plenty of room for growth.

Part of the reason is the projected population growth in the state. "Some 100,000 new residents are expected within the next 10 years or so," said Olarte. "Also bear in mind that the construction and tourism sectors are the main employers in South Florida."

Olarte estimates the value of South Florida’s construction industry at around $3 billion. She said a number of Puerto Rico-based developers have expressed interest in grabbing a piece of the pie.

"I believe one of the reasons Puerto Rico developers are looking forward to expanding outside or the opportunities to develop new projects there," said Olarte.

Strong, diverse economy

Larry Flowers, president of Kislak National Bank and head of Banco Popular’s South Florida operation, said the growth of South Florida’s economy comes from traditional as well as nontraditional sectors.

"It’s a diverse economy across the board. From a builder’s perspective, you can build for first-time homebuyers all the way up to buyers of luxury family homes. You’ve got family buildings as well as single-family homes," said Flowers. "The annual growth rate [of the construction sector] is between 5% and 6%. We are still creating jobs in the state of Florida across the entire spectrum, with the exception of manufacturing."

South Florida also benefits from being an important port of entry to the U.S. and Latin America.

"We continue to see very strong growth in business, mostly small businesses that are engaged in international exports, importing products here for assembly or to be customized for the end user," said Flowers. "We see a lot of those types of businesses here. It’s just a very strong economy, and we don’t see it changing [anytime soon]."

Banco Popular’s Emilio Piñero: Great business synergy between Puerto Rico and Florida

Banco Popular North America, the U.S. mainland bank subsidiary of Popular Inc., built yet another bridge between Puerto Rico and Florida when it acquired the eight-branch Kislak National Bank in Miami and established a construction-lending unit for South Florida. This move will benefit local businesses and individuals doing business in Florida and vice versa, said Emilio Piñero, executive vice president of Banco Popular de Puerto Rico’s Commercial Banking Group.

In related news, Banco Popular de Puerto Rico’s Commercial Banking Group also hired Sonia Olarte as head of its new construction-lending unit in South Florida.

"There is a great interrelationship between South Florida and Puerto Rico from the construction and commercial point of views," Piñero told CARIBBEAN BUSINESS. "There is a significant number of businesses with roots in both Puerto Rico and Florida."

In some family businesses, said Piñero, the father lives and works in Puerto Rico while a son runs a subsidiary in Florida; Florida residents with businesses in Puerto Rico also have family members who jump the pond.

"For some time now, we have seen certain Puerto Rico housing & commercial real-estate developers who have been very successful on the island and also develop single-family and multifamily homes and shopping centers in Central and South Florida," said Piñero. "This told us that acquiring Kislak and hiring...Olarte... could create tremendous synergy."

Olarte is a premier construction-lending banker with more than 30 years’ experience in South Florida’s market.

The timing of the two events was coincidental, Piñero said, as the bank had them planned anyway.

Piñero is convinced that both moves will be a bridge between Puerto Rico and Florida, adding value to local entrepreneurs and developers who are Banco Popular clients and do business or are looking to do business in Florida.

"Sonia and her team will add tremendous value to our customers thanks to her vast knowledge of the construction, housing, and commercial real-estate industries and her excellent relations with the Florida market. At the same time, the excellent relationships we have with many of the local developers who are looking into the Florida market adds value as well," added Piñero, who was influential in the hiring of Olarte.

Developers Federico Stubbe of Prisa Group Inc. and Freddie Sanchez of Interlink, construction firm Desarrollos Metropolitanos, and shopping-center developer Vadim Nikitin are some of the local developers purportedly pursuing development projects in Florida.

Piñero said the Kislak acquisition ideally complements Banco Popular de Puerto Rico as a growing institution in the Caribbean.

"Certainly Miami is one of the most important financial centers in the Caribbean. It is the closest point [to] and the main commerce and distribution point of goods and services to the Caribbean and Latin America," said Piñero. "The Kislak acquisition certainly improves Banco Popular North America’s foothold in South Florida."

