Strong fundamentals fueling growth in Miami’s financial industry
Invest: Miami speaks with Abel Iglesias, President and CEO, Professional Bank
How has Professional Bank evolved since its opening in 2008?
Professional Bank opened in 2008, right in the middle of the financial crisis. Despite the economic downturn, the timing was actually advantageous for us. As financial institutions were inward-looking, spending time and money cleaning their balance sheets, we were one of the few banks that were able to increase our activity by taking an outward-looking approach. We did not take on any bad loans or take on any toxic assets, but rather grew strong accounts enabling us to be highly rated by Bauer.
We began our journey as a full service commercial banking institution that caters to the professional community. However, we have evolved to also include residential lending, construction and commercial real estate financing, commercial business financing and SBA lending. Today, we are at roughly $400 million in assets with a diversified portfolio of assets. Technology, an area that we heavily invest in, has played an important role in leveraging our bank and has enabled us to cater to a growing number of clients with fewer offices. That said, we are planning to open a Palm Beach branch by summer 2017 and are actively looking at other markets in South Florida.
Which business lines are expected to rise faster in South Florida in the upcoming years?
Despite a strong dollar and the headwinds we are currently facing in Latin America, Miami continues to offer a strong business environment with expectations of growth in 2017. Our main growth driver in South Florida, commercial real estate, will continue to be a part of every community bank’s product set in Miami. One area in this space that will continue to grow and do well will be construction loans for the middle market homes. We see a lot of opportunity in areas like West and South Miami-Dade. On the other hand, high rise condominium construction that you see predominantly in Downtown and Brickell is starting to see some saturation, and, therefore, we will start to see some pull back on lending activity in those markets.
As Miami businesses continue to grow and expand, we see great opportunity in commercial lending. SBA lending is at an all-time high and we anticipate this will continue to grow in 2017.
Lastly, we just recently opened our insurance agency and are quite excited and optimistic about growing this business in 2017.
What are the expectations of the performance of the mortgage lending segment in Miami-Dade County and South Florida for 2017?
Mortgage lending is an area where Professional Bank has done exceptionally well. Even so, I like to say that we are cautiously optimistic as the rates are increasing. While homes priced under a million dollars are doing very well and are expected to continue to do so, rising rates, higher inventories and a stronger dollar have caused a slowdown in the upper end of the market.
We are carefully watching the bond market, observing capital flow out of the bond market and into equities, which forces interest rates upwards. This is important as we don’t know how much higher rates will grow. This ultimately affects how many people will be able to afford mortgages. However, by historical standards, rates continue to be very low, and if people are in the position to purchase a home, this is still the right time to do so.
We are very bullish on bank profits as they are poised to do well with the anticipated Fed increases. Banks may see an increase in their profit margins, which would be good news for the sector. This might cause an increase in M&A activity, as investors will be willing to pay greater multipliers now that banks’ profits are expected to rise.
What is the impact and challenges of the current regulatory framework on South Florida’s banking industry?
One item the banking industry anticipates is the possibility of some regulatory relief in the near future. Modifying the Dodd-Frank Act would be very welcomed by the banking sector as a whole, and by smaller- and medium-sized institutions in particular. Dodd-Frank has some good aspects, but it has also been very onerous on the residential lending front. We would like to see some common-sense modifications to diminish the difficulties associated with compliance. Unintended consequences and costs occur because of these difficulties, such as the distortion in the burden of compliance between big banks and small banks. The former has armies of people working on compliance, the latter does not.
In 2015, Florida banks grew loans at more than twice the average percentage growth of other U.S. financial institutions. What are the main differences in such growth for the different type of institutions?
With over 1,000 people coming to our state a day, Florida is one of the fastest growing states in the country. This fuels our economy. This has benefited the banking industry because, as the economy expands, so does the banking sector. In South Florida in particular, the resurgence of real estate values has fueled a lot of our growth. International banks have seen a slowdown due to currency devaluations, a strengthening dollar, regulations and socio-political issues they are currently facing in areas like Latin America.
Domestically, the banking industry overall has cleaned up their balance sheets, building strong reserves, allowing them to be more aggressive in business. However, in general terms, the current banking growth has not been accompanied by an increase in nonperforming loan thus far, so it is safe to say that what we are seeing is healthy growth.
Taking into account that the banking industry is quickly embracing technological advances, what are the main challenges and opportunities regarding security?
Cyber security is one of the main subjects that concern every bank. We can never be ‘too safe’ because there are always new ways of experiencing attacks and new threats. This is why investment in software security is a top priority not only for us but also for every bank. Small- and medium-sized banks have an advantage over big banks because security issues are handled by third party, specialized professionals that produce state-of-the-art security systems designed specifically for the bank. Larger banks struggle with this because of their size. Another challenge is the possibility of a high-tech game changer in the banking industry, like Uber has been to the transportation business. That being said, it is also important to underline the fact that technological advances have allowed us to grow exponentially with a smaller footprint. To be able to operate in Miami with only two branches is something that I find remarkable.
For more information on Professional Bank, visit their website at: www.professionalbankfl.com