TBO.com - TBO is Tampa Bay Online

Smaller Sometimes Better, Bankers Say

ADVERTISEMENT

By Carl  Orth | The Suncoast News

Published: August 13, 2008

TRINITY - Bigger may not always be better, some local bankers think.

Smaller community banks have weathered the economic storm better than many of the giant banking institutions, Patriot Bank Chief Executive Officer Stephen G. Zahorian argues. The Trinity-based bank has five branches in West Pasco and North Pinellas

Community banks shied away from the subprime mortgage loans, which are weighing heavily on the bottom lines of some big banks, Zahorian said.

The smaller institutions are positioned well for an economic rebound. As evidence, Patriot Bank lured highly respected banker and community leader Larry Starnes away from Wachovia Bank to become the new president of 4-year-old Patriot.

Similar bullish sentiments were expressed by Ed Hancock, senior vice president commercial banking at Mercantile Bank.

"I believe community banks are stronger today," Hancock commented.

Even so, the smaller banks are having to reassure jittery customers in the wake of the July 12 seizure by federal regulators of IndyMac Bank, in California, and the Aug. 1 closure of Bradenton-based First Priority Bank.

Most people realize the Federal Deposit Insurance Corp. insures individual deposits up to $100,000 Zahorian said. "Not one depositor has lost one nickel in the history since FDIC existed. That's fact."

Fewer people are aware of the CDRS program, pronounced like the tree, cedars. Certificate of Deposit Account Registry Service helps banks like Patriot extend deposit insurance through FDIC all the way up to $50 million, Zahorian emphasizes. So there's simply no need to worry, he said.

"We did not get involved in a lot of the lending that created a lot of the problems," Zahorian continued. "We had no subprime loans on our books."

Smaller institutions will create mortgage loans, but then typically sell off many of them in the secondary market. Patriot Bank concentrated on traditional mortgage loans, often with 20 percent down from customers with excellent credit.

Patriot specializes in small business lending and consumer lending like home equity loans. Patriot kept the amount of each home equity loan under 80 percent of the value of the house, unlike some bigger institutions.

"And that's typical of community banks and that's why most community banks didn't get caught up" in the housing market downturn, Zahorian explained. "Did we avoid it totally? No. Some customers were flipping homes and they got caught" by the downturn. Buyers invested in homes, thinking they could turn around and sell them quickly again for big profits until the bubble burst.

"We could have jumped on the bandwagon and got involved in builder development loans, ... but we chose not to," Zahorian commented. "Of course hindsight told us we made the right decision."

"Community banks as a whole did not suffer from loan problems that the larger banks did," he concluded.

Mercantile Bank has followed a slightly different route in its 15-year history, but adheres to similar banking principles and philosophy.

South Financial Group in Greenville, S.C., bought Mercantile in 2004, Hancock recalled. So now Mercantile's reach extends to three branches in Pasco, some 20 branches in Tampa Bay and 50 locations throughout the state.

A former top Barnett Bank executive, Kendell Spencer, serves as president of the Florida locations.

"We're very strong in commercial loans and deposits," Hancock said, plus originating mortgage loans, many of them sold in the secondary market.

Once IndyMac failed in California, some local customers sought reassurance from Mercantile officials.

"We're very strong financially" with more than a billion dollars in capital, Hancock said. The bank carries one of the top investment grades.

"Our customers seem to be satisfied," Hancock said.

Carl Orth can be reached at 727-815-1068 or corth@suncoastnews.com.

Loading Comments...

Email Print

ADVERTISEMENT