Making A Comeback

Georgia’s banking industry is proving its resilience as survivors reshuffle the deck and out-of-staters enter the market.

The waves of bank closures that washed over the state during the recession – many tied to toxic real estate loans – gave rise to predictions that recovery could be long and slow. But Georgia’s banking industry has proved more resilient than expected. Banks are improving their lot as the economy becomes more robust and Georgia becomes more alluring for out-of-state banks, according to Joe Brannen, president and CEO of the Georgia Bankers Association (GBA).

“Things have improved,” Brannen says. “The un-employment numbers are coming  down. We’re seeing businesses expand or move to Georgia, and demand for new housing is growing. A large majority of Georgia banks have returned to profitability, have strong capital levels and are flush with deposits to lend.”

Some banks broadened their share of the market, while others found ways to extend their territories and expand products and services to get healthier.

 “The banking industry in Georgia continues to improve, primarily because our customers’ finances are improving,” Brannen says. “We report on a quarterly basis to the FDIC, and the first quarter of this year showed that 86 percent of our state’s banks were profitable. That’s good news, and we also saw for the 12th consecutive quarter non-current loans were down – and they were down 50 percent from a year earlier, so more people were able to pay their loans back on time.”

First quarter bank-owned real estate and foreclosed real estate numbers were down 20 percent from the same period in 2012, more encouraging news. “Charge-offs, those loans that will never be paid back, were down 47 percent in the first quarter of 2013 from the first quarter of 2012,” he says. These numbers are not just anomalies. “We’re seeing a continuing cycle of improvement. It’s not just a blip; it’s a continuing recovery, and we’re glad to see it.”

Under The Radar

Ed Hortman is the low-key leader who has kept his bank holding company on a successful track as steady as a laser beam with a business model that seems to rely mainly on flying under the radar. It’s a position of strength that has grown his Moultrie-based Ameris Bank from a small-town rural institution with a customer base of farmers and small businesses to a financial network of more than 60 locations in four states with assets totaling $2.9 billion as of March 2013.

If it is anything, the parent company, Ameris Bancorp, is a model of consistency, having only  two CEOs in the 42 years since the first bank opened its doors. “Early on, there was this desire to grow, primarily [through] acquisitions of small banks [in places] that were similar in geography and demographics to Moultrie,” says Hortman.

“There were a number of small acquisitions, and then in the last four years we’ve done 10 FDIC deals [acquisitions of troubled banks’ assets].” That has led some in banking circles to say the Federal Deposit Insurance Corporation is about as strong a banking partner as Ameris could have, and there is no argument from Hortman. “They are our partners, for better or worse, for richer or poorer,” he says, adding, “till death do us part.”

The partnership began in 2008 with the advent of the federal Troubled Asset Relief Program (TARP), which made $500 billion available in an effort to stabilize financial markets and the American economy through what was commonly known as “bailouts” for troubled private companies and financial institutions.

“They intended to make capital available to the stronger banks they thought were well managed so they would be able to participate in consolidations,” Hortman says. “And about four months later we did participate, and they loaned us $52 million – that we will pay back, with interest – to have capital during this downturn so we could grow and have capital to make loans. We did two FDIC-assisted transactions early on, and we raised capital in 2010 and did eight more transactions with the FDIC.”

Hortman says if Ameris had not rescued the failed banks, their depositors could have lost all their money in the process. “I think it’s been a good process,” he says. “If a bank doesn’t step in to pick up the failed bank, the customer deposits wouldn’t be honored. And if they are over the FDIC limits [of insured funds], we cover all those deposits, so no depositors have lost money. It’s been a good process to help us get through difficult times. If you banked in the Southeast in the last four or five years, you’ve been stressed and impacted in a pretty big way.”

The Ameris banking brand may have been flying under the radar, but it did not escape the eye of banking analyst Chris Marinac. “I know Ameris quite well,” says Marinac, managing principal and director of research at FIG Partners, a financial investment group. 

“The company has done several deals with the FDIC, and I think they’ve largely worked out well for both parties. I think what you’re seeing is Ameris transition those failed banks into real assets, partly because the economy is starting to expand. And I think you’re seeing Ameris making some really good strides picking off incremental business in Atlanta and doing more in Jacksonville and doing some small measured success in places like Columbia, Charleston and Savannah.”

New Presence

Ameris is not the only bank creating larger numbers in acquisitions and a multi-state presence. Pittsburgh-based PNC Financial Services Group has displayed its brand in Georgia for the past 15 years and is seeking to make that brand better known in the Peach State, according to Eddie Meyers, Georgia regional president of PNC. “We had a Georgia presence for the past 15 years from an asset-based perspective but did not have a retail presence until the acquisition of RBC [Royal Bank of Canada] in 2012, as well as [Michigan-based] Flagstar in 2011.”

Those two deals made PNC the seventh largest bank in Metro Atlanta, with 79 branches in the area and $2.6 billion in local deposits, according to published reports. “Having the retail branches that we have helps us from a brand recognition standpoint [and] helps identify us as an institution,” Meyers adds.

“Still, there are a lot of folks that know of us, but really don’t know us as a financial institution. What I mean by that is that being a $300-billion bank [more like] Bank of America, J.P. Morgan, Wells Fargo, Citibank and so forth, everybody is aware of you. Granted, we are larger than SunTrust, but SunTrust is housed here in Atlanta and they are a Southern bank, and they grew up in the South.”

