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2013 Annual Report - BACFlorida2013 Annual Report BAC Florida Investments, a subsidiary of BAC...
Transcript of 2013 Annual Report - BACFlorida2013 Annual Report BAC Florida Investments, a subsidiary of BAC...
2013 Annual Report
Private Banking and Wealth Management
Real Estate Finance
Corporate and Institutional Banking
Virtual Branch “My e-BAnC”
Florida Bank
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2013 Annual Report
BAC Florida Bank had very good performance during 2013. Net profits reached $7.8
million, compared to $4.0 million in 2012. A critical factor affecting earnings during
recent years had been the need for high provisions for loan losses due to the very severe
and long real estate crisis; however, in 2013 we saw the beginning of the end of this
crisis, which is reflected in the reduction of reserves for loan losses from $7.0 million
in 2012 to $2.0 million in 2013. In addition, our key financial indicators are generally
better than the average for Florida banks with assets between $500 million and $1.5
billion, according to the “Uniform Bank Performance Report” from the Federal Financial
Institution Examination Council as of December 31, 2013.
Our private banking and residential real estate businesses, mainly with clients from Latin America and Europe,
continued to grow, reaffirming the attractiveness of Florida for affluent investors from countries in those regions.
We also continued to expand our international corporate and correspondent banking business, particularly in
Central America. As a result, total assets grew by 8.7% to $1,424 million and total loans grew by 10% to $1,115
million.
The Bank’s liquidity remains strong. Our cash, cash equivalents and total securities add up to $280 million. In
addition, we have over $250 million in available lines from the Federal Home Loan Bank and the market. Our
total deposits reached an all-time high of $1,093 million as of December 31st, 2013. We consider this liquidity
more than adequate to cover any contingent adverse flow in funding, particularly as we have never issued any
commercial paper, subordinated debt or bonds.
BAC Florida Bank’s capital position continues to be strong as well. We ended the year with a Tier I Capital ratio
of 8.5% and a Total Capital ratio of 18%, classified as a “Well Capitalized Bank” under standard guidelines from
the Federal Deposit Insurance Corporation which require a minimum of 5% for Tier I Capital ratio and 10% Total
Capital ratio.
During 2013 we applied and obtained approval to open a representative office in Mexico City primarily to
capitalize on trade finance opportunities with one of the United States’s most important trading partners and
main users of the U.S. export credit agencies. In addition and as part of our growth and diversification strategy,
we developed “My e-BAnC”, BAC Florida Bank’s Virtual Branch which services customers that are citizens and
permanent residents of the United States.
Our entire team, Shareholders, Board of Directors, Senior Management and Employees, is committed to
providing our clients with excellent service while continuing to manage and control risk prudently and ensuring
compliance with applicable Federal and State laws and regulations.
Message from the President and CEO
Frank D. Robleto President and CEO
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2013 Annual Report
The Private Banking and Wealth Management Division of BAC Florida Bank is the most important source of funding for the Bank with its deposits comprising close to 70% of total bank deposits. The Division serves the banking needs of its clients and works, in conjunction with BAC Florida Investments and BAC Global Advisors, to provide investment and securities portfolio solutions as part of a holistic approach to wealth management services.
The Division’s niche strategy is directed to serving principally non resident aliens, mostly domiciled in Latin America and Europe. Throughout the years, it has refined a unique approach to working with and serving individuals and payment needs of their corporations by emphasizing personal service and cultural affinity accompanied by an unusually high employment stability of our relationship managers. Independent consumer surveys consistently indicate that BAC Florida Bank, despite its size, is one of the mostly highly regarded institutions in client satisfaction.
The Division finished the year with a record $753 million in deposits, following continuous increases that during the last eleven years have amounted to $467 million, equivalent to a 13% compounded rate of average annual growth. This deposit growth has been entirely organic, and the Division’s relationship managers have worked closely with BAC Florida Investments and BAC Global Advisors to create a total of over $140 million in suitable portfolios for clients wishing to pursue integrated investment solutions.
