As a matter of principle, banking with a large institution had never much bothered Lloyd Solomon.
It was not his first choice — his company, a New York staffing firm with more than $100 million in annual revenue, initially was a customer of North Fork Bank of Long Island. Still, when Capital One Financial Corp. took over North Fork in early 2008, Solomon Page Group stayed put.
Then came the financial crisis, and a sense that Solomon Page's banking relationship was no longer just about Solomon Page.
"If a bank has a big real estate problem or a big credit card exposure, those issues, which are really not central to the theme of the relationship between a medium-size business and its lender, become very much a part of the relationship," Solomon said.
"Things that might have been no big deal previously become a very big deal."
At the urging of a business acquaintance, Solomon and his partner took a look at Sterling National Bank, owned by Sterling Bancorp of New York, as an alternative.
And that is how Solomon Page went from doing business with a McLean, Va., financial institution with assets of $212 billion to becoming a client of a $2.1 billion-asset bank based 14 blocks away in Manhattan.
How many times has this story been repeated, with other clients, and other banks? It is impossible to say. But the anecdotal evidence suggests that commercial clients of large banks — with some perhaps having gotten fed up and others perhaps having been purposefully squeezed out — are increasingly exploring their options.
Sterling estimates that 80% of the potential deals in its pipeline have come from clients of much larger banks. Sterling's sweet spot on loans is in the $5 million to $10 million range, while the target DDA deposit size is $1 million or above, said its chairman and chief executive, Louis J. Cappelli.
"It's obvious that many of the larger institutions around town are just not interested in small or midsize banking and lending relationships," Cappelli said. "When people are not wanted, you know what happens. It's the same in business. You can sense when you're being taken care of and attended to."
Michael Slocum, executive vice president of commercial banking for Capital One Bank, said his company is "committed to commercial banking and to increasing our market share in New York and across our footprint."
But many small and midsize borrowers are nervous about their relationships with large lenders, said James Simpson, the managing partner of Corporate Finance Solutions LLC, a Stamford, Conn., consulting firm for middle-market companies.
"Companies are definitely afraid that if they just have a minor trip-up on a covenant, a bank is going to come in and reprice them dramatically or just say, 'I've had enough, go get another bank,' " Simpson said.
Sometimes it doesn't take a covenant violation to spell the end of a relationship. Simpson said he has a client that recently left one of the biggest U.S. banks for a smaller, but still sizable, institution, after the larger bank balked when it came time to renegotiate terms.
"The days of relationship banking with very big banks, well, it's not dead — I think my banker friends would object to that — but it's not as prevalent. And the reason is that everybody is taking seriously the obligations of the [borrower] and of the bank on credit facilities and so on," Simpson said.
"It's not that the smaller banks are any less dogmatic. It's just that they have a little more room to work with [midsize customers] because it's more of an important relationship."
Solomon, whose business switched over to Sterling in September, said he was sold on the smaller bank's experience with other clients in his industry, and on the promise of tailored, attentive service.
"They have the knowledge of our industry to know where risk has to be managed, and they have the willingness to participate in an active relationship where you're feeling as though you're a customer as opposed to just a number," Solomon said. "Sterling keeps a very active eye on the ball. I'm not suggesting other people don't. But Sterling is very immersed in learning about our business and culture, so there are no surprises."
Solomon said his firm's chief financial officer, Eric Davis, speaks with Sterling bankers several times a week to discuss a relationship that covers lending, deposits and cash management.
While Solomon has been happy with the transition, he would not recommend it to everyone.
"If I were a $30 billion company that operated in 50 countries and had 50,000 employees, I don't know that Sterling would be my option. I might need a more appropriate institution with that kind of bandwidth," he said. "We're a $100 million-plus company and we have 200 employees. [Sterling is] not too big or too small for us, and we're not too big or too small for them."
