This episode of In Our Expert Opinion Real Estate Podcast welcomes Paul Noris, Chairman of the Board and Chief Executive Officer of Bank of Central Florida. As one of the original board members of the bank, Paul brings with him a wealth of knowledge and expertise in the banking industry. During this episode, he discusses some of the major changes in the modern banking world, the impacts of rising interest rates, as well as some of the interest-related impacts in commercial real estate lending.
Below is an excerpt from the interview. Listen above for the full podcast
How did you start Bank of Central Florida? We hatched the idea in March 2006 when I was the Founding CEO of the bank. It took us about a year to get a charter, and then we opened in March 2007. We had an original board of 12 that started the bank in Lakeland and raised all of the money there. We raised about $23.5 million in capital over about a two-month period to get the bank started. 95% of our shareholders are right here in Lakeland. It's been an awesome ride.
I've been in the banking business my whole life. After I graduated from the University of Florida with a finance degree, I went to work at SunTrust and spent 17 years there. I love that company, but as they got bigger, it just became a little bit less personal. I really wanted to do something different. My dad owned his own business so I sort of had an entrepreneurial spirit.
When we made the decision to leave, Wesley Beck and I decided we were going to buy some businesses and do some different things. We got a call one day from somebody that said, “I'm thinking about starting a bank. Do you and Wesley have any interest in investing?” We took the lunge and out of that grew Bank to Central Florida. It's a homegrown bank, truly. The shareholders are local and the vast majority of our clients are here in Polk County. It's been a fun time.
What makes Bank of Central Florida different? It's about culture. Everybody talks about client service and those kinds of things, but for us, it's really about finding people that have a servant's heart that really love to take care of people. If you can create that culture where that's the norm and that's acceptable, then they have the opportunity to really be who they want to be. They want to take care of clients, they want to take care of their fellow employees, and we're very active in the community.
From our perspective, that’s the culture that we build. It’s very entrepreneurial and it's not like a typical bank. We look for solutions that other banks wouldn't try. We hold ourselves to a pretty high standard and one of the great things about our culture is that everybody knows what that standard is.
What major changes have you've seen in banking? In the old days, the banking business didn't change very much. It was pretty stodgy and it was the same product suite. I can remember internet banking becoming a thing and how we had people who were like, “No, I'll never do that.” Now can you imagine a bank that doesn't have internet banking or an app?
In our bank, about 80% to 85% of our deposits get made digitally. People don't come into the office to make deposits. We love our clients when they want to come see us, but the vast majority of our clients are either using their phone, or they're using a teller device that we put in their office - remote deposit capture. They can deposit checks at their office and at their convenience without having to run to the bank. That didn't exist when we opened. It makes it very difficult for us to figure out how many branches you need. You don't have a lot of traffic, but people still want that convenience.
How is the economy impacting your business and clients? We bank probably 600 to 700 commercial clients here in Polk County. They’re all different kinds of industries: real estate, physicians, attorneys, manufacturers. We have a pretty diverse client base and I would tell you that we really haven't seen any cracks in it as of yet. Most everybody is doing okay.
What I will say is, most of our clients are pretty happy that things have kind of slowed down a little bit. The pace at which they were running, going into the pandemic, was chaotic. So I think that they're happy, but we really have not seen any credit issues. Quite honestly, we're in Central Florida and people are moving here and capital flows here.
How is the economy impacting commercial real estate? I think commercial real estate has been impacted to some extent because you have higher interest rates. Commercial real estate's a function of really three things: 1) What does it cost to acquire or build the building? 2) What is the cost of the money to be able to borrow money for the project? And 3) How much rent can you get? When you have one of those three factors changing fairly dramatically, it makes some deals not look quite as good when interest rates are at 8.5.
I think it's had some impact, but I think most of what your folks are hearing about are really in the bigger metro markets. You're seeing big issues with office and just general commercial real estate in those bigger markets. Here in Central Florida, we really haven't seen a lot of challenges. I think you could see some challenges as those loans mature and they get repriced from 3.5% or 4% up to 7.5% or 8%. That changes the economics on the deal. It may require some principal reduction or some different things, but we really haven't seen much of it.