The Division has produced these results despite an adverse environment in the United States of almost zero short term interest rates. Over the last five years, the Federal Reserve Board, in order to induce economic growth, has increased liquidity through the creation of money in its balance sheet to unprecedented levels, driving down the rates banks pay to depositors and savers. Under these adverse circumstances, BAC Florida Bank, with its differentiating characteristics of FDIC insurance, strong U.S regulatory supervision, solid balance sheet, robust capital ratios, emphasis on trust and accessibility, has managed to have its clients increase their relationship volumes as well as attracting new ones preferring it instead of offshore institutions offering higher rates.
Private Banking and Wealth Management
A Safe and Sound BankBAC Florida Bank,
supervised by the State ofFlorida, is a Member of theFDIC. We are experiencedin BSA/AML compliance
requirements fornon-resident aliens.
Experienced Private BankingOfficers
We have long tenured and experienced officers familiar with our
clients’ regions and culture. Ourbusiness model allows us to provide aclose personalized service, based on
building strong and lastingrelationships.
Business StrategyOur Private Banking Division’s
strategic plan integrates importantfactors, such as methods for
achieving service excellence bymeasuring client satisfaction, and
gains in operational efficiency.
Products and ServicesOur wide selection of financial products and
services is integral to providing financial solutions,including investments products through
our subsidiaries BFI and BGA, a great complementto our banking activities for individuals and
corporations, mostly from Latin America.
A Unique BankWe are committed toproviding excellent
personalized service. Themajority of our clients have been with us for more thanten years indicating loyalty,
trustworthiness, andsatisfaction.
Dec-02 Dec-08 Dec-13
Deposit Growth Private Banking(in US $ Millions)
753
286
542
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2013 Annual Report
BAC Florida Investments, a subsidiary of BAC Florida Bank, is a broker-dealer incorporated in the State of Florida since 1986. It is registered with the Securities and Exchange Commission (SEC) and is a member of the Securities Investor Protection Corporation (SIPC) and Financial Industry Regulatory Authority (FINRA). BFI offers securities transaction services to its customers through a fully disclosed clearing agreement with Pershing LLC, a subsidiary of The Bank of New York Mellon Company.
With 28 years of experience, BFI has developed an expertise in emerging markets, while continuing to provide coverage of international capital markets. It offers full brokerage services, research analyses, and investment products across all major asset classes to service the specific needs of its retail and institutional clients. In 2013, mainly as a result of increased sales and trading volume doubling the head count of its trading table, institutional and retail business continued to expand and further penetrate markets in South and Central America. Looking ahead into 2014 we plan to extend supplementary coverage with specific targets, primarily in Uruguay, Peru and Mexico.
During the first quarter of 2013, BFI appointed Mr. Alejandro Falla as its new President and CEO. With more than 20 years of investment experience and extensive business knowledge, Mr. Falla has taken steps to expand coverage and increase revenues by implementing a fresh vision for the firm. Not only has he created a unique environment for growth, but he has also implemented measures to strengthen BFI’s brand image and position as a leading establishment for Latin American investments. Through his leadership, we have fortified our relationship with BAC Florida Bank’s private banking group, which has been essential in providing solid private wealth management to clients at BFI.
Despite numerous world economic obstacles, primarily U.S. fiscal problems, unresolved issues in Europe and Emerging Market fragility that during the year triggered uncertainty in financial markets worldwide, BFI surpassed its 2012 performance. It increased trading revenue by 35% from 2012, whereas assets under custody continued expanding. Entering 2014, we expect our business to continue growing despite headwinds. We will carry on with our strategy to ensure long-term success, aiming to deliver increasingly improving results.
This improved performance could not have been accomplished without a skilled and hardworking team of brokers, compliance and operations professionals and the support from staff and officers at BAC Florida Bank. We would like to thank all our clients for their trust in our services and hope to continue servicing their financial needs.
BAC Global Advisors (“BGA”)BAC Global Advisors was established as a subsidiary of BAC Florida Bank in 2002 and is registered with the Securities and Exchange Commission (SEC). During 2013, the firm underwent structural changes in order to better fulfill the needs of existing customers and attract prospective clients. Additionally, it began the development of a new product intended to cater to clients with portfolios of a more moderate size. Through these efforts, BGA is aiming to increase participation in Latin American advisory markets. We are dedicated to servicing the financial wellbeing of our clients, having the ability to offer personalized attention through our boutique approach. Heading into 2014, we are looking forward to expanding our business and continuing to servicing our clients.
