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Getting Even
The jury awarded Levan and BankAtlantic $10 million in damages. More than that, the verdict provided some measure of vindication for Levan, BankAtlantic's chairman and CEO, who endured years of bad reviews as he worked to turn the bank around.
"We got severely criticized from 1987 to 1991 for high expenses, losses, layoffs, restructuring - every time we made an announcement, we got terrible press," Levan says. Amid a rash of failures in south Florida's banking industry - including such big names as Amerifirst, CenTrust and Southeast Bank - "the marketplace started waiting for us to go broke."
Levan prevailed. By staying afloat while others sank, BankAtlantic emerged as the largest independent savings institution in Florida. "He's a helluva sharp cookie," says Carol R. Owen, president and CEO of Family Bank, based in Hallandale, a Broward County community bank that does business in BankAtlantic's backyard. "He does pretty well at most things he does."
The news has been pretty good in recent years. BankAtlantic has been comfortably in the black since its return to profitability in 1992. The company completed a big acquisition in 1996, Bank of North America, that boosted its presence in the southeast Florida market and its assets to $2.6 billion. And its publicly traded corporate parent, BankAtlantic Bancorp, is getting attention as a possible takeover target in the merger-happy banking industry.
Selling out could be lucrative for Levan. He owns or controls about 46.1% of BankAtlantic Bancorp's 10.5 million shares of Class B voting stock, which recently traded on NASDAQ at $13.25. "Someday, somebody probably is going to make him an offer he can't refuse," predicts Sam Beebe, a bank stock analyst with the St. Petersburg investment firm of William R. Hough & Co.
Maybe, but for now Levan reiterates earlier company statements that BankAtlantic is not for sale. A man with a compact build and a meticulous manner, Levan is a handsome, well-dressed 52-year-old who certainly looks the part of a career banker. "I'm very happy with what I'm doing," he says. "It's a very exciting business. The banking business of 20 or 30 years ago was a business that never changed from year to year. This is a business today that changes regularly in terms of what you can do and what you can't do."
Business experience
Levan's career has come full circle. Born in Brooklyn, then raised in Miami, his first job out of Tulane University was a banking position with Morgan Guaranty in New York City. "I knew I wanted to be in business, but did not know what I wanted to do," he recalls. "So I thought if I went to a bank, it would give me a broad range of business experience and give me an idea of where I wanted to go."
After spending time in a management training program, with a focus on real estate loans, Levan left Morgan after two years to return to Miami and to invest in commercial properties.
A commercial real estate syndicator in the 1970s and early 1980s, he organized public offerings and brought tens of thousands of investors into partnerships he controlled. But as the real estate market began to sour, Levan switched from investing to lending. Levan bought into Atlantic Federal Savings & Loan Association of Fort Lauderdale, renamed it BankAtlantic and gradually turned the sleepy thrift institution into a diversified commercial banking operation.
Levan dramatically scaled back his commercial real estate purchases in the mid 1980s, but continued to manage the properties his partnerships already had purchased. Unfortunately, by the end of the 1980s, the market value of these properties was falling fast. "We had 30,000 investors," Levan says, "and the real estate market was collapsing."
Led by Levan, a majority of investors in several partnerships agreed to swap their real estate holdings for unsecured bonds issued by BFC, BankAtlantic's holding company. BFC, in turn, used cash from real estate sales to expand the capital base of BankAtlantic at a time when the federal government was raising regulatory capital standards for financial institutions.
But instead of getting credit for strengthening BankAtlantic, Levan was criticized for putting the financial institution's interests ahead of the real estate partnerships' interests. Dissident partners filed suit, arguing that the real estate they had had was worth more than the bonds issued by BankAtlantic. Levan settled by taking back dissidents' BFC bonds and distributing proceeds of real estate sales to them.
Along the way, Levan testified about the dispute before a U.S. House subcommittee. His and others' testimonies helped to pave the way for federal laws that protect small investors in real estate partnerships - legislation Levan says he supported.
