Banking During A Global Pandemic
How Local Banks Have Pivoted, Adapted and Accelerated Their March into the Future
How can a small bank in South Florida compete these days among bigger chains and online-only rivals? And how can it maneuver during the pandemic amid uncertainty over the future of the economy? Luis de la Aguilera at U.S. Century Bank is emphasizing specialized services, including a team in Coral Gables dedicated to law firms and private banking. He’s rolling out new digital tools, too.
Brian Hagan is changing office design at First American Bank. He’s just opened a branch in Coral Gables with no teller lines. Customers sit at desks to talk with bankers. The idea: To build personal relationships and brand loyalty, but to do away with mundane tasks in-house that can be done online.
Over the past year, coronavirus has accelerated trends underway in banking: A shift to digital transactions, consolidation, and low interest rates squeezing profit margins and making efficiency key, to name a few. It’s also heightening rivalry among small banks pursuing a high-tech, high-touch strategy, offering both online tools and a focus on personal service. Indeed, some South Florida banks worked so hard to provide Covid loans to local companies that they lured away clients from larger national competitors.
“The pandemic underscored how critical it is to have a relationship with your bank and the value of local decision making,” says Jorge Gonzalez, vice chairman and CEO of Miami-based City National Bank, which has its executive offices and its private banking group in Coral Gables.
Mastering New Ways of Work: From Home, Online
U.S. Century illustrates the trend. CEO de la Aguilera has led at turnaround since taking the helm in late 2015, nearly doubling assets and diversifying business. U.S. Century had struggled after the 2008 financial crisis because of an over-reliance on real estate loans.
De la Aguilera, a former chief at Miami’s Total Bank, expanded into other lending areas, from medical practices to homeowners’ associations. He shut branches close together and opened in strategic locales, notably Coral Gables in 2016.
U.S. Century’s Gables office featured a team specialized in law firms, offering what he calls “high-touch, concierge-level service for attorneys.” That’s proved so successful – lawyers started using the bank for personal needs and referring others – that U.S. Century set up its private banking group in the city, too.
But the speed of all that change paled next to the sudden Covid lockdown in early 2020. De la Aguilera’s team moved fast to work mostly from home, thrilled to have installed a new core processing system and computers ready for video conferencing even before the virus hit. Soon, staff worked overtime to write up federally authorized Paycheck Protection Program (PPP) loans to small businesses – remotely. “If you are not competing in the tech spacein banking, you are cutting your future potential for growth and expansion,” says de la Aguilera from the bank’s Doral headquarters. “Because customers demand it.”
PPP Loans: The Best and Worst Banks
When it comes to PPP loans, Coral Gables banks rank among the best and the worst in Florida, says bank analyst Ken Thomas, a longtime finance teacher at The Wharton School and president of Miami-based Community Development Fund Advisors.
Thomas researched how much Florida banks loaned in PPP, compared that amount to their deposits and market share, and deemed the result an indicator of “responsiveness to the community.” He found the state’s most responsive banks were Coral Gables-based Professional Bank and Miami-based City National Bank of Florida, which keeps its executive offices in Coral Gables. The least responsive: BAC Florida, which has its sole branch on Miracle Mile, says Thomas.
Professional Bank (assets: Roughly $1.6 billion) provided over $226 million in PPP loans and City National (assets: Roughly $18 billion) loaned $1.9 billion last year, underscoring how both vie to serve small businesses locally, Thomas says. In contrast, BAC Florida (assets: Roughly $2 billion) made just one PPP loan for less than $100,000, reflecting its focus on overseas clients buying Florida property, says Thomas.
“These banks are on opposite poles in how they responded to Covid in the community,” says Thomas. He is hopeful that BAC will engage more with local borrowers under its new owner; indeed, in defense of BAC Florida, it was in the midst of being acquired by Brazil’s megabank Bradesco during the pandemic and aims to expand offerings to, and engagement with, small businesses.
Professional Bank: “First Responders in Finance for Small Business”
Approving more than 1,500 PPP loans took a massive effort at the nearly 200-employee Professional Bank, says President and COO Abel Iglesias. The staff was already busy in early 2020, offering shares on Wall Street for the first time and completing a merger with its colleague across the street, Marquis Bank.
Yet when Covid spread and Washington authorized PPP loans, “We literally turned the bank upside down in April, May and June to accommodate clients and do our part for the community,” says Iglesias. In the end, about half of its PPP loans went to customers new to Professional, which launched in 2008. “We were kind of like the first responders in finance for small businesses,” says Iglesias proudly.
Some Bad Loans, But Not Too Many This Time
Fortunately, banks were well-capitalized when Covid hit, bolstered by new regulations and stress tests put in place after the 2008 financial crisis. They had imposed tougher standards for lending and kept bigger reserves against potentially bad loans, making them better able to withstand new blows.
That helped when one big South Florida borrower – coffee trader Coex – unexpectedly went belly up last summer, with more than $100 million in loans. Among local banks hardest hit: Coral Gables-based Amerant, formerly known as Mercantil Commerce- bank. Amerant charged off $19 million of its loans to Coex. That contributed to a net loss of $1.7 million last year at the publicly traded bank, reports show.
Amerant, the biggest bank based in Coral Gables (assets: Roughly $8 billion), has been diversifying for years. It’s reaching out beyond its base of longtime Venezuelan customers, who still provide nearly half its deposits. In January, the bank teamed up with veteran Florida real estate executives to launch Amerant Mortgage, expanding aggressively in the area of home loans.