BAC Florida Investments (“BFI”) and BAC Global Advisors (“BGA”)
Assets Under Management
47%
13%
40%
■ Corporate ■ Institutional ■ Private
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2013 Annual Report
For almost two decades, BAC Florida Bank has been a leading provider of real estate mortgage loans in Florida to high net-worth foreign nationals. BAC Florida Bank has seen real estate financing as a vital part of a strategy to assist and advise international clients in building and managing a diversified asset portfolio. The Bank finances houses and condominiums on the residential side; and office buildings, owner occupied properties, shopping centers and rental apartment buildings on the commercial side.
2013 marked a turning point in the Florida real estate market as the difficulties caused by the financial crisis that started in 2007 began to subside. BAC Florida Bank has approached the market since the financial crisis with conservative guidelines and has successfully expanded its origination of real estate loans. Real Estate loan origination growth has been consistently increasing over the last four years. The Bank originated $234,000,000 in new real estate loans in 2013, an increase of approximately 20% over 2012 loan volumes.
The future outlook for South Florida real estate appears healthy. The number of problem loans at all banks, including BAC Florida Bank, has decreased, and the number of foreclosures in South Florida has also significantly decreased; in many areas real estate valuations have recovered most of the losses stemming from the financial crisis. South Florida is continuing to experience a resurgent real estate market. A significant percentage of sales are made to buyers who reside outside the United States, mainly from Central and South America, Europe and Canada. Since providing financing to these foreign buyers is a core specialty of BAC Florida Bank, we feel confident in our future business opportunities.
An historically important component of the Bank’s real estate business strategy has been the distribution of originated assets. The Bank’s distribution program, which was suspended during the real estate crisis, was very appealing to major financial institutions, who regularly bought and arranged financing for the purchase of assets. 2013 marked a return by the Bank to the asset distribution business, as the Bank successfully closed asset sales transactions. Asset distribution allows BAC Florida Bank to expand mortgage originations, enhance its liquidity, improve its earnings ratios, ensure portfolio asset quality and demonstrate proper loan pricing.
BAC Florida Bank, as a participant in the South Florida Real Estate market, certainly has its future challenges, such as increased competition, margin compression due to the low interest rate environment, mortgage loan prepayments and a significant amount of new condo construction. As in the past BAC Florida Bank will continue its conservative approach to real estate lending credit risk and apply underwriting guidelines that are appropriate to current and future market conditions. BAC Florida Bank remains committed to the mortgage business, now and in the future.
Real Estate Finance
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2010 2011 2012 2013
548655
767849
Real Estate Loan Growth(in US $ Millions)
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2013 Annual Report
2013 was another productive year for the Corporate and Institutional Banking Division (“C&IB”). The Division reached all of its goals and objectives despite very challenging market conditions. Although economic activity has slowed weakening demand for credit in some of our main markets and interest rates continued to decline for most of the year, the Division was able to grow loan balances and increase fee income to off-set margin compression. Additionally, the gradual shift in asset category toward corporate loans continued. During the year, loans to corporations increased from 30% of the Division’s average loan balances to 40%.
The C&IB Division is also a major contributor to the Bank in terms of deposits, non–interest income, and liquidity management. Deposits and operating accounts of customers have consistently grown while maintaining our excellence in KYC and BSA. Together with our Electronic Banking Department, we have successfully marketed our WiresDirect payment platform to several large local and regional corporate clients resulting in new deposits. Growth in customer deposits, especially with our traditional institutional banking clients, is also a direct result of our Relationship Manager’s experience, knowledge, and understanding of our customer’s business needs and the culture of service BAC Florida Bank has become known for. Another important achievement has been the increase in non-interest income derived from services and trade finance activities. The Division’s income generated from letters of credit, collections, and other trade finance products account for approximately 30% of the Bank’s total service charges and fees.
