TriState Capital Bank is an ambitious name for a start-up. But this two-week-old business bank is already setting records.
It raised $85 million of capital by its January opening, more than any other start-up in the history of Pennsylvania, Ohio, and New Jersey, the states its name denotes. It plans to raise another $15 million by mid-March.
TriState has just one office in Pittsburgh, but it plans to ramp up quickly, opening an office in Johnstown within a few weeks, in Philadelphia and Harrisburg by midyear, and in Cleveland, Columbus, Cincinnati, Baltimore, and Washington by yearend.
"We've got to put that capital to work," said TriState's president Bill Schenck, an industry veteran who left his job as Pennsylvania's secretary of banking last summer to help found the bank.
TriState plans to add the offices as it hires seasoned lenders in each city. It also might expand into other cities across Pennsylvania, such as Allentown, Erie, Scranton, and Wilkes-Barre, if it finds the right people to hire, Mr. Schenck said.
From the Philadelphia office TriState plans to go after customers in neighboring New Jersey. And TriState, which has a state charter in Pennsylvania, may buy a small bank in New Jersey this year, mainly to acquire a charter that would allow it to open offices in the state, Mr. Schenck said.
He said he realized that would mean TriState would have offices in four states, but, he joked, "I didn't like the name QuadState."
The early success raising capital is paying off in lender recruiting and customer acquisition, Mr. Schenck said. "We're seeing quite a pipeline of loans even now at day 12."
The bank is targeting all types of middle-market businesses with sales up to $250 million.
TriState locations will be in office buildings. "The business model is to have no 'branches,' " Mr. Scheck said. "This is a pure business bank."
It is limiting itself to loans of $10 million or less, and it plans to get other banks to participate in larger credits, he said.
It also offers private banking for business owners and officers, and has mortgages, home equity loans, credit and debit cards, and online banking for those individuals.
Mr. Schenck said the time he spent as a state banking regulator should help in his new job … from the contacts he made to the lessons he learned. For instance, successful start-ups "have a real focus. They don't try to be all things to all people," he said.
Hiring is another key. "It's quite clear that a bank is as good as the people who are in it," Mr. Schenck said.
TriState set out to hire people who have been in the industry at least 10 years, but all its lenders have double that amount, he said.
"When you have $100 million of capital and the ability to lend at that size, you are able to attract very experienced bankers," he said. That allows TriState to handle much more "sophisticated" business than a typical start-up, he said.
David Darst, an analyst at First Horizon National Corp.'s FTN Midwest Research, said he expects Mr. Schenck's turn as a regulator to benefit TriState.
"That would give them an advantage, his knowledge of the industry and his understanding of how to navigate a bank from the start-up phase to profitability," Mr. Darst said. "I would think you'd see them reach profitability faster and be more efficient in the way they utilize capital."
Mr. Schenck, who joined the state government in 2003 and soon earned a reputation as a consumer advocate, started his banking career in 1969 at Pittsburgh National Bank, a precursor to PNC Financial Services Group Inc. By the time he left, in 1994, he was the executive vice president overseeing consumer and small-business banking.
He was the chief operating officer for Great Western Financial Group of Chatsworth, Calif., from 1995 to 1997 and then was the CEO of Fleet Mortgage in Columbia, S.C., until 2001. (Both companies were bought by Washington Mutual Inc.)
TriState's two other founders are Jim Getz, its chairman and CEO, who led Federated Securities Corp., the sales and distribution arm of the mutual fund company Federated Investors Inc.; and Mark L. Sullivan, its vice chairman and chief financial officer, who was a partner at Ernst & Young LLP.
David Lazar, a managing director at Ryan Beck & Co. Inc., said Mr. Schenck's banking background will probably prove more valuable at TriState than his stint as a regulator.
"The PNC experience is one that I think will bode well for his position at this new bank," Mr. Lazar said. "He had a substantial position at a very good, large, middle-market lending, commercial bank."
Mr. Lazar said he expects to see more start-ups with a commercial lending strategy targeting Baltimore and Washington now that PNC has swallowed Mercantile Bankshares Corp. and Riggs National Corp. TriState can go after larger customers than other start-ups, he said.
"The capital base they've been able to raise is going to give them a distinct advantage," Mr. Lazar said. "They're going to have $100 million of basically interest-free capital to lend and leverage. It's going to give them an opportunity to compete on a different scale than most of the de novos."
Start-ups typically raise $15 million to $30 million, Mr. Lazar said.
"I applaud [TriState] for being able to raise that much capital in this market," he said. "It's quite an accomplishment."
Mr. Lazar said research by his firm indicates that most start-ups go public or sell within seven years, mainly because of capital constraints. But "with a bank this size, that's clearly a different ballgame," he said of TriState. "They've got capital to hold them for a while."
Or maybe not.
If Mr. Schenck gets his way, TriState will exceed $1 billion in assets within three years and go public in three to five years.
