A number of community banks are taking advantage of a slow economy, artificially low interest rates, or other factors to negotiate sweet deals on new office space.
In the past year, at least a dozen community banks have opened new corporate space or are in the process of building new offices. Interest rates are certainly a contributing factor for those that are buying lots for new headquarters buildings.
But there are a myriad of other secondary factors that are contributing to the trend, says Kirk Diamond, a commercial real estate broker who has advised several banks on relocations.
"There are a lot of things playing into this," says Diamond, a senior managing director and principal at Cassidy Turley in Atlanta. "Sometimes it's an opportunistic lining up of the stars."
These factors are quite varied.
Metropolitan Bancgroup in Ridgeland, Miss., and Patriot Bank in Broken Arrow, Okla., outgrew their old space. The management of Lakeland Financial (LKFN) wanted to demonstrate a commitment to a community by opening a cutting-edge facility.
Heritage Financial (HFWA) in Olympia, Wash., moved quickly to lock up a building's naming rights. And Georgia's Own Credit Union in Atlanta negotiated a good deal on a lease in a trophy office tower after the owner had become delinquent on its loans.
To be sure, loan demand remains tepid and new regulations are cutting into fee income. Still, a number of banks can justify the costs of moving to a new headquarters building, says Anton Schutz, the president and chief investment officer at Mendon Capital Advisors in Rochester, N.Y.
"If you decided to build a monument to the CEO and put a statute of him out in front, that's not the best use of your funds," adds Schutz, whose firm invests in community banks. "But if you've gone from a tiny company to something bigger, and you have eight different offices, it might make sense to have a new building to walk around and see other members of your team."
Assets at Patriot Bank have nearly doubled since 2009, to $89 million, and loans have grown by roughly 185%, says Mike Bezanson, the bank's chairman and chief executive. The bank ran out of room in its 4,500-square-foot building. That led management to build a 12,000-square-foot office in nearby Tulsa.
"We're building it for all the right reasons," Bezanson says. "We do plan additional growth, and [the new headquarters] will be in the very market that we want to be in."
Metropolitan's reasons for a new headquarters building are similar, though the company's growth is tied to commercial lending and private banking for high-income clients. "Our focus is not the mass market," says Curt Gabardi, the company's president and chief executive.
Metropolitan, which opened in 2008, has about $677 million of assets. Gabardi says the company has added 21 employees in the last two months, spread across offices in metropolitan Jackson, Miss.; Memphis, Tenn.; and Nashville, Tenn. Its new offices, housed in a 15,000-square-foot building, will host some of the new employees.
For some, upgrades are about something other than running out of space. Lakeland built an 11,000-square-foot regional office in Carmel, Ind., to show its commitment to the Indianapolis area, says David Findlay, the company's president and chief financial officer.
Lakeland incurred added cost to obtain the U.S. Green Building Council's Leadership in Energy and Environmental Design certification for the office, which includes a branch.
Some small banks are leasing space instead of developing and building new facilities, Diamond says. State Bank Financial (STBZ) in Atlanta signed a lease last year for 56,000 square feet in a prominent building in the fashionable Buckhead neighborhood. The company was drawn, in part, by a deal where it could put its name and logo on the tower.
Heritage Financial signed a lease for a regional headquarters in Vancouver, Wash., that also provided the company with naming rights, says Brian Vance, the company's president and chief executive.
"We feel like we got a pretty good deal on the lease," Vance says without discussing specific rates. "The increasing visibility with the signage and with a very key hire are all things that position us for growth in that market."