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Florida Bank
2012 Annual Report
Personal Banking and Wealth Management Corporate Banking | Institutional Banking
Real Estate
Florida Bank
1
2012 Annual Report
BAC Florida Bank had very good performance during 2012. 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.
Earnings after tax reached $ 4.0 million, compared to $ 1.0 million in 2011. A critical
factor affecting earnings during recent years has been the need for high provisions for
loan losses due to the very severe real estate crisis of the last five years; however, this crisis is showing signs
of abatement, reflected in the reduction of reserves for loan losses from $ 10.2 million in 2011 to $ 7.0 million
in 2012. It is also important to note that 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, 2012.
BAC Florida Bank’s capital position continues to be strong. During 2012, our bank launched a $ 10 million
program of Preferred Convertible Perpetual Non-Cumulative stock which was totally placed among current
shareholders. This capital infusion, together with current earnings, provides the Bank with enough capital to
continue with our prudent growth. We ended the year with a Tier I Capital ratio of 8.6% and a Total Capital ratio
of 17.8%, 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.
The Bank’s liquidity remains strong as well. Our cash, cash equivalents and total securities add up to $ 258
million. In addition, we have over $ 160 million in available lines from the Federal Home Loan Bank and the
Broker and Listing Deposits markets. Our total deposits and overnight corporate placements reached an all
time high of $ 957 million in 2012. We consider this 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 continues to maintain very conservative credit policies and to keep a diversified risk profile
which is reflected in our Bank’s profitability throughout all the years of the South Florida and national real estate
crisis. We remain focused on the financial needs of our international customers, providing them with residential
real estate financing, FDIC insured deposits, portfolio investments through our subsidiaries BAC Florida
Investments and BAC Global Advisors, and cash management and trade finance to banks and corporations
primarily in Central America and selected countries in South America.
Our entire team: Shareholders, Board of Directors, Senior Management and Employees, is committed to
providing our clients with excellent service while continue managing and controlling risk prudently.
Message from the President and CEO
Frank D. Robleto President and CEO
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2012 Annual Report
The Private Banking and Wealth Management Division of BAC Florida Bank continues to be most important source of funding for the Bank. The Division also serves the commercial banking needs of its clients and works in conjunction with BAC Florida Investments and BAC Global Advisors, to provide investment and portfolio solutions as part of a holistic approach for wealth management services.
The Division’s niche service strategy is directed to serving principally Non Resident Aliens, mostly domiciled in Latin America and Europe. Throughout the years, the Division has refined its unique approach to working with and serving individuals and payment needs of corporations by emphasizing personal service and cultural affinity, accompanied by an unusually high employment stability of its 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 $728 million in deposits, following continuous increases that during the last decade have amounted to $443 million equivalent to a 15% rate of average annual growth. This expansion has been entirely organic without purchasing deposits from other institutions. In addition, the Division’s relationship managers have worked closely with BAC Florida Investments and BAC Global Advisors to create directly a total of over $150 million of suitable investment portfolios for clients with a higher risk profile wishing to pursue integrated investment solutions.
The Division has produced these results despite an adverse environment of almost zero interest rates. Over the last four years, monetary authorities in the developed world, particularly the Federal Reserve in the United States, in order to induce economic growth, have increased liquidity through the creation of money in their balance sheet to unprecedented levels, driving down interest rates banks pay to depositors and savers in general. Under these adverse circumstances, BAC Florida Bank, with its differentiating characteristics of FDIC insurance, strong U.S. regulatory supervision, solid balance sheet, high capital ratios, emphasis on trust and accessibility, has managed to have its clients increase their relationships as well as attracting new ones who prefer us instead of offshore institutions offering higher interest rates.
The Division results described above could not have been possible without the support from the Operations and Information Technology units of the bank, which through innovation, have enhanced the client’s experience. We should also mention the continued deployment and utilization of our Customer Relationship Management system and the increased size and relevance our electronic Customer Service unit. The former has helped us greatly to get closer to the client, and the latter has increased its contribution for solving clients’ everyday needs.
