By Martha Brannigan, The Miami Herald

Mar. 15--Looking across a glistening Biscayne Bay on a recent chilly morning, Wells Fargo & Co. Chairman and Chief Executive John Stumpf pointed east and asked, "What's that, over there?"

It was South Beach.

"Never been there," said Stumpf, a lean, silvery-haired man with leading-man good looks.

It's not surprising that Stumpf had a little trouble getting his bearings. He and his San-Francisco-based bank are among the newcomers that are changing the face of Florida banking as the financial upheaval of the past two years spawns mergers and acquisitions here and nationwide.

Stumpf was in town to preside over Wells Fargo's first board meeting in Miami. The choice of location was a testament to the bank's new focus on Florida now that it owns Wachovia Corp.

The Wachovia acquisition -- hurriedly forged during the financial meltdown in October 2008 -- doubled Wells Fargo's size and gave it a mirror image banking network in the East to match its muscle out West. It also transformed Wells Fargo overnight from a nobody in Florida banking to a dominant force, with the second-largest share of deposits behind Bank of America.

Florida is now Wells Fargo's second-largest market behind California. Wells Fargo has the largest branch network of any Florida bank, with 705 stores, as Stumpf calls branches.

"We're so excited about this part of the market and the business, even though it's going through a lot of challenges today," said Stumpf, who grew up on a Minnesota farm, one of 11 children. "If you bet against Florida and Miami, over the long period, you're going to lose."

The arrival of Wells Fargo -- which has long been a favorite investment of Warren Buffett, its largest shareholder -- points to a new group of powerful players in Florida banking.

The newcomers include private equity firms as owners, newly combined financial institutions and a string of Spanish banks that bought up Miami-based institutions, looking to diversify into the strongly Hispanic state.

The Wachovia deal was struck as Western Civilization itself seemed to teeter on the precipice. Fannie Mae and Freddie Mac went into conservatorship. Lehman Brothers collapsed. Merrill Lynch rushed into the arms of Bank of America. AIG got a massive government bailout.

Wells Fargo moved aggressively, snatching Wachovia -- a jewel of Southeast banking -- from the arms of Citigroup, which had agreed in principle days earlier to buy its banking operations.

In another big deal during the tumult, JPMorgan Chase acquired Washington Mutual in September 2008, grabbing the sixth largest share of Florida deposits. New York-based Chase is using that beachhead of branches to sell a wider array of products and services than the old home-mortgage lender ever did.

JPMorgan Chase plans to hire 600 new employees in 2010 on top of the 14,000 it already has in the state. "We are thrilled to be here in a bigger way with the WaMu acquisition," Jamie Dimon, JPMorgan Chase's chairman and CEO, said in January, when he visited Miami to meet with employees and clients.

The deals are upending the equilibrium established in Florida banking in the 1980s and 1990s when fledgling regional giants waged a war for market share.

The state has long been a magnet for banks, attracted to a wealth of deposits from retirees and wealthy transplants and -- until the recent real estate debacle -- to Florida's steady growth.

Wells Fargo can now trace its heritage to Miami's old Southeast Bank, which was among the Florida banks gobbled up by First Union Corp. First Union, in turn, acquired Wachovia and adopted its superior blue-blood name.

It's no coincidence that the big, opportunistic buyers -- Wells Fargo and JPMorgan Chase -- earned the highest profits among U.S. commercial banks in 2009.

It is a Darwinian drama, with the strong banks gobbling up the weak. Florida has logged 21 bank failures since the beginning of 2008, with more expected during 2010 as the real estate debacle plays out.

One thing the new arrivals won't bring to Florida consumers is high interest on savings accounts. The top banks can often garner their deposits on the cheap. Wells Fargo, in particular, boasts to Wall Street about keeping its cost of deposits at the bottom of the pack. As part of Wells Fargo, Wachovia is no longer offering the higher rate certificates of deposits it used to have and has still seen its deposits grow.

Lending remains tight, and while bankers uniformly insist they're making all the loans they can to creditworthy customers, some acknowledge they don't see much competitive pressure to sweeten loan terms.

Tony Plath, who teaches banking at the University of North Carolina in Charlotte, sees Florida's changing banking scene as a mixed bag: "You're getting stronger banks that are better capitalized and more profitable, but sometimes not as sensitive as the Florida community banks were. Florida is becoming even more of a banking colony."

The changes so far, he said, are "the tip of the iceberg." For one thing, many of the acquiring institutions, such as BB&T, haven't yet had time to put their mark on the companies they've acquired.

