TotalBank management eyes 14 new branches in 5-year plan
By Zachary S. Fagenson
TotalBank's new management team is to nearly double its footprint and add up to 140 employees over the next five years, President Luis de la Aguilera said Tuesday.
The expansion is part of recently completed plan that also calls for the Miami-based bank to fill what it sees as an industry-wide gap in residential mortgage lending and to break into Broward and Palm Beach counties.
The Banco Popular Español subsidiary plans to add two branches in Miami-Dade County in the third and fourth quarters of fiscal 2010, four in 2011, four in 2012, two in 2013 and two in 2014.
If all the added branches are opened, the bank's footprint will grow from 15 to 29.
And even though the bank had a net operating loss of about $15 million for the quarter ending Sept. 30, it's poised to grow at the expense of a slumping real estate market.
"On a per branch basis, we're looking at $300,000 to $400,000 in annual expenses there from a personnel point of view," said Chief Financial Officer José Marina. He also estimated that each branch, after opening, would take about a year and half to break even.
Yet the cost of physically moving into each branch will depend on the deals the bank can find. No locations have been selected yet.
"The expense varies a lot on whether you're building something from the ground up or if it's a turnkey situation," Mr. de la Aguilera said. You "have to leave yourself open to move based on opportunity, and from our bank's perspective and our parent's perspective we have the resources."
But "we're definitely seeing that the rents are in our favor and we have ability to negotiate space," he added.
The concentration of new branches, he said, will be in Miami-Dade but the bank is eyeing markets north and even Monroe County to the south.
"There's so much change right now happening with the number of bank failures that there's going to be openings for us to step forward," Mr. de la Aguilera added.
Each new branch is to have seven to 10 staff, including a branch relationship manager, a business banker, a mortgage originator and support staff.
And while most banks in the region have been running as far from residential mortgages as possible, TotalBank seems to subscribe to Warren Buffett's theory of being scared when others are greedy and being greedy when others are scared.
"We just see so many model line residential lenders that have closed shop," Mr. de la Aguilera said. "We're taking a contrarian approach and think 2010 is going to be a great year for" residential lending.
"There [are] a lot of good clients looking for a bank to do the residential piece and it gives us the opportunity to cross-sell them all kinds of products," he added.
Whether the plan will work, however, is yet to be determined.
Late last summer, Mr. de la Aguilera was one of several executives who became part of the new management team lead by Chairman and CEO Jorge Rossell. The organization also added a workout team to help sort through the bank's cache of troubled loans.
As of Sept. 30, TotalBank had about $2 billion in assets and $1.2 billion in deposits. Its noncurrent loans and leases jumped from 2.48% on June 30 to 6.95% on Sept. 30.