Private Banking & Wealth Management
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2012 Annual Report
BAC Florida Investments is a registered broker-dealer, regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) and a member of the Securities Investor Protection Corporation (SIPC). Incorporated in the state of Florida since 1986, it is a subsidiary of BAC Florida Bank. BFI clients maintain custody of their assets at Pershing LLC, a subsidiary of The Bank of New York-Mellon, assuring additional protection of their investments.
With more than 25 years of experience, BFI has developed an expertise in emerging markets, offering a wide-range of investment products, services and analysis.
BAC Florida Investments continued its record of good performance in 2012. Our institutional business as well as retail client business remained stable, despite the headwinds that continued to affect the market, including U.S. fiscal issues, China’s low growth scenario and the ongoing concerns in Europe.
Our institutional business continued to grow, expanding into new markets in Colombia and Panama. We strengthened our core business in Central America, maintaining stable volumes despite the low interest rate environment and high competition. Moreover, the collaboration between our Client Advisory Teams and BAC Florida Bank’s private banking group has been essential to the private wealth management efforts at BAC Florida. This partnership has contributed positively, reaching customers’ assets under management of $ 121 million, with new accounts added throughout the year.
Additionally, BAC Global Advisors posted positive results in 2012. Customers’ assets under management grew 12% to over $325 million. This performance was due to new relationships as well as an increase in assets under management of existing clients.
The consolidation of South America regional players is bringing new challenges to Emerging Capital Markets. As the strongest market target of BAC Florida Investments and BAC Global Advisors continues to be Latin American emerging markets, we will be looking forward to increasing market participation among local and regional institutional players across the region, expanding our offering to the U.S. markets.
We hope to continue our good performance in 2013, with improvements in our research efforts and product offerings. We also plan to expand into new markets in Chile, Peru and Colombia, while maintaining our solid relationships in existing markets. As new product solutions are becoming more and more important in the current environment, and to continue committed to our clients and shareholders, we will be developing new alternatives and solutions to satisfy those needs during 2013.
The results detailed above could not have been possible without the hard work of our brokers, compliance and operations professionals, as well as our Officers at BAC Florida Bank. Most importantly, we would like to thank our clients for their continuing support and faith in our services, and hope to only improve our relationships in the future.
BAC Florida Investments (“BFI”) and BAC Global Advisors (“BGA”)
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2012 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 of assisting and advising 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.
The year 2012 saw a continuation of the unprecedented 6 years of challenges that began in 2007 and affected all real estate mortgage lenders and banks. Many industry experts defined the 2008, 2009 and 2010 markets as the most challenging real estate environment since the Great Depression. As a result of BAC Florida Bank’s reaction to the difficulties facing real estate markets, the Bank severely curtailed its real estate lending in new mortgage loans during 2008 and the first half of 2009. The Bank’s presence in the Real Estate lending markets in the latter part of 2009 reflected much more conservative underwriting guidelines. This careful origination of Real Estate lending generated $194,000,000 in new loan originations in 2012, an increase of approximately 10% over 2011 loan volumes.
BAC Florida Bank was one of the first South Florida banks to recognize the need to institute a more conservative approach to credit risk. Beginning in 2007 and into 2009, the Bank continued to modify underwriting policies and instituted much more conservative guidelines, consistent with the Bank’s historical approach to mortgage lending. These more conservative guidelines were applied to 2010, 2011 and 2012 loan originations with great success. Although all U.S. Banks and real estate lenders continued to experience loan portfolio deterioration in 2011 and 2012, it is important to note that BAC Florida Bank never originated sub-prime, negative amortization loans or home equity lines of credit in residential real estate. In commercial real estate, the Bank never granted construction or condo-conversion loans, many of which continued to become problematic for banks in from 2009 to 2012.