A group of private equity firms now own the largest Florida-based financial institution, Bank-United. Risky home-mortgage lending prompted regulators to seize its predecessor in May 2009 and to sign a generous loss-sharing pact with the new buyers, led by New York banker John Kanas.

Private equity firms, which pool money of wealthy individuals and firms to make strategic investments, have emerged as key new players in banking, snapping up failed banks. They are stepping in as the traditional buyers -- existing bank holding companies -- often stand on the sidelines, preoccupied with ailing loan portfolios and capital issues.

In January, Bond Street Holdings came on the scene with a first-of-its-type shelf charter, empowering it to buy banks, and a war chest of capital to prowl for failed Florida institutions. Bond Street, based in Naples, acquired most of tiny Premier American Bank in Miami when it was seized by regulators. The new Premier turned around a week later and bought most of Florida Community Bank, a small Immokalee bank that failed.

MORE CHANGES ON WAY

Bond Street plans more deals. It's headed by Daniel M. Healy, a director at Keefe, Bruyette & Woods, a prominent investment bank that specializes in financial institutions. Healy was the long-time chief financial officer at North Fork Bancorp, where he worked for Kanas, who was its chairman and CEO.

Still other deals have shaken up Florida's banking scene. BB&T, a high-performing Winston-Salem, N.C.-based bank, acquired the deposits and most assets of Colonial Bank from federal regulators in August 2009. That made BB&T the state's fifth largest bank and elevated it from a cameo role in South Florida to a significant institution.

BB&T, which has posted a profit through every quarter of the banking crisis, keeps most decisions at the local level. And it is touting its financial strength as a come-on to do business. "We're still strong. And we're still lending," said Rob Bowlby, senior vice president of BB&T and city executive for Miami-Dade.

"Right now, a lot of banks are inwardly focused, and we're very outwardly focused," said Bowlby, who moved to Miami from Winston-Salem in November 2009.

Now Bowlby is adjusting to Miami's glitzier lifestyle, where it seems even bank tellers drive BMWs and wear designer clothes. "I asked, 'How much do you pay tellers down here?' " he said.

Meanwhile, Pittsburgh-based PNC Financial Services Group acquired National City Bank, amid the financial crisis in October 2008. PNC also has big plans for growing in Florida. The bank plans to add about 10 new branches to its existing 108 in Florida over the next year or so.

"We see a lot of opportunity on the corporate side. Corporate customers are more in play than historically," said Craig Grant, PNC's regional president for Florida. "With the dislocation in Florida banking over the last 18 months, they're more open to looking to new relationships and looking at other options."

THE MARKET-SHARE WAR

Carlos J. Arboleda, a recruiter with Stephen James Associates, who specializes in Florida bank executives, said banks are on the prowl for high producers who can bring along a book of business. "It's a war for market share and certainly a war for top talent," he said. "Each institution is fighting the other for top talent. In my 11 years in the business, I've never seen anything like it."

After Wells Fargo acquired Wachovia, it tapped Shelley Freeman, a Wells Fargo veteran who was in Los Angeles, as the regional president for Florida. She moved the headquarters to Miami from Jacksonville.

With the Wachovia deal, Wells Fargo doubled its size and geographic reach, with 6,629 branches in 39 states and Washington, D.C. The bank is taking three years to put the two giant organizations together -- a slow and deliberate pace that seems to show respect for the target company's value.

After all, while Wachovia stumbled in its acquisition of Golden West Financial just as that firm's big portfolio of adjustable rate mortgages turned bad, the storied North Carolina-based banking company is still a coveted gem. Indeed, in areas such as corporate banking for Fortune 500 clients, Wachovia brings far more expertise and business than Wells Fargo, which was more heavily into retail banking. Wachovia has brought new lines of business, such as investment banking.

INTEGRATING OPERATIONS

Wells Fargo has been combining operations first in states with overlapping businesses and will integrate the Florida banking operations next year. Only then will it replace the Wachovia name with Wells Fargo.

Plans call for putting all banking operations on one computer system, which will make it easier for customers to do business around the network.

Wells Fargo opened six stores in Florida in 2009 and has been adding staff at existing ones to provide more personal service. It added 300 employees in Florida last year and will add at least that many in 2010.

The bank is installing new high-tech ATM machines that work without envelops and even sell stamps. Freeman has spent much of her first year traveling the state to get to know employees and customers and figure out who should run what.

"We're betting on Florida," Freeman said. "We definitely see a great opportunity to gain market share."

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