2013 also marked the beginning of a new and exciting phase in the implementation of the Bank’s Growth and Diversification Strategy. In May 2013 the Board of Directors approved the establishment of a Representative Office in Mexico City, Mexico. After months of planning, on December 12th, 2013 the Bank obtained all necessary regulatory approvals from the Mexican regulators and the plan became a reality. This bold move signals the Bank’s firm commitment to the Strategy and to our ability to continue developing our core C&IB businesses in new markets. As one of the U.S.’s main trading partners and an increasingly important commercial partner to Central America, Mexico will present BAC Florida Bank vast opportunities to grow in the area of trade finance. With a strong emphasis on Ex-Im Bank products and other traditional financing structures, BAC Florida Bank will target large local and middle market corporations with solid financials who value commitment, efficiency, and service.
Domestic Banking
The Domestic Banking Division continues to deliver consistently positive results. By offering competitive products and services and targeting businesses in our community and individuals with ties to Latin America, the Division has been able to consistently increase its portfolio throughout the years. The Domestic Banking Division is also responsible for managing the Coral Gables Branch which supports the Private Banking and Wealth Management, Real Estate Finance, and C&IB Divisions.
Corporate and Institutional Banking
10%
29%61%
C&IB Asset Categories■ Foreign Banks ■ Corporates ■ Structured Trade
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2013 Annual Report
My e-BAnCBAC Florida Bank’s Virtual Branch
Customer satisfaction has always been at the center of BAC Florida Bank’s culture. As part of our commitment, we are proud to offer the latest technology in our products and services along with personalized service. This combination allowed us to develop “My e-BAnC”, BAC Florida Bank’s Virtual Branch. The initiative was launched in April 2013 as part of our growth and diversification strategy, becoming a channel to reach new markets across the United States.
The Market
The Virtual Branch currently services customers who are citizens and permanent residents of the United States. My e-BAnC has customers in 32 states, with the expectation of covering the entire country by year end 2014. Additionally, we plan to expand the convenience of the Virtual Branch to U.S. citizens abroad in an effort to allow retirees and expatriates convenient access to their moneys in the US.
The Results
After just eight months, My e-BAnC finished the year with more than $10 million in deposits from all over the United States. The geographical spread has been possible thanks to our technology, which benefits not only “Virtual Customers” but also international clients.
My e-BAnC by BAC Florida Bank offers competitive interest rates, which, together with our excellent personalized service, make the perfect combination to develop and maintain long lasting customer relationships.
My e-BAnC has been implemented with a conservative strategy of offering traditional banking products such as demand, savings and money market accounts as well as time deposits. The deposit growth of the Virtual Branch is shown below:
Deposit Growth (in US$ thousands)$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-April May June July August September October November December
$244
$2,216
$4,341$4,813
$6,758$7,873
$9,041$9,487
$10,753
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2013 Annual Report
BAC Florida Bank and the CommunityCaring For Our Communities in South Florida
BAC Florida Bank is committed to maintaining high ethical practices in all aspects of our operations and believes that it is our corporate social responsibility to support the developmental objectives and civic initiatives and to invest in and contribute to the welfare of the key communities we serve.
Cultivating Community Development and Affordable Housing
BAC Florida Bank has created partnerships and has supported organizations that target economic growth and make affordable housing available in low and moderate income neighborhoods. Our Community Development partners include Community Reinvestment Group LC, Habitat for Humanity, Neighborhood Lending Partners, New Equity Partners Inc. and South Florida Smart Land Trust Inc.
Education Empowers People
BAC Florida Bank is a strong champion of educational initiatives and has positioned itself to partner with organizations that empower students in our community through programs which improve the quality of education and enhance the students’ opportunities for access, advancement, achievement and personal development. Our educational based alliances include Breakthrough Miami, City Year Miami and Step Up For Students.
Social Change and Philanthropic Endeavors
BAC Florida Bank recognizes the importance of working together with nonprofit organizations in collaborative ways in order to address social issues that include developmental disabilities, child abuse, healthcare, arts and culture and economic development. We have forged community bonds for positive change with Actors Playhouse Children’s Theater, American Cancer Society, American’s For Immigrant Justice, Community Habilitation Center/The WOW Center, Greater Miami Chamber of Commerce, Kristi House, Liga Contra El Cancer and Radio Paz.