Piñero said opening a construction-lending unit in South Florida will in no way affect the operations of the Puerto Rico unit, headed by Yamil Castillo.

Popular Inc.: Steady Growth in Puerto Rico and on U.S. mainland


When Banco Popular de Puerto Rico opened its doors 110 years ago, its goal was to promote savings while providing quality service to the communities it served. Today, parent company Popular Inc. (Nasdaq: BPOP) continues Banco Popular’s tradition of being the people’s bank. Constant growth, innovation, diversification of services, and a goal-oriented leadership have made Popular the largest financial institution in Puerto Rico and an up-and-coming competitor on the U.S. mainland.

There, Popular has again ranked among the top 10 lenders according to the U.S. Small Business Administration. In August, it completed the acquisition of Quaker City Bancorp of Southern California. In so doing, it acquired 27 branches of savings-and-loan affiliate Quaker City Bank, of which 16 are inside Wal-Mart stores. At the end of 2Q04, Quaker City Bank had reported total assets of $1.9 billion and deposits of $1.1 billion.

"In the States, we will [keep] expanding within our already existing markets [urban areas with large Hispanic populations]. We will keep up our efforts to be recognized as the best banking alternative, not just because we are a Hispanic bank but because we are a good bank," said Jorge A. Junquera, Popular’s senior executive vice president & chief financial officer.

Popular’s mortgage and consumer-lending operation on the U.S. mainland, Equity One, has helped its parent gain ground in that marketplace. In 3Q04 alone, Equity One sold $1.34 billion in mortgage-backed securities. It finished 2003 with total managed net loans of $6.8 billion, up 41.2% from the year before. Future securitization deals will be under the Popular ABS Inc. name. Affiliate Banco Popular North America had $15.4 billion in assets in 2Q04, representing nearly 39% of Popular’s total assets.

Despite the company’s expansion into the stateside market, it remains focused on Puerto Rico. "We continue to strengthen our operations in the highly competitive Puerto Rico market," said Junquera. "In 2004, as in 2005, we will continue strengthening our presence and our products on the island, always aware that quality of service comes first. Yet, we see outstanding growth potential in the [mainland] U.S. market, where we have made a commitment to our investors to increase our income by 10% a year. Many of our new businesses, such as insurance, brokerage, and electronic-processing initiatives, have great potential," he said.

Outstanding performance

In the first three quarters of this year, Popular’s net income reached $361.7 million and total assets $42.9 billion, compared with $364.6 million and $35.8 billion in the same period in 2003. The increase in net interest income resulted mostly from a $5.1 billion increase in average earning assets for the quarter ended Sept. 30, 2004, compared with the same period in 2003.

As of Sept. 30, 2004, total loans amounted to $27.5 billion, net ($27 billion after allowance for losses), compared with $21.7 billion in 2003 (or $21.3 billion, net).

Commercial loans (including industrial, agricultural, and construction loans) and mortgage loans accounted for some 80% of the total through the first three quarters of 2004.

Mortgage loans generated the largest increase in the portfolio, rising $2.8 billion, or 31%, since Sept. 30, 2003, and $1.1 billion, or 10%, from June 30, 2004. Commercial loans rose $2.1 billion, or 26%, compared with Sept. 30, 2003, and $1.5 billion, or 17%, compared with June 30, 2004.

From 3Q03 to 3Q04, total deposits grew by 16%, from $17.7 billion to $20.5 billion. Popular said its net income decreased by about 12%, from $130.9 million ($0.48 earnings per common share) in 3Q03 to $115.4 million ($0.42 earnings per common share) in 3Q04. According to, the variance in profit from year to year responds to a one-time securities gain.

