BankAtlantic, an Offbeat Thrift, Bets on Business Line Diversity
Thompson, Laura K., American Banker
Already a prominent home lender, BankAtlantic Bancorp has suddenly become one of Florida's most prolific home builders.
The thrift company entered the building business in late 1999 when it bought Levitt Corp. -- which was best known for developing the Levittown suburban communities soon after the end of World War II -- from Starret Housing Corp. in New York City.
Buoyed by a $50 million investment from $4.6 billion-asset BankAtlantic, Levitt last year began building six active-adult communities in Florida and became the lead developer of St. Lucie West, a 4,600-acre planned community that includes the New York Mets' spring training center. In all, Levitt built 600 homes and signed 703 contracts in 2000, more than doubling its 1999 activity.
Though it is uncommon for thrifts to venture into home building, BankAtlantic chairman and chief executive officer Alan B. Levan said the move seemed a natural extension of the company's business lines. BankAtlantic was already in the development business -- it was the primary owner of St. Lucie West -- and has been making home loans for 50 years. Moreover, Boca Raton, Fla.-based Levitt had been a commercial customer of BankAtlantic for 15 years.
"We wanted to diversify and had a desire to build up our noninterest income," Mr. Levan said, "and we thought an external acquisition of business we knew and had a longstanding relationship with was the best route. We believe that this diversification strategy gives us a unique competitive advantage in Florida."
The decision appears to be paying off. In the fourth quarter, the Levitt subsidiary earned $7.3 million, nearly 37% of BankAtlantic's noninterest income. For the year, Levitt earned $10.2 million, or about 22% of all fee income.
The Levitt purchase continued BankAtlantic's strategy of breaking out of its role as a traditional thrift and expanding its income base. In 1997, it began an ambitious plan to blanket the Southeast with automated teller machines and install ATMs on cruise ships and in Native American-owned casinos. In 1998, it bought the Livingston, N.J., investment firm Ryan, Beck & Co. and, for the first time, began making small-business loans.
Though some initiatives succeeded, others failed to meet the company's goals. For example, a series of bad small-business loans in 1998 led to numerous chargeoffs and a loss that year of $8 million. Ryan Beck's 2000 income was down more than 51% from 1999, due to the stock market's weakness. This contributed to a 20% decline in BankAtlantic's earnings last year.
Though many of the company's 800 ATMs, including those on cruise ships and in casinos, were quite profitable, others struggled to meet the company's expectations, and 350 ATMs were shut down this year.
With its small-business lending problems behind it and a better hold on its ATM network, BankAtlantic is expecting to rebound this year. Expectations are particularly high for the Levitt unit, which plans to use its healthy profits from 2000 to fund expansion this year.
"The only change in plans is to grow more," said John E. Abdo, CEO of Levitt and vice chairman at BankAtlantic. "There are a lot of markets in Florida we want to capitalize on, like around Jacksonville and Orlando, and we will also be looking into other parts of the South."
Steve Davidson, financial economist for the Washington thrift group America's Community Bankers, said few thrifts have ventured into home building, let alone made money at it. …