The reinvention of Kislak; Kislak National Bank has a conservative reputation, with one of the best niche marketing strategies out there. Now the Miami Lakes-based institution—which has also spawned one of South Florida's top charitable foundations—has set a new course for growth - Profile

South Florida CEO, Jan, 2004 by J.P. Faber

When Jay Kislak founded Kislak National Bank in 1963, it was almost an afterthought. The institution was to function as an adjunct to the thriving Kislak Mortgage Corporation, a place to hold deposits and funnel loans. Today, the institution has assets of more than $822 million, having leveraged a unique market niche--lending to community associations, primarily condominiums.

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Back in 1963, condominiums were just getting started. Even by 1970, there were only 60,000 units nationwide. A decade later there were more than 2 million. Kislak realized that, as these buildings aged, cash would be needed for maintenance and repairs. The bank approached condo and homeowner associations with a way to stretch out payments. Rather than assess a resident $5,000 all at once, for example, they could stretch out payments for 15 years--reducing them, in this case (calculated at 6 percent interest), to $42 per month.

With some 50 million Americans now living as part of some sort of community association, that strategy has paid off handsomely. Kislak is the country's leading lender to condo associations, and most of the bank's portfolio of loans--$500 million--is devoted to such groups.

The days of Kislak Bank's one-trick pony, however, are soon to pass. On November 1, the bank acquired a new president--Larry Flowers--a banking veteran brought in to inaugurate a new era of expansion. Flowers replaced William Biggs, who became the bank's vice chairman, while Kislak, now 81, still serves on the board (his son Jonathan is the bank's chairman).

Flowers is not new to South Florida, having served with Citibank in Miami in the early '90s. Since then, however, Flowers has been a regional president for BB&T, a $2 billion Georgia-based bank. His mission for Kislak: to diversify the type of assets on the balance sheet.

"We are very large condo lenders," says Flowers. "We do not want to walk away from that business, which we believe we do better than any other institution in the United States. [But] we want to do other things that look a lot more like a traditional bank." Among them: more commercial loans and more consumer loans.

The bank will also, very specifically, ratchet up its relationships with the world of condo dwellers. "Through our condo associations, we have thousands and thousands of consumers within those associations who we have yet to tap into," says Flowers. "We have some of these condo associations that, literally, are as big as some small towns." Kislak will offer them mortgages, equity lines of credit and deposit accounts. The bank is also looking to increase its South Florida deposit base by expanding its current eight branches to 15 in five years or less, primarily in Broward, Palm Beach and Martin counties. "We want to get in front of some of the growth curve," says Flowers, "and the growth continues to go north."

The bank feels confident it can snag more accounts in the increasingly competitive South Florida retail banking environment because of its reputation and track record for community involvement. The Kislak Foundation is involved in various philanthropic activities, most notably through its museum collection of pre-Columbian art and Columbus-era maps and manuscripts (see sidebar).

"The advantages of being a home-grown bank are huge," says Flowers. "We have a brand name down here that people know .... There is also a vast knowledge about business here in South Florida."

Another advantage that Kislak enjoys is a reputation for sound, even conservative, banking practices. According to Jupiter-based Weiss Ratings, Inc., Kislak is one of the best-run institutions in South Florida. "The bank is rated a B , which is a recommended rating," says Weiss vice president Melissa Gannon. "It has strong capitalization and strong profitability, and they score high on our asset quality index, which means they have very few non-performing loans."

Miami-based banking analyst Ken Thomas agrees. "Their financial numbers are strong," he says. "It's kind of a big bank that's grown up under the radar screen here. They're not really a big retail presence because half their deposits are in one office, and because of their unique lending niche."

In the meantime, says Flowers, the game is all about people. "What worries me is that same thing that worries anybody running any company, and that is attracting and retaining good people," says. "In the end, execution always comes down to the people." Not only does that mean the kind of friendly face that consumers expect in a local bank, but it also means a swiftness of response impossible at larger institutions.

"We have a new product that [came out] in December, a very attractive depository account, a takeoff on a step CD, where rates ratchet up over time," says Flowers. "We put that together in about four days. The institution where I worked before wouldn't have put it together in four months."