A commercial lending battle royal in Kansas City

Register now

Kansas City, Mo., is becoming a crowded commercial market with banks of all sizes elbowing each other for space.

Capitol Federal Savings Bank in Topeka, Kan., Emprise Bank in Wichita, Kan., and Heartland Financial in Dubuque, Iowa, are among the new players.

Capitol, historically a mortgage lender, has been making more commercial loans since buying Capital City Bank, while Emprise recently opened a loan production office in the city. Heartland is on pace to close on its purchase of Bank of Blue Valley in the Overland Park suburb later this month.

Bigger banks are getting in on action, too.

PNC Financial Services Group has opened a few branches in the city, while JPMorgan Chase aims to do the same later this year.

The newcomers add to an already packed market. More than 120 banks, with nearly 700 branches, operated in the state at June 30, according to the most recent data from the Federal Deposit Insurance Corp.

“I’ve been kind of surprised by the amount of banks that have wanted to enter in the last few years, because it’s a tough market,” said Martin Nay, Kansas City market president for Simmons First National. Nay noted that commercial-and-industrial lending is dominated by the $23 billion-asset UMB Financial and the $25 billion-asset Commerce Bancshares.

UMB and Commerce control roughly a third of the market's deposits.

Client relationships are critical in Kansas City because, at its heart, the city is really a small town, making access to decision makers vital to success, Nay said.

“Jamie Dimon is not coming to see a Kansas City prospect ... so I’m interested to see how those bigger banks try to play," Nay said.

To be sure, the market is growing.

The city's employment rate stood at 3.8% in March, on par with the national rate, according to the Bureau of Labor Statistics.

Total commercial loans held by banks based in Kansas and Missouri rose by 11% last year, to $31.5 billion, according to FDIC data. In comparison, the total amount of deposits in the Kansas City area at June 30 rose by just 3% from a year earlier, to $57.5 billion.

Damon DelMonte, an analyst at Keefe, Bruyette & Woods, said the city is one of the more vibrant markets in the Midwest, and banks are generally positive about lending opportunities. Construction lending, largely driven by necessity instead of speculative building, continues to present opportunities.

“We view this favorably, as it generally helps to prevent the market from overheating and potentially crashing,” DelMonte said.

Simmons has been trying to make more commercial loans, though a good year is the "two or three relationships that you can pry out of UMB or Commerce,” Nay said. Still, the company has been able to secure $440 million in commercial commitments in Kansas City, with another $200 million outstanding.

Simmons had two branches and $74 million in local deposits in mid-2018.

As it relates to competition, the story in Kansas City is similar to many other Midwestern markets.

While competition is very strong, opportunities exist to take business from bigger banks, though DelMonte cautioned community banks to stay disciplined with pricing and terms.

Acquisitions are also an option for growth-minded banks.

A number of outsiders have already entered the market with deals, said Doug Wareham, president and CEO of the Kansas Bankers Association. The number of banks operating in the city has been reduced by a fifth since the financial crisis, based on the latest FDIC data.

Though the number of targets is shrinking, DelMonte said there are some smaller, tightly held banks that could provide a boost.

“I definitely see consolidation continuing,” Nay said.

Emprise, which spent years evaluating Kansas City, made the move because clients in Lawrence and Wichita had migrated to the market.

“It was just a natural time to capitalize on some of those relationships and connections,” said Trey Cunningham, a former Simmons banker who joined Emprise in April as its Kansas City market president. “It’s a great time to be in banking in Kansas City.”

The $1.8 billion-asset Emprise plans initially to staff its commercial office with four bankers. Though a branch could eventually follow, Cunningham said business banking will be the bank's focus, with some dealings in commercial real estate. Emprise will initially target C&I and medical lending, with typical loans of $3 million to $10 million.

“Our message is being well received,” Cunningham said.

For reprint and licensing requests for this article, click here.