Jorge Gonzalez, CEO, City National Bank of Florida, poses at the bank’s offices in Coral Gables, on Friday, June 18, 2021.
It’s the second-oldest bank in Miami-Dade — and with nearly $20 billion in assets, among the 90-largest banks in the U.S.
Yet just like every other institution in the rapidly consolidating world of traditional banking, City National Bank of Florida is finding that these days, it must compete for every asset it can get its hands on.
In Florida, there have never been more assets to be had. According to data group Unacast in collaboration with partner firm TSCG Analytics, Florida gained $8.3 billion in new-resident income in 2020 — with an additional $800 million coming into Miami-Dade in just the first quarter of 2021.
While some other banks are facing existential questions, 75-year-old City National — the second-oldest in Miami-Dade, after 95-year-old Grove Bank and Trust — is figuring out how to leverage the region’s explosion into its own growth while retaining its culture of personalized service.
Ironically, the pandemic helped catapult City National into the national spotlight as it provided swift relief loans while larger banks remained mired in process. Its efficient, friendly approach brought it a slew of new customers. But resting on past performance won’t ensure success in today’s highly competitive market. City National is focused on expanding in myriad ways — services, technology, brand presence and physical footprint — while retaining its longstanding personal touch. While City National’s consumer banking clients benefit from that service, CEO Jorge Gonzalez said it’s among the most important assets for the biggest part of its business, namely commercial lending, which comprises 70% of City National’s revenues.
“In this business, scale is important,” Gonzalez said. “People are more expensive every day, technology compliance is a huge investment number — so if you don’t have scale to pay for all that, you quickly lose your competitive edge. So growth continues to be an important part of what we’re trying to accomplish.”
But while size matters, it has to be balanced by culture, Gonzalez said.
“We’re trying to be the big-bank alternative. That means we have the talent, the product offering, the assets of a larger bank, while still giving our clients access to people making the decisions — still having that small-bank feel. Clients get the benefit of having both…it’s a really unique value proposition.”
The opportunity has never been greater — and experts say small and mid-cap banks like City National may be best positioned to take away market share from megabanks, who stumbled amid the rollout of the Paycheck Protection Program.
With $20 billion in assets, City National is now larger than all but one South Florida-based bank; the next largest are Amerant Bank at $7.7 billion; Ocean Bank at $4.7 billion, and Professional Bank at $2.2 billion. Only Miami Lakes-based BankUnited, with $35 billion, is bigger. All of the five largest community banks hold five star ratings from Bauer Financial, a respected industry measuring group.
“City National Bank’s metrics exceed its peers in many, if not most, of the critical areas of measurement: capital, profitability, loan quality and liquidity,” said Karen Dorway, president of Bauer Financial, in an email. “And it has done so consistently while offering a wide variety of loan options. Not easy to do over these last couple of years.”
Yet that peer group may be changing. Banking experts say an increasing number of national banks, like Bank OZK and Valley National Bank, have chartered in Florida to try to access the capital moving here. Meanwhile, other regional banks with a statewide footprint, like Stuart-based Seacoast, are edging into South Florida.
It’s one reason why City National continues to open new locations elsewhere in the state at a time other institutions are folding theirs.
“Florida tends to replenish itself with banks faster than other states — it’s such a high growth market with so much wealth, so that’s certainly something they’re competing against,” said Sean Enright, director at banking advisory Hovde Group. “
The question for City National now is how to grow in an environment that has rarely been more in flux.
History
Throughout its first 67 years, City National was associated with a single family. The bank was founded in 1946 by Leonard Abess Sr. in North Beach. After a brief period in the hands of a Colombian firm, Abess’s son, Leonard Jr., took over City National in 1985. When the bank was sold to Caja Madrid of Spain in 2008, Leonard Jr. took $60 million in proceeds from the sale and split them up among current and former employees, turning some into millionaires.
“He really took care of his employees and customers,” said Ken Thomas, president at Community Development Fund Advisors, LLC and a banking expert. The gift was so remarkable that it netted Abess Jr. an invitation to then-President Barack Obama’s State of the Union address.
In 2013, the bank gained its current owner, Banco de Crédito e Inversiones (BCI) of Chile. Since then, the bank’s employee base has more than doubled, from 450 to approximately 1,000. Some of that has been through acquisitions: In 2018, City National purchased Miami-based TotalBank for $528 million. And in 2020, it successfully acquired Executive National Bank, another longtime local community bank with assets of $455 million at the time of acquisition.
Gonzalez, a Miami native, joined City National in 2009, after serving as now-defunct Wachovia’s Southeast Florida regional president. Though he navigated City National through the throes of the Great Financial Crisis, the challenges created by the pandemic were almost a mirror image: During the first crisis, lending dried up; during the pandemic, Gonzalez said, City National had to process about two years of business in the span of 90 days.