BAC Florida Bank also was one of the earliest South Florida banks to pursue effective loss mitigation measures. At the beginning of 2008, the Bank put together a sophisticated Loss Mitigation Department. This effort has continued and was expanded throughout the years 2010, 2011 and 2012. This loss mitigation effort enabled it to manage a historic problem with significant positive results that far surpassed those of other banks in the State of Florida.
In spite of the continued formidable obstacles in the real estate business, BAC Florida Bank remains committed to the mortgage business, now and in the future.
Real Estate Finance
4
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2012 Annual Report
The Corporate and Institutional Banking Division (“C&IB”) is a key element of the Bank’s Growth and Diversification Strategy. The Division offers a wide range of commercial banking products to corporations and financial institutions in Latin America and the US. With a heavy emphasis on trade finance and cash management, the C&IB Division has established itself as one of the Bank’s core businesses. As of FYE 2012 the C&IB Division represented close to one-third of the Bank’s total loan portfolio and a very significant revenue source, both in terms of interest income as well as fees.
Facing a very difficult banking environment, characterized by low interest rates as a result of economic stimuli across our markets as well as a high degree of uncertainty regarding credit risk, the Division’s primary objective for 2012 was to contribute to improving the interest margin of the Bank’s loan portfolio by shifting into higher yielding asset categories, while maintaining our traditional Institutional Banking clients and highly conservative credit standards. As expected, during 2012, interest rates continued to decline. And, while average loan balances remained relatively flat compared to 2011, the successful implementation of the C&IB strategy led to a 26% increase in the division’s interest income, as the average yield on its portfolio improved by 0.78% per year.
Despite strong competition from regional and local banks with high liquidity, our corporate banking initiative focusing on loan origination to large and mid-sized companies in Central America gained traction and delivered very good results. We focused our efforts on identifying solid entities with good track records who value commitment, efficiency, and service. To complement credit-based (trade finance) products, we emphasized building on the relationships by cross-selling our US Dollar cash management and electronic banking products. The successful launching of our WiresDirect payment platform has been instrumental in enabling the Bank to bring new corporate operating accounts. This product allows for a high degree of customization and in-house support that many competitors in the Region cannot deliver. We expect this product to gain more traction and help us grow our cash management business.
Although C&IB has been gradually shifting toward a more corporate banking business, the Institutional and Correspondent banking line of business will remain very important to the Bank overall, accounting for nearly 70% of total C&IB loan portfolio, being a steady source of deposits, non-interest income, and playing an important role in liquidity management. It is important to note also that, because the C&IB portfolio is spread throughout the Latin American region across more than 10 countries, it is a key component of the Bank’s geographic diversity.
Domestic Banking
The Corporate & Institutional Banking Division is also responsible for domestic banking serving individuals and businesses in South Florida by offering trade financing, traditional account products and services. The Division continues growing its deposits organically by delivering un-paralleled customer service. The 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
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2012 Annual Report
Real Estate Financing• Residential Mortgages
• Commercial Mortgages
Deposit Accounts & Services• Checking and Savings Accounts
• Money Market Accounts
• Global Stock Market Indexed Time Deposits
• 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
We are proud to present My e-BAnC, BAC Florida Bank’s virtual branch platform, where U.S. Residents can apply for and manage personal accounts and services online.
Treasury• Foreign Exchange
• Interest Rate and FX Derivatives
• Repurchase (Repo) Facilities
Credit Products• Institutional and Corporate Lines of Credit
• Cash Collateral Loans
• Syndicated Loans
• Working Capital Loans
• Equipment Loans
Trade Finance• Commercial Letters of Credit
• Standby Letters of Credit
• Import and Export Financing
• Receivables Discounting
• 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.
