Bank Board Letter February 2015 : Page 2
That compensation, in combination with generous benefits and ongoing training opportunities, virtually eliminates turn-over and boosts productivity. “When I came to this bank, we were a $20 million bank, and I had 10 full-time people. Now, we’re a $60 million bank, and I have 10 full-time and four part-time employees. We’re so much more efficient than any other bank I know,” Burns said. When Burns took over in 2005, the bank’s name was First State Bank. Even though it was an independent bank, many potential customers assumed it was related to the large number of other banks in the state with the same name. The bank also lacked a web site and an ATM, which led local residents to look elsewhere for banks with more modern offerings, Burns said. After changing the name, redecorating, re-branding and upgrading its technology resources, local money returned to the bank. It is now known throughout the region for its fast, personal service. Burns cites the example of a fire chief who lives about 25 miles from Maypearl in a town with a wide variety of banks to choose from. The fire chief needed a loan to purchase land and build a home. He applied at a local branch of a large bank, waited months for a response and eventually realized the banker had missed important details. The fire chief related the story to his builder and to another colleague. Even though nei-ther person lives in Maypearl, both told him he should have gone to The Cowboy Bank. “He was here the next day, and we had him closed in about 25 days,” said Burns. “It’s an example of, if you do it right, you don’t have to advertise. People will advertise for you.” In 10 years, the bank’s legal lending limit has grown from $235,000 to $1.5 million, Burns said. That means the bank can service nearly every kind of loan its customers need, but it re-mains a cautious lender. “We virtually never have losses. If somebody walks in with some-thing weird, we let them take that to another, bigger bank that wants to take on the risk. In 10 years, we’ve had $130 million in real estate loans and have never lost a cent. We have only had four foreclosures.” Both Yellowstone Bank and The Cowboy Bank of Texas were among the community banks with the highest return on aver-age assets, according to American Banker . In September, financial information company Sageworks named Carolina Alliance Bank, Spartanburg, S.C., to its list of top 15 com-munity banks; the ranking was based on ROAA and efficiency ratio. With assets of $420 million, a merger helped spur growth for Carolina Alliance Bank. In addition to higher lending capac-ity and increased efficiencies in marketing, data processing and other expenses, the merger with Forest Commercial Bank of Asheville, N.C., expanded the bank’s footprint. The two markets are contiguous yet have distinct and diverse economies, said President John Kimberly. The economy in the up-state region of South Carolina rests on a solid manufacturing base, and that of western North Carolina relies on a large healthcare sys-tem. Tourism, retirement and higher education support both regions. The merger, completed in April, expanded the bank’s ser-vice offerings into commercial leasing. Another acquisition in August of a small South Carolina-based leasing company fur-ther increased the bank’s capability. “It’s typically vehicles, small fleet, and we do some heavy equipment,” Kimberly said. “It’s been a great business for us.” Close customer relationships are just as important in leasing as in banking, he added. “In leasing, as much as we’re providing financing for our custom-ers with competitive interest rates, we’re also providing a service. We can help with the acquisition or disposal of vehicles. Our leas-ing customers value that relationship with our leasing executives.” Maintaining that level of service for customers as well as growth for the bank requires employees who have the ideal combination of technical and people skills, Kimberly said. “To find that special combination is tough,” he said. “They’re out there, so we will find them, and then we need to develop them to continue to grow.” Elizabeth Whalen is a contributing author based in Berkeley, Calif. THE WAY MAY BE OPENING FOR DE NOVO INVESTORS By Bill Poquette, editor-in-Chief D oes the United States have too many banks? Not enough? It depends on whom you ask, but the conventional wis-dom is there won’t be as many in five to 10 years from now. This view is supported by the current rate of attri-tion, which has seen the number steadily decline from 9,024 as of Sept. 30, 2004, to 6,589 at Sept. 30, 2014. From 2004 Next moNth: how Apple Pay Is Leveling the Playing Field for Banks Digital File Conversion Improves Loan Accountability through 2008, the nation was losing fewer than 200 banks an-nually; since then the losses have averaged close to 300 per year. In “normal” times, this trend would have been offset to some extent by de novo formations. But there has been only one of these consummated since 2010, the Bank of Bird-in-Hand in Pennsylvania, whose market and investors include many Amish. The organizers raised $17 million in start-up capital. The bank opened in December 2013 and now counts assets of $64 million. Until recently, there effectively has been a moratorium on new charters. The FDIC denies this, but organizers were put off by the agency’s hardened rules to get deposit insurance for a new bank. At the same time, according to Bob Wray, president/CEO of The Capital Corp. LLC in Overland Park, Kan., with small bank prices relatively low and branching laws being quite liberal,
THE WAY MAY BE OPENING FOR DE NOVO INVESTORS
Does the United States have too many banks? Not enough? It depends on whom you ask, but the conventional wisdom is there won’t be as many in five to 10 years from now. This view is supported by the current rate of attrition, which has seen the number steadily decline from 9,024 as of Sept. 30, 2004, to 6,589 at Sept. 30, 2014. From 2004 through 2008, the nation was losing fewer than 200 banks annually; since then the losses have averaged close to 300 per year.
In “normal” times, this trend would have been offset to some extent by de novo formations. But there has been only one of these consummated since 2010, the Bank of Bird-in-Hand in Pennsylvania, whose market and investors include many Amish. The organizers raised $17 million in start-up capital. The bank opened in December 2013 and now counts assets of $64 million.
Until recently, there effectively has been a moratorium on new charters. The FDIC denies this, but organizers were put off by the agency’s hardened rules to get deposit insurance for a new bank.
At the same time, according to Bob Wray, president/CEO of The Capital Corp. LLC in Overland Park, Kan., with small bank prices relatively low and branching laws being quite liberal, “buying a small bank and branching it is probably the easier path.” His firm is seeing a little more interest in de novo formations, but he describes it as “minimal” still. “I do think there are some interested investors out there,” he says, “but without actual deals it is tough to gauge.”
The Wall Street Journal reported recently on a de novo move in New Hampshire from a group led by Bill Greiner, a real estate investor and restaurant owner in Bedford, who believes his Primary Bank “will fill a void for smaller loans in his region.” The charter application, filed in October, was the first for a new bank in 2014, according to the newspaper.
Ironically, about a month later, the FDIC hinted it might be more amenable to de novo formations. In a Financial Institution Letter dated Nov. 20, the agency announced it was issuing a guidance in the form of questions and answers “to aid applicants in developing proposals for deposit insurance and to provide transparency for the application process.” Topics for the Q&A included pre-filing meetings with regulators; processing timelines; initial capitalization requirements; and initial business plans for the first three years of operation.
Opinions vary about whether more banks are needed. But the benefits of multiple choices are related again and again by community bankers.
The rules and financial requirements are not for the faint of heart, but entry for qualified applicants should be encouraged by the banking industry and its regulators. Consumers and businesses will not be well-served if the financial services industry morphs into ever fewer, ever larger and more impersonal options.
Read the full article at http://omagdigital.com/article/THE+WAY+MAY+BE+OPENING+FOR+DE+NOVO+INVESTORS/1935067/247050/article.html.