“In hindsight, given the urgency of the situation, it’s amazing what you can do when you have a crisis,” Gonzalez said.
Thomas said unlike many other owners of small and mid-size financial institutions, BCI appears to have no interest in selling City National.
“It’s patient capital,” Thomas said. “They’re after just a good, solid return — a strong asset in America, which, in South America and the rest of world, what better asset is there than a bank with smart people making money? So they can afford to be patient.”
Pandemic relief
It was a sense of community responsibility, in part, that led City National to make some 9,500 loans totaling approximately $2 billion under the emergency Paycheck Protection Program. It was able to do so thanks to its Goldilocks stature: small enough to be in touch with its existing client base — plus new ones in need — but large enough to have the manpower and systems to deploy that amount of money.
Those funds came in the nick of time for Pinecrest Bakery. When the pastelito purveyors asked their longtime national bank for a PPP loan, co-owner Gladys Valdes found they were treated as if they “just a number.”
“We were just in the queue — things didn’t get moving,” Valdes said.
Her accountant suggested City National. Quickly, she found herself speaking with a representative who was already familiar with Valdes’ business. The restaurant received a loan totaling $1,125,000.
“It wasn’t like dealing with someone out of state, and they’re reviewing your profile and they really don’t know your business,” she said. “City National, they have a ‘big bank’ feel, but it feels like hometown. They know of Pinecrest Bakery and how we have grown in such little time.”
Pinecrest’s story mirrors that of thousands of other small businesses in Miami and beyond, as City National became one of the most prolific PPP lenders nationwide. Approximately 40% of City National’s PPP funding went to new clients, and Gonzalez says a “war room” was set up to meet the demand that saw City National employees work round the clock to input documents. The all-hands-on-deck effort saw even marketing and administration workers pulled into service.
While many, including the Miami Herald, have documented the PPP effort’s imperfections — and while some economists debate exactly how many jobs the program saved — Gonzalez is convinced of the program’s overall efficacy. The bank tallies 250,000 jobs supported by its PPP loans, most of them in Florida.
“In hindsight, it was as close to great execution as you can have given the urgency and what was possible in the moment,” Gonzalez said.
City National declined to say how much it earned in fees from the loans; it did say most of its loans were for around $100,000. With banks able to take a 5% fee for each loan between $50,000 and $350,000, the math suggests as much as $50 million in fees. Despite that prospective haul, City National’s net income declined on an annual basis amid the pandemic, as it deferred as much as $3 billion worth of loans.
Capturing wealth
The Paycheck Protection Program process underscored the disconnect between many large financial institutions and local communities — something that may have opened an opportunity for banks like City National.
“A customer service gap was revealed by PPP that has given smaller and mid-cap banks a chance to jump in on the business lending side,” said Stephen Scouten, managing director and senior research analyst at Piper Sandler investment group.
In a low-interest rate environment, Scouten said, wins for banks like City National come from meat-and-potatoes services offerings.
And as the pandemic gave way to a wealth migration boom, City National has pivoted. In May it launched a private banking arm, served from its offices in Brickell and Coral Gables, led by a 40-year veteran of Florida banking, Steven Hayworth, previously of Seaside National Bank & Trust in Coral Gables. Alongside Hayworth, the bank has hired a chief strategy officer, a chief clients officer, and an executive helping lead commercial lending.
“It’s a hyper-competitive market on the wealth management side,” Scouten said. “And it will be a slow road. Some of the growth will be predicated on the basic blocking-and-tackling of banking — building relationships. And that takes time.”
Why would a well-heeled newcomer need a local bank? To avoid the tax man. A new Florida resident with substantial means who is attempting to establish domicile in the Sunshine State must now jump through a host of hoops to prove Florida is truly home base. Having a relationship with a community bank can help get them across that goal line.
“We’ve got the scale to matter, and we’ve got the talent and experience,” Hayworth said in an interview. “It’s natural for us to not miss this opportunity to build on them.”
Meanwhile, not every northern transplant is moving to South Florida.
Even as its roots will remain in Miami, City National is now looking to expand its footprint statewide, with sights set on Tampa, Orlando, and even Jacksonville. The bank has opened a new, 14,000-square-foot Central Florida headquarters in downtown Orlando, where its logo sits atop a 28-story tower.
“What you will see is continued growth, both organic and, where there are the right opportunities, acquisitions,” said longtime City National director, and former Miami Beach Mayor, Neisen Kasdin. “City National will continue to grow and be a survivor in the consolidation of banks.”
CITY NATIONAL BANK
Rob Wile covers business, tech, and the economy in South Florida. He is a graduate of Northwestern’s Medill School of Journalism and Columbia University. He grew up in Chicago.