Shortly after his appearance before Congress, the ABC network broadcast its report on Levan. "This was yellow journalism at its worst," Levan said at a press conference he held at the National Press Club in Washington, D.C. "There was overwhelming evidence that the gist of the story was false, and ABC News knew it." Despite the controversy, Levan went on to build an impressive banking franchise.
BankAtlantic has gotten attention for aggressively expanding its branch office and automated teller machine (ATM) networks. It has 56 offices, most of them in Broward, Palm Beach and Dade counties. In southwest Florida, the savings bank operates several full-service branches inside Wal-Mart Supercenter stores. BankAtlantic also has exclusive agreements to operate ATMs in Wal-Mart and Sam's Club stores throughout Florida. And it may be the only financial institution in the U.S. that operates satellite-linked ATMs on cruise ships, through deals with the Carnival and Celebrity lines, earning up to $5 per transaction.
What is more important, BankAtlantic earns far more interest on loans and other assets than it pays for deposits, sporting one of the highest net interest margins in its national peer group, according to a recent quarterly analysis of regulatory filings by Sheshunoff Information Services., a financial research firm in Austin, Texas.
It is the fifth largest originator of commercial mortgage loans in Dade, Broward and Palm Beach counties, outdistancing larger banking companies such as Barnett and SunTrust, according to a recent survey by the South Florida Business Journal. Yet Levan's staff seems to be lending and investing money prudently. Compared with similar institutions across the U.S., Sheshunoff says BankAtlantic's loans and other assets are above-average in quality.
Higher interest rates
But Levan and other bankers face serious challenges. Worries about higher interest rates in May sent BankAtlantic and other bank stocks south. High rates squeeze lenders like BankAtlantic by choking off loan demand and forcing them to cough up more in interest on deposits.
Longer term, there is concern about deposit growth in the banking industry, which has been flat for years. Money that might have gone into checking and savings accounts increasingly winds up in securities brokerage accounts, mutual funds and tax-deferred investment shelters such as 401(k) plans. Other sources of bank funds are available for loans and investments, but deposits generally are the cheapest, so the slow growth of deposits portends pressure on profit margins.
Richard Bove, a bank stock analyst with Raymond James & Associates in St. Petersburg, believes those pressures will lead many of Florida's second-tier financial institutions to accept buyout bids from Barnett Banks, the largest Florida-based banking company by far. Bove believes BankAtlantic is one of eight institutions that Barnett might capture to maintain its status as the state's largest depository, ahead of number two First Union.
According to Bove, while Barnett has broken its dependence on real estate loans - as a consequence of its national expansion into auto lending and other financial services - BankAtlantic and other second-tier institutions around the state have not. "These banks are all tied to the Florida real estate cycle," he says, "and when Florida has a down cycle, their loan losses will soar."
Other big banks may be eyeing BankAtlantic, too. In February, a filing with the Securities and Exchange Commission revealed that 5.1% of BankAtlantic's voting stock had been acquired as an investment by PNC Bank Corp., a major bank holding company in Pittsburgh with more than 600 branch offices from New Jersey to Indiana. Just days before PNC announced its purchase of BankAtlantic shares, a separate SEC filing disclosed that another 5.9% of the voting stock was acquired by a unit of Boston-based Fidelity Investment, the world's largest mutual fund company, with more than 200 funds and 30 million customers.
Levan sees some familiar signs of excess in commercial real estate lending in the markets where BankAtlantic competes for borrowers. "I am a little bit concerned about out-of-state lenders coming in here and offering high loan-to-value, non-recourse, speculative types of lending. That's the beginning of an overheated market."
But he says BankAtlantic has a tightly underwritten loan portfolio that won't unravel in a depressed real estate market. "We have built our size and reputation to where we can do business with quality people in quality businesses, and that goes a long way in a down market," Levan says. "It helps when you're dealing with the right kind of people."
So even if the real estate industry starts to spiral downward, as inevitably it will, don't expect Levan to bail out. After watching him pull BankAtlantic through, it's hard to imagine Levan submitting to any kind of fire sale.
