In the past two years IronStone Bank of Fort Myers, Fla., has devoted much of its resources to expanding into far-flung markets — from Austin to Sacramento to Portland, Ore. — but it plans to spend 2005 settling down.
Jay Parker, the president of the IronStone’s western region, said the $1.3 billion-asset bank is taking a break from scoping out new markets to focus on cities it recently entered, as well as working to improve its balance sheet.
“I think our near-term strategy is to take the expansion we have done so far and mature it a little and let the revenue stream catch up,” Mr. Parker said.
IronStone is building a branch in San Diego to go with the two it opened there in May 2003. It is also building two in Austin (which will give it four there) and two more each in Sacramento and Scottsdale, Ariz., markets it entered in mid-2003.
IronStone ventured out of the Southeast to begin its western expansion in September 2002, opening a branch in Austin. The bank, a subsidiary of the $12.8 billion-asset First Citizens of Raleigh, decided to pursue its unusual growth strategy because it wanted to be in high-growth markets.
It faces stiff competition in many of its new markets particularly for deposits. Mr. Parker said it lends primarily to doctors and other professionals and that its bankers are “aggressively” going after deposits.
IronStone, which was Atlantic States Bank until May 2003, had a solid deposit base in its southwest Florida market when it began expanding. As it moved west it concentrated on acquiring loans through production offices that it opened before establishing branches.
Consequently, deposits from the new branches total only $90 million, while loans are three times that amount, according to Mr. Parker. He would not disclose IronStone’s performance goals but said he would like to see deposits catch up to loan growth.
The expansion has been costly: IronStone lost $1.6 million in the first half and $1.9 million in all of 2003.
“Certainly, there has been a lot of start-up expense,” Mr. Parker said. “But we are ahead of pace working toward profitability.”
Next month IronStone will open its first Albuquerque and Denver branches, and it has January ribbon-cuttings planned for Portland and Seattle.
IronStone has bankers lined up to staff start-up branches in its new cities and in its existing markets. Mr. Parker said it has been actively recruiting; it calls employees at large and small banks and tries to win them over with IronStone’s personal service philosophy, as well as a nice compensation package.
In fact, Mr. Parker said that the bank does not open a branch until it finds the right bankers.
“Our whole strategy is to hire experienced, well-connected bankers,” he said.
Robert Rogowski, a principal at Columbia Financial Advisors Inc. in Seattle, said that if IronStone sticks with that formula it should be successful in expanding in the new markets.
Still, Mr. Rogowski said, IronStone will have a reasonable amount of new-entry competition in San Diego, where three banks have opened in the past year, and in Seattle, where two have opened in the past six months.
Mr. Parker is not worried. IronStone has been successful in attracting medical professionals and other professional in its markets, he said, and it plans to stick with that approach. It includes offering specialized products, such as loans to buy into practices, equipment leasing services, and building mortgages for health-care providers.
IronStone is also trying to get business from larger practices in each market in hopes of persuading others to make a change.
“We are not interested in being all things to all people,” Mr. Parker said. “We have a niche, and we are going to stay with that.”
