More new banks meeting local needs

Published May 30, 2007

Lately it seems that a new building rising on a street corner is almost certain to be a bank. This latest trend raises the question: Why are so many new banks coming to the area?

"Local needs aren't being met by the big-city banks anymore, " said Todd Shank, finance professor at the University of South Florida St. Petersburg, a management consultant and a former federal bank examiner.

"The new banks are the ones I've never heard of, " Shank said, "so obviously they're new, locally started banks."

Banking professionals say the newer, smaller banks like Old Harbor Bank in Clearwater, Bank of St. Petersburg or Freedom Bank are part of a development pattern that recurs every few years.

New banks are acquired by larger banks, but the buyers leave the hole Shank described. The larger banks don't serve the old customers as well, so some drop off, creating a market for another small bank.

"The Bank of Americas, the Wachovias, the customers they lose to us, they don't really feel it, " said Barry Miller, director of Old Harbor Bank, which has five branches. "We fill a niche."

Old Harbor recently announced that Miller, who launched the community bank less than four years ago, will turn over the reins of the $200-million institution but will remain as a bank director.

Banks don't lose customers because they're bad bankers, experts say, rather because they're striving to be good in other ways.

"They expect to lose 20 percent of the customers, but they're willing to do that because they can't grow any other way, " said Dan Hudson, president of Nu Bank, which consults with banks at various stages of development. "It's not profitable for a large bank to do business development in a community, so they buy others. That's the way the monster is fed."

Skip Carr has lived through several mergers and acquisitions in his 42 years of banking in St. Petersburg. The chairman of the board and CEO of Cornerstone Community Bank was with Home Federal S&L, which went public in 1987 to be bought by Barnett Bank, which became Nations and later Bank of America. Later, he was executive vice president with Anchor bank, which was bought by Premier Community Bank, later acquired by Colonial Bank. In 1999, he started Cornerstone to fill the gaps.

"Everybody calls themselves a community bank, but the difference is how you operate, " he said.

Carr says out-of-state banks want into this market so badly that there's always a temptation to sell. He cites Whitney Bank, a Louisiana product that bought Signature Bank earlier this year as part of a growth strategy. Signature officials said they couldn't resist being acquired.

"We had no intention of selling, but you work at the pleasure of the stockholders, " said David Feaster, area president of Whitney Bank, and a founder of Signature. "The numbers were so large, we had to look at it."

Larger banks throw money around because Florida is among the top five banking states. But, experts say, the Tampa Bay area is not yet dense enough for the large banks to want to get as involved as they are elsewhere.

"The big boys have a tough time playing on the west coast because it's not a numbers game, it's a relationship game, " said Carlos Fernandez-Guzman, senior executive vice president for neighborhood banking with BankUnited.

Richard Hunt works with Kendrick Pierce and Co. of Tampa, a consultant group that helped start new banks like Old Harbor and Cornerstone. He says banks are usually profitable but still not easy to run. Technology has leveled the playing field and made it easier to start a bank, but bankers still need to make good decisions to run one well.

Though it seems like there are a lot of banks, there have been more in the past, said Jim Wagner, CEO of Trust Administration Services, which consults with community banks. In 2000, there were 14, 000 banks in the United States, Wagner said, then came a wave of consolidation and now there are about 2, 500. That shift begat the present surge.

"The anomaly is that in Florida, some banks are started solely as targets for acquisition, " said Kyle Kittleson, market research director of Pitney Bowes MapInfo firm.

MapInfo investigates demand for banks but also determines which small banks are prime on the financial food chain. Kittleson said buyer banks are also interested in what the community banks know of the market.

"All the information and local knowledge resides in these startups, " he said.

While the money flows in with investors and new residents, the roots of banking don't change. Old Harbor's Miller said he knows all the players starting all the new banks because they've all been working together for years.

"The bank names change, but the bankers are still the same, " Miller said. "It's a personal business."

Paul Swider can be reached at 892-2271 or pswider@sptimes.com or by participating in itsyourtimes.com.