Central American Community InitiativesBAC Florida Bank is headquartered and located in South Florida and the people, neighborhoods and local businesses that we serve in Miami-Dade and Broward Counties make up our core community. However a large portion of the bank’s clients are foreign nationals that live in Central America. We are keenly aware of our responsibilities to help the people of the region deal with the challenges of economic, social and educational issues that impact the key international communities we serve. Our commitment to helping our Central American communities thrive is exemplified through our partnerships with the American Nicaraguan Foundation; APROQUEN; INCAE Business School and Instituto Tecnico Juan Pablo II.
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2013 Annual Report
Real Estate Financing• Residential Mortgages
• Commercial Mortgages
Deposit Accounts and Services• Checking and Savings Accounts
• Money Market Accounts
• Interest Bearing Accounts
• Time Deposits
• Multicurrency Denominated Accounts
• Bill Payment Services
Cash Management• Remote Deposit Capture
• Domestic and Foreign Wire Transfers
• Automated Clearing House (ACH) Transactions
• Positive Pay Services
• “WiresDirect”
Online Banking• “AmeriTransfer”
• Statements and Transactions
• “Wires on Line”
• Electronic Bill Payment
• Mobile Banking with Check Deposit
Treasury• Foreign Exchange
• Repurchase (Repo) Facilities
Credit Products• Institutional and Corporate Lines of Credit
• Cash Collateral Loans
• Syndicated Loans
• Working Capital Loans
• Exim Bank Facilities
Trade Finance• Commercial Letters of Credit
• Standby Letters of Credit
• Import and Export Financing
• Structured Trade Finance / Export Credit Agencies
• Documentary Collections
BAC Florida Bank offers its clients a wide selection of financial products and services from the platform of its business divisions. The combination of this variety of products and services is integral to providing banking solutions for individual, corporate and institutional clients from Latin America and South Florida. In addition, the Bank offers investment products through its subsidiary BAC Florida Investments.*
Products and Services
• Fixed Income Products
• Equity products
• Alternative Investments
• Structured and Derivative Products
• Cash Equivalents
Investment Products offered through BAC Florida Investments*
* Investment Products offered by BAC Florida Investments, a subsidiary of BAC Florida Bank, are not FDIC insured and are not a deposit or other obligation of or guaranteed by BAC Florida Bank or any federal government agency. These products are subject to investment risk and may lose value.
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2013 Annual Report
Florida Bank
Condensed Consolidated Financial Statements2013 and 2012
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2013 Annual Report
Condensed Consolidated Statements of Financial ConditionDecember 31, 2013 and 2012
BAC Florida Bank Condensed Financial Statements
2013 2012
Assets:
Cash and due from banks $ 183,847,736 $ 188,441,330
Securities 88,544,967 69,773,422
Total loans 1,114,847,012 1,011,163,502
Allowance for loan losses (16,589,968) (17,512,814)
Bank owned life insurance 20,606,236 20,024,263
Other assets 33,049,481 38,986,363
Total Assets $ 1,424,305,464 $ 1,310,876,066
Liabilities and Stockholders’ Equity:
Total deposits $ 1,092,760,710 $ 939,352,017
Federal home loan bank advances and other borrowed funds 196,874,423 244,965,950
Other liabilities 12,694,507 11,532,939
Total Liabilities 1,302,329,640 1,195,850,906
Total Equity 121,975,824 115,025,160
Total Liabilities and Stockholders’ Equity $ 1,424,305,464 $ 1,310,876,066
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2013 Annual Report
Condensed Consolidated Statements of Earnings December 31, 2013 and 2012
BAC Florida Bank Condensed Financial Statements
2013 2012
Interest and dividend income $ 45,843,598 $ 42,783,489
Interest expense 11,366,090 10,873,766
