Too strong for its own good, Mercantile bows out

TRIGAUX E-mail: Click here Archive

© St. Petersburg Times
published March 27, 2002

If any of the Tampa Bay area's independent and home-grown banks seemed on a tear, it was Mercantile.

Good earnings. Strong growth. An experienced chief executive named Gordon Campbell with a thrifty Scotsman's eye on the bottom line. A successful presence on both the Pinellas and Hillsborough sides of the bay.

And even the industry's snappiest pitch -- When you outgrow the big banks -- that played perfectly to its market niche: attracting customers unhappy with the giant out-of-state banks that dominate Florida.

But it was not to be. St. Petersburg's Gulf West Banks, the parent of Mercantile Bank, said last week it will be acquired by The South Financial Group. The midsize South Carolina banking company is bullish to expand a toehold in the Florida market into a larger footprint.

Did Mercantile just opt to cash out with a great big check for $115-million?

Or is it simply impossible for any home-grown, Tampa Bay area (or any Florida) bank to grow without being gobbled up by some distant financial institution?

The questions are neither academic nor sour grapes. They address a chronic stumbling block in our regional economy. No healthy bank that's started here and grows to noticeable size (say, more than $500-million in assets) is likely to last long before it is picked off by somebody bigger.

The bad news: As fast-growing as the bay area is, the largest banks that control the market here are located far away. No. 1 Bank of America and No. 2 First Union (soon to be renamed Wachovia), both in Charlotte, N.C., together control 40 percent of the area banking market. SunTrust in Atlanta is a close No. 3. Rounding out the top five are SouthTrust and AmSouth, both from Alabama.

That makes the economies of the Tampa Bay area and all of Florida beholden to bank executives living elsewhere in the Southeast.

That may seem a dated concern after so many years. But it means the big business decisions about who gets credit, what projects are financed and, in tough times, who gets a break on a late payment, ultimately are made from afar.

And that will haunt Florida in subtle ways for a lifetime.

On a smaller scale, the good news is Mercantile realized it was in other banks' acquisition sights in time to do something positive about it.

At Mercantile, Campbell says out-of-state banks got excited again about expanding in Florida during the 2000-2001 war between First Union and SunTrust to buy Wachovia. That's when banks, mostly from the Southeast, began approaching Mercantile to talk about selling.

"We were not for sale but I was afraid we might get a big "bear hug' offer," Campbell says, a deal that was so high-priced that Mercantile's board would be compelled to discuss it with shareholders.

Rather than lose control and see Mercantile sold to a big bank that might close some of its 15 offices and lay off employees to help pay for the deal, Campbell and his directors made a list.

Who are the dozen banks calling on us that are interested in buying, but are not yet in the Tampa Bay market?

The idea was to find a buyer who would keep Mercantile's hard-won franchise -- branches, but especially employees -- intact. With list in hand, Campbell hired specialty bank investment firm Sandler O'Neill -- which lost 66 people on Sept. 11 when 2 World Trade Center collapsed -- to find the best deal.

Enter South Financial Group of Greenville, S.C.

While operating a bank called Carolina First in the Carolinas, the company is keen on pushing further into Florida. It entered the Sunshine State in 1999 with the purchase of a small Orlando institution called Citrus Bank. Since then, Citrus has expanded to Jacksonville and secondary central Florida towns. But its eye was on the Tampa Bay market.

Why here? By national standards, Tampa Bay is a boom town, South Financial CEO Mack Whittle suggests. Per-capita income is growing at 18.4 percent, compared with a U.S. median of 14.8 percent. The area's population is growing at 8.1 percent versus a U.S. median of 5.1 percent.

Then there is sheer mass. The greater Tampa Bay area is home to about 3-million people.

"Just as a point of reference," Whittle says, "the state of South Carolina's population is 4-million, so this market in and of itself is almost equal to the entire market in South Carolina."

Once Mercantile is formally acquired later this year, South Financial will grow to about $6.5-billion in assets. In Florida, Mercantile Bank will merge with Citrus Bank with combined assets of $1.3-billion. The resulting bank will adopt the Mercantile brand, a name better suited to central and north Florida than "Citrus," Campbell says.

Is that the end of this banking tale? Just another Tampa Bay bank bites the dust?

We can wonder about South Financial's own vulnerability. Largely ignored in South Carolina, the company's push into the higher-profile Florida market may turn it into an acquisition target.

We can wonder about the future of other Tampa Bay banks. Surely, St. Petersburg's Republic Bank, the area's largest local institution, will be vigorously pursued once its problem loans are brought under better control.

We need not wonder about Gordon Campbell. He will remain with the larger Mercantile as an adviser and a board member of South Financial. But at 69, with the fourth bank of his career about to be sold, he's got things other than banking on his mind.

"I'm done," Campbell says with a sigh of relief.

Want proof? The Scotsman just bought a 48-foot Viking Sports cruiser dubbed Argyll (the Duke of Argyll is chief of Clan Campbell) to take him out in Gulf waters where, for now, no bank branches can be found.

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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