In 2003, Popular sold $500 million in five-year fixed-rate, medium-term notes and issued $31 million in corporate debt. Through Popular Capital Trust I, it also sold $300 million of trust-preferred securities. In May, Popular said its quarterly cash dividend had increased by 18.5%, from $0.27 to $0.32 per common share. Also, the board authorized a 2-for-1 stock split in the form of a stock dividend.

Banco Popular - Total Assets (1999-2003)

In Billions (Year Ending Dec. 31)

1999: $25.5

2000: $28.06

2001: $30.7

2002: $33.7

2003: $36.4

Year to Date: $42.9 billion

Source: Popular Inc.

Banco Popular – Net Income (1999-2003)

In millions (Year Ending Dec. 31)

1999: $257.6

2000: $276.1

2001: $304.5

2002: $351.9

2003: $470.9

Year to Date: $361.7 million

Source: Popular Inc.

R-G Financial strengthens its platform in Florida


In October 2004, R-G Financial Corp. (NYSE: RGF) and its Florida subsidiary, R-G Crown Bank, reached an agreement with SouthTrust Bank of Alabama to buy 18 of SouthTrust Bank’s branches (15 of them in Florida) for an estimated $120 million to $130 million. The transaction is pending regulatory approval but is expected to close by the first quarter of 2005 (1Q05).

Nine of the branches are in Jacksonville, Fla.; five in Lakeland, Fla.; one in DeLand, Fla.; and three are in Augusta, Ga. The branches bring around $300 million in assets (primarily in the form of loans) and $600 million in liabilities (mostly deposits).

The SouthTrust Bank acquisition brings R-G’s total number of branches operating in Florida to 29. "This acquisition will allow us to strengthen our platform in Florida to expand into new markets," said Victor J. Galan, chairman & CEO of R-G Financial Corp.

The branches were sold to facilitate regulatory approval of Wachovia Corp’s acquisition of SouthTrust Bank’s parent company, SouthTrust Corp.

In June 2002, R-G Financial acquired the 14 branches of Florida-based Crown Bank. Continental Capital Corp., a mortgage & banking subsidiary out of New York, was integrated into the Florida operations. R-G Financial’s Florida venture took the name R-G Crown Bank in July 2003.

"We saw an opportunity in Central Florida’s demographics, lower costs of deposits, and incredible movement in construction and real-estate development," said Galan. "Central Florida has a mild climate; low cost of living; a booming housing market; and, more important, a large Hispanic population of which Puerto Ricans make up more than 50%."

R-G Financial Corp. reported earnings of $40.9 million in 3Q04, up 19% from $34.3 million in 3Q03. For the first nine months of 2004, net income rose to $120.2 million, up from $94.9 million in the same period last year, representing a 27% gain.

Consolidated earnings per diluted share increased by 22%, from $0.59 in 3Q03 to $0.72 in 3Q04. For the first nine months of 2004, consolidated earnings per diluted share were $2.11, up 30% from $1.62 in the same period last year. Return On Equity in 3Q04 was 25.08%, and Return On Assets was 1.81%, compared with 24.26% and 1.82%, respectively, in 3Q03.

"The increase in earnings reflects another strong quarter of loan production as we continue to benefit from strong loan demand both in Puerto Rico and Central Florida," said Galan. "Because of these strong results, together with the continued strong demand we are experiencing in commercial and residential lending, we remain optimistic about our future performance."

R-G Financial’s total loan production during 3Q04 was $1.3 billion; during the first three quarters of 2004, it reached $3.4 billion. In each period, almost 90% of the loan production was generated internally.

There were trading losses of $25 million and $24 million during the nine months and the quarter ended Sept. 30 on derivative instruments held, including certain derivatives held for risk-management purposes.

At the end of 3Q04, R-G Financial had total assets of $9.2 billion, up from $7.8 billion in 3Q03. The total assets of R-G Crown Bank at the end of 3Q04 were $1.6 billion; the bank contributed $18.3 million in profit during the first nine months of the year.

This Caribbean Business article appears courtesy of Casiano Communications.
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