Net Interest Income 34,477,508 31,909,723
Non interest income 11,133,037 9,631,343
Net Operating Revenue $ 45,610,545 $ 41,541,066
Provision for loan losses 2,000,000 7,020,000
Non Interest Expense
Personnel and management expenses 17,359,963 14,995,378
Occupancy and equipment expenses 2,518,836 2,665,057
Other operating expenses 11,541,998 11,640,674
31,420,797 29,301,109
Total Expenses 33,420,797 36,321,109
Earnings Before Non-controlling Interest and Taxes 12,189,748 5,219,957
Income tax expense (benefit) 4,359,032 1,163,608
Net Income 7,830,716 4,056,349
Less: Net Income attributable to non-controlling interest (10,141) (4,998)
Net Income Attributable to BAC Florida Bank $ 7,820,575 $ 4,051,351
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2013 Annual Report
Financial HighlightsAs of December 31 or for the year then ended
Assets(US $ Millions)
2010 2011 2012 2013
1,1221,175
Capital(US $ Millions)
2010 2011 2012 2013
98 99
Deposits(US $ Millions)
2010 2011 2012 2013
802851
Loans(US $ Millions)
2010 2011 2012 2013
804883
Net Income(US $ Thousands)
2010 2011 2012 2013
1,311115
939
1,424122
1,0111,115
1,093
780 1,004
4,051
7,821
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2013 Annual Report
Financial HighlightsAs of December 31, 2013
Loans
■ Residential Real Estate (1-4)
■ Commercial Real Estate
■ Corporate
■ Institutional
■ Individual
70%
1%
14%
9%
6%
Deposits
■ Non-Interest Bearing Demand Deposit Accounts
■ NOW, Savings and Money Market Accounts
■ Time Deposits
■ Other22%
3%
47% 28%
Investments
■ U.S. Agencies
■ Corporate Bonds
■ Mortgage-backed securities
■ Collateralized mortgage obligations, Collateralized debt oblications, and Other
11%
8%
40%
41%
■ Federal Home Loan Bank Advances
■ Securities sold under agreements to repurchase
■ Overnight coporate repurchase agreements
19%
14%
67%
Other Borrowed Funds
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2013 Annual Report
Selected Financial RatiosAs of December 31, 2013
Source: Federal Financial Institutions Examination Council (FFIEC): Uniform Bank Performance Report, December 31, 2013*Peers: State of Florida average for Banks with assets greater than $500 million and less than $1.5 billion, December 31, 2013
Loans 90+ Days Past Due
to Total Loans (%)
Tier One Leverage
Capital (%)
BAC Peers*
3.21
2.09
BAC Peers*
9.59
8.51
Total Assets
Growth (%)
Tier One Capital
Growth (%)
BAC Peers*
5.70
8.67
BAC Peers*
10.7910.62
Net Income to Average
Assets (%)
BAC Peers*
0.45
Net Loan Losses to
Average Total Loans (%)
BAC Peers*
0.50
0.28
0.59
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2013 Annual Report
BAC Florida Bank Executive Team
Sitting left to right:
Lina Campos Chief Financial Officer and TreasurerFrank D. Robleto President & CEO
Ruben Diaz General Counsel
Standing left to right:
Leon Debayle Division Head, Private Banking and Wealth ManagementCarlos E. Arguello Division Head, Corporate and Institutional Banking
Adilson Araujo Division Head, Information TechnologyJose Calienes Chief Credit Officer
Alejandro Falla President & CEO, BAC Florida Investments & BAC Global AdvisorsJeff Gross Division Head, Real Estate Finance
German Merida Division Head, OperationsDavid Hernandez Chief Risk Officer and BSA Officer
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2013 Annual Report
BAC Florida Bank Board of Directors
Sitting left to right:
F. Alfredo Pellas, Jr. Director and Co-ChairmanFrank D. Robleto Director, President & CEO
Carlos F. Pellas Director & Chairman
Standing left to right:
Roderick N. Petrey Director & SecretaryLuis Parajon Director
Agustin J. Abalo Director R. Bruce Cuthbertson Director
Oscar Bustillo DirectorRuben Diaz Director & Assistant Secretary
Jorge L. Viera DirectorTimothy W. Davis Director
Fernando A. Tamayo DirectorErnesto Cruz Director (not shown)
Private Banking and Wealth Management
Real Estate Finance
Corporate and Institutional Banking
Virtual Branch “My e-BAnC”
Florida Bank
169 Miracle Mile, Suite 700Coral Gables, FL 33134
Tel: 305-789-7000Fax: 305-374-1402
Florida Bank