My e-BAnCby Florida Bank
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2012 Annual Report
Florida Bank
Condensed Financial Statements2012 & 2011
8
2012 Annual Report
Consolidated Condensed Statements of Financial ConditionDecember 31, 2012 and 2011
BAC Florida Bank Condensed Financial Statements
2012 2011
Assets:
Cash and due from banks $ 188,441,330 $ 143,609,570
Securities 69,773,422 106,121,797
Total loans 1,011,163,502 882,725,956
Allowance for loan losses (17,512,814) (14,780,198)
Bank owned life insurance 20,024,263 19,405,591
Other assets 38,986,363 37,770,481
Total Assets $ 1,310,876,066 $ 1,174,853,197
Liabilities and Stockholders’ Equity:
Total deposits $ 939,352,017 $ 851,179,506
Federal Home Loan Bank advances and other borrowed funds 244,965,950 214,050,037
Other liabilities 11,532,939 10,233,792
Total Liabilities 1,195,850,906 1,075,463,335
Total Equity 115,025,160 99,389,862
Total Liabilities and Stockholders’ Equity $ 1,310,876,066 $ 1,174,853,197
9
2012 Annual Report
Consolidated Condensed Statements of Earnings December 31, 2012 and 2011
2012 2011
Interest and dividend income $ 42,783,489 $ 38,512,462
Interest expense 10,873,766 10,694,613
Net Interest Income 31,909,723 27,817,849
Non interest income 9,631,343 12,062,939
Net Operating Revenue $ 41,541,066 $ 39,880,788
Provision for loan losses 7,020,000 10,190,000
Non Interest Expense
Personnel & management expenses 14,995,378 14,737,195
Occupancy and equipment expenses 2,665,057 2,720,989
Other operating expenses 11,640,674 11,618,178
29,301,109 29,076,362
Total Expenses 36,321,109 39,266,362
Earnings Before Non-controlling Interest and Taxes 5,219,957 614,426
Income tax expense (benefit) 1,163,608 (403,486)
Net Income 4,056,349 1,017,912
Less: Net Income attributable to non-controlling interest (4,998) (14,194)
Net Income Attributable to BAC Florida Bank $ 4,051,351 $ 1,003,718
BAC Florida Bank Condensed Financial Statements
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2012 Annual Report
Financial Highlights
Assets(US $ Millions)
2009 2010 2011
$977
2012
$1,122$1,175
Capital(US $ Millions)
2009 2010 2011
$89
2012
$98 $99
Deposits(US $ Millions)
2009 2010 2011
$680
2012
$802$851
Loans(US $ Millions)
2009 2010 2011
$701
2012
$804$883
Net IncomeYear To Date
(US $ Thousands)
2009 2010
$746
2011
$780
2012
$4,051
$1,311
$1,011
$115
$939
$1,004
0.330.27
BAC Peers*
Net Income to Average Assets ROA (%)
0.45
1.15
BAC Peers*
Net Loan Losses to Average Total Loans (%)
3.35
4.54
BAC Peers*
Loans 90+ Days Past Due to Total Loans (%)
8.58 8.88
BAC Peers*
Tier One Leverage Capital (%)
12.08
7.34
BAC Peers*
Tier One CapitalGrowth (%)
11.61
5.52
BAC Peers*
Total AssetsGrowth (%)
Selected Financial Ratios
Source: Federal Financial Institutions Examination Council (FFIEC): Uniform Bank Performance Report, December 31, 2012 *Peers: State of Florida average for Banks with assets greater than $500 million and less than $1.5 billion, December 31, 2012
2012 Annual Report
12
2012 Annual Report
BAC Florida Bank Board of Directors
Sitting left to right:
Carlos F. Pellas Director & ChairmanFrank D. Robleto Director, President & CEO
F. Alfredo Pellas, Jr. Director & Co-Chairman
Standing left to right:
Fernando A. Tamayo DirectorRuben Diaz Director & Assistant Secretary
Luis Parajon Director Agustin J. Abalo Director
Oscar Bustillo DirectorRoderick N. Petrey Director & Secretary
Timothy W. Davis DirectorR. Bruce Cuthbertson Director
Ernesto Cruz Director
Personal Banking and Wealth Management Corporate Banking | Institutional Banking
Real Estate
Florida Bank
169 Miracle Mile, R-10Coral Gables, FL 33134
Tel: 305-789-7000Fax: 305-374-1402
www.bacflorida.com
Florida Bank