Meyers says PNC is pulling in the reins on further immediate acquisitions. “Banks are sold, but not really acquired,” he says. “If you look at it from that perspective and you look at who else is on the horizon from an acquisition standpoint, and you want to expand and think about what’s going on in the marketplace, most financial institutions you would think about acquiring to deepen your network here are contracting. So at this juncture it’s probably not a good time to go out and find another acquisition.”

But Meyers points out there are other ways to grow. “We’ve got a contract with Walgreens, and we’ll be putting ATMs in 191 Walgreens throughout the Southeast,” he says. “We’re also working on expanding the branch network, first here in Atlanta, and we’ll be shoring up what we don’t have in Atlanta,” he adds. “This is not a sprint; it’s a marathon, and we’re here for the long haul.”

Fueling Growth

BrandBank, a venerable financial institution based in Lawrenceville since 1905, found the recession a perfect opportunity for raising capital to fuel growth. The bank has $1.53 billion in assets and closed on a $200-million capital raise in April 2011. “Right before the recession began, we decided we were going to go out and explore bringing private equity in … and that gave us the ability to grow much faster than the industry has in Georgia and also deal with all the recessionary matters,” says Bartow Morgan, CEO of BrandBank.

 “Since we closed on the capital raise in 2011, the last two years we’ve had a growth rate faster than 25 percent per annum. In the five years before 2011, we were relatively flat [in growth] throughout the recession to even smaller [numbers].”

Morgan has joined a growing number of industry CEOs expressing concerns about regulatory changes that could drive down profits. “The banking industry is a heavily and highly regulated industry; it’s just part of the job,” he says. “There will be lots of new regulations coming out of this recessionary time, and the cost of business is going to go up as it relates to dealing with the regulators.”

Morgan believes technology can help balance the books and expand his customer base. “We believe the future of banking will lie in how well your customers can access the bank,” he says. “So, this year we’ve put in a mobile banking app so you can go with your smartphone and access all your accounts, transfer money; and you can take a picture of a check and mail it to the bank.” Other tech upgrades include improvements on BrandBank’s website to make it more accessible and easier to interact with, he says. “We also opened a BrandExpress location without tel-lers. It’s a complete electronic branch that is run from a call center.”

More Marketing

Blairsville-based United Commun-ity Banks, a holding company with $7 billion in assets and 106 locations in four states, became more aggressive in expansion plans and marketing its products as the recession wore on, says its president and CEO, Jimmy Tallent. “We had, particularly in a good part of our geography, real estate that created good opportunities for loans,” Tallent says. “But of course when we hit the deep depression real estate values dropped so dramatically, and we all know what the after effects were. Now, as we’re seeing the economy stabilizing, the type of loans we’ve looked at over the years [before] are just difficult to find. Therefore in an economy that’s just not growing but may be more stabilized, we don’t see the businesses expanding.

People have been refinancing homes because of low interest rates,” Tallent says. “But the number of lending op-portunities have certainly been less than anybody anticipated. Consequent-ly, good loans, when we find them, [we also find] there are a lot of [other] banks typically in the mix [to make them], which puts pressure on pricing from a banking standpoint.”

Tallent says his banks have responded by opening new territories and finding new niches for their products. “What we’ve done is kind of diversified our geography,” he says. “We’ve ex-panded into Greenville, South Caro-lina, which has been really good for us. Their economy, overall, I think is considerably stronger than some in our existing footprint. But we do see some strength in the Savannah market, and we see Atlanta starting to grow some.”

United Banks has begun to mine some niches that hold promise for growth. “We hired a team of healthcare [lending] specialists in Nashville, Tennessee,” he says. “Healthcare is a real growing industry, but you have to have very experienced lenders that are very knowledgeable in that sector.”

United Community Banks’ network is seeing another growth area in auto loans, according to Tallent. “Certainly, on the automobile side, we’ve been able to grow lending, particularly over the last three or four quarters where we’ve been able to see a rebound. I think during the recession people drove their automobiles much longer than normal. So there was somewhat of a pent-up demand for autos, and we tried to make as much of that opportunity as we could.”

The recession and its causes should have been learning experiences for bankers, says Tallent. “I think the recession made us look broader than just taking what the market was giving us,” he says. “In other words, to grow the loan book today in this environment, doing business the way we did for the last two decades just doesn’t work. We have to look to expand and diversify the loan portfolio. We had too many real estate loans. I think bankers today are beginning to look at their loan portfolio in a more segmented basis.”

Tallent says modern banks will need specialized niche lenders as part of their executive corps and will have to explore the expansion of their market areas if they are to remain competitive. And, he says, the modern bank will need more muscle in the marketplace. “Our company is unique in its size, in that we operate as 27 banks but have the resources of a much larger bank,” Tallent says. “We deliver our services in that small-town community bank environment that customers like, but have the resources [where] we can provide much larger loans as the borrower grows.”

Georgia, says the GBA’s Brannen, has always been attractive to banking interests because of what we offer.

“We’ve got a terrific infrastructure system. We’ve got a pro-business legislature and a pro-business governor,” he says. “We’ve probably got the best banking laws of any state in the country, we’ve got population growth numbers that continue to be among the top five states in the country and we’ve got an affordable housing market and workforce.”