In February, Gerald “Jerry” Plush, a longtime board member, became its new CEO. He succeeds veteran chief Millar Wilson, who led the bank’s spinoff from Venezuela’s Mercantil group and its 2018 stock sale on Wall Street. Among his plans: Raise awareness of the Amerant brand.
Banks Based in Coral Gables
| Name Deposits | June 2020 | June 2019 |
| Amerant | $6.13 billion | $5.87 billion |
| BAC Florida* | $1.90 billion | $1.90 billion |
| Banesco USA | $1.56 billion | $1.56 billion |
| Professional* | $1.56 billion | $0.76 billion |
*Professional merged with Coral Gables-based Marquis Bank in early 2020.
Source: Federal Deposit Insurance Corp. (FDIC). Deposits are for all offices of each bank, not only the offices in Coral Gables.
How Fast Will Florida’s Economy Recover?
Plush takes over Amerant as banks face uncertainty over the economy. Florida is benefiting from an influx of companies and residents from higher-tax New York, California and Illinois, now that remote work makes geography less important for business. But the state’s vital hospitality industry – especially hotels and restaurants – continues to suffer from a serious drop in travel and dining out.
How quickly Florida’s market revives depends partly on how fast U.S. residents get vaccinated. Many bankers see the economy gaining steam as 2021 progresses, and they’re preparing now to offer loans to local businesses for working capital and other needs. The banks are flush with deposits, because many customers socked away cash during Covid that they did not spend on outings or clothes.
City National Bank, the largest bank based in South Florida, just added six veteran commercial bankers, and it’s hiring, as lending picks up. “Today, the regional economy is improving, and [City National’s] pandemic-induced loan deferments have been reduced by more than 90 percent,” says Gonzalez. “We are very optimistic about 2021.”
Lloyd DeVaux, president and CEO of Palmetto Bay-based Sunstate Bank (assets: Roughly $500 million), is upbeat, too – even for tourism, once Covid vaccines are more widely distributed.
“I see huge pent-up demand,” says DeVaux, whose bank has a Coral Gables branch. “People are yearning to go on vacation. They’re yearning to travel and go places, go to restaurants. They’re going to get out of the house and spend money. There’s going to be a strong recovery, and Miami is going to benefit.”
Business Won’t Look the Same Post-Covid: Smaller Offices?
Yet one thing’s for sure: Business and the economy won’t work the same after Covid, says de la Aguilera. He sees the changes among attorneys. Before Covid, many law firms had spacious, well-appointed offices with lobbies and conference rooms. Now, partners and staff from firms work mostly from home, using online tools. Law firms sense an opportunity to save lots on rent post-Covid.
“Businesses are looking at things differently. They’re re-assessing the need for so many square feet of office space,” says de la Aguilera. “And they’re evaluating the need to have so much staff on site.”
Customers also are seeking more digital tools. U.S. Century (assets: $1.6 billion) is rolling out a new website, new mobile banking app and new treasury app for businesses this year, de la Aguilera says.
City National already has added “contactless debit cards and conversational banking with Alexa” to its tech offerings, says CEO Gonzalez. And it’s meeting customer demand for stricter health standards, adding everything from “proximity bracelets to ensure social distancing, to an elevated A/C filtration system that helps prevent the spread of Covid-19 and plexiglass barriers throughout all spaces,” says Gonzalez.
Banking Consolidation Continues, Could Accelerate
New technology, health measures and compliance with tighter banking rules all cost big money. That’s fueling consolidation, as banks seek to spread costs over a bigger base. Covid did not halt mergers already in progress, although negotiations for some new deals were put on hold, executives say.
Among unions just completed: City National – owned by one of Chile’s biggest banks – finalized its purchase of Miami’s Executive National Bank (assets: Roughly $455 million). And Brazil’s Bradesco sealed its first U.S. acquisition: Buying BAC Florida in a deal unveiled in 2019 at a $500 million price tag.
Coral Gables: Affluent, Full of Business, Accessible
Coral Gables remains a favored site for consolidation and banking generally. That’s because the nearly century-old city is affluent, hosting lots of businesses, multinational companies, consulates and high-income residents. It’s centrally located near Downtown Miami and Miami International Airport. And it offers strong quality of life, with a walkable downtown, leafy neighborhoods and waterfront living.
First American Bank set up in the city in 2014 by purchasing the one-branch Bank of Coral Gables. The Illinois-based bankhad been serving customers in Florida from afar, catering to many family-owned businesses active in export-import. Soon, the bank snapped up a bigger prize: Miami’s Continental National Bank, with five branches. Last fall, Florida President Hagan moved First American’s headquarters to a larger space: 540 Biltmore Way across from City Hall, opting for no teller lines.
“Florida has more export-import business, more entrepreneurship and lower taxes than many U.S. areas,” says Hagan, explaining why First American (assets: Over $5 billion in Illinois, Wisconsin and Florida) opened in the Sunshine State. “And we appreciate a community like Coral Gables that supports and encourages new and growing businesses.” The challenge then for community banks is how best to shape their high-tech, high-touch strategy, combining digital tools with personal relationships. It’s that human touch that distinguishes brick and mortar banks from online-only rivals such as Quicken Loans, says de la Aguilera. “We know our customers. Our credit decisions are taking into consideration more than an algorithm. We’re also looking at the character of the individual,” says de la Aguilera. “And in my 39 years in banking, character still counts.”
The lesson for banks – and maybe for all of us – from the pandemic and growing competition? “Be flexible and learn to adapt,” says Hagan. “You have to be ready to change.”