Swanky bank's customers can get lattes with loans
By RANDY DIAMOND
Palm Beach Post Staff Writer
Monday, October 22, 2007
BOCA RATON — Treadmills, a pool table and unlimited ice cream, free for the taking.
Add cocktails, a coffee bar and weekly free lunches, and you could be talking about a clubhouse in Key West.
But this is a different paradise. Try Paradise Bank.
Longtime area banker Ward Kellogg's dream has become reality: a bank with enough amenities to rival some clubs in Boca's toniest enclaves. Already, a second, temporary branch - at this point, without amenities - is operating in Fort Lauderdale, while a third is planned for Delray.
To be sure, many banks over the past decade have rejected the staid conservative look that has long been the standard for financial institutions. Today, many branches look more like retail stores and boast 7-Eleven-like hours.
But Kellogg's Paradise takes it a step further.
"This may be a first,'' said John Hall, who follows consumer banking trends for the American Bankers Association.
Kellogg said his $4 million banking office was designed to create a welcoming feeling. Flat-panel televisions and onyx desks with sit-down tellers, combined with open beams and a white beadboard ceiling, conjure the image of an elegant tropical resort that wants you as a guest.
''It's over the top,'' admitted Kellogg, 48, a banking executive for the past two decades. ''We've been accused of creating a country club bank.''
Dividend expected in '09
So far, the concept seems to be working well for Kellogg and the 80 investors who put up $24 million to open the bank a little more than two years ago. He said the bank is on track to start paying a dividend to investors in 2009.
Kellogg said a steady stream of new customers comes largely by referrals from existing customers. ''People say to their friends, 'Let me show you my bank,'" he said.
Ocean Ridge police officer Steve Wohlfiel came with a friend to the bank Wednesday for a lunch of submarine sandwiches. An hour later he was opening accounts for his welding and barbecue businesses.
''It's an out-of-the-box concept," Wohlfiel said.
Although many customers are affluent - the average account balance tops $80,000 - Paradise deviates from its country club image when it comes to expensive entrance requirements.
Boca Raton auto mechanic Carl Graber said he had no more than a few hundred dollars in his Paradise checking account. He found out about the bank from his boss, who opened an account there this year.
Graber has not used the pool table or the workout room, but he was enjoying a turkey wrap at the Wednesday lunch. ''It's a different approach," he said as he sat at the bank's cocktail bar, whose flat-panel TV was tuned to ESPN. "It's refreshing.''
Graber hopes to use the lunches to promote his work as a mechanic and to garner more business for the garage where he works.
Word of caution about glitz
As aesthetically pleasing as Paradise Bank's lobby is, John Schaefer, a principal in the Cincinnati architectural firm K-4, said financial institutions need to be careful creating new environments in which to do business.
He said creating too many amenities can take a bank away from its core mission, which is taking deposits and making loans.
Although his firm specializes in creating bank designs that focus on an "emotional connection" to the customer, such as having customers and tellers interact in upscale seated modular areas, Schaefer said the Starbucks concept can go too far.
One banking client, for example, wanted to create a coffee bar and sunken living room for customers. Schaefer said he recommended against it. "The customers would forget they were in a bank," he said.
Fun, business separate
Paradise is aware of the potential for distraction and has put most of its amenities on the building's second floor. The first floor is made up of desk areas containing bank tellers and officers.
The first-floor ceiling fans and yellow walls convey a resort atmosphere, but still there is no mistaking that this is a bank. Kellogg said the design was intentional: He didn't want the second floor's clubhouse feel to interfere with the first floor's financial transactions.
After all, Kellogg said, the primary goal is to turn a profit - which the bank did for the first time in January, 18 months after opening and well ahead of the two- to three-year cycle many banks take to become profitable. Paradise spent about $3 million last year on start-up costs.
Through Sept. 30 the bank earned more than $450,000.
The bank has $200 million in assets from 2,500 depositors. As for bad loans, there aren't any among the more than 500 that have been made, Kellogg said. Paradise avoided the county's overheated residential real estate market, instead putting its focus on commercial real estate and business loans.
A sound business strategy, to be sure. But a teller who knows your name and a free weekly lunch don't hurt.
''It's not just the food or the entertainment," said Fred McNaboe, 67, a retired engineer. "They want you to feel part of the family.''
McNaboe, of Boca Raton, said the luncheons are his way of keeping up with happenings in the community. Although he is retired, it gives him an opportunity to network with professionals.
Appeal to nostalgia
Many of Paradise's customers did business with Kellogg when he ran Admiralty Bank, which Canada-based RBC Centura bought in early 2003.
It was at Admiralty that Kellogg and a colleague developed the concept for Paradise Bank.
First came the ice cream. Bill Burke, his chief operating officer at Admiralty, noticed customers coming in hot and uncomfortable. Burke had an ice cream freezer placed in the bank stocked with favorites from childhood, such as Good Humor bars.
The idea was to let customers explore the freezer looking for their favorites, bringing back a positive emotional experience, said Burke, now Paradise's president.
Meanwhile, a bank conference room became a place to hang out with customers late in the day, Kellogg said. Soon food and wine became part of the mix.
''It became homey and personal,'' he said.
Paradise is ''an expansion of our original concept,'' Kellogg said.
He sees the pool table and workout room as somewhat experimental. They have had only limited use, but Kellogg can see them becoming more popular as word spreads among customers.
And if they don't? Kellogg said the $31,000 investment for the pool table and exercise equipment can be written off and the bank can convert the space for other use.
There can be many views of Paradise, he said.
At Your Service
Member FDIC | Equal Housing Lender
Member FDIC | Equal Housing Lender
