The Bankers Bank in Atlanta has outgrown its name.
Continuing its transformation from a traditional bankers' bank to a hybrid that acts as both a correspondent bank and a direct lender, Bankers Bank said this week that starting Jan. 2 it will be Silverton Bank.
Tom Bryan, the $2.2 billion-asset bank's president and chief executive, said it is changing the name mainly to eliminate confusion in the dozen or so states it has entered in recent years.
"In the various markets we compete in, there are lots of other bankers' banks," he said. "They all have unique names, but all are generically referred to as 'the bankers' bank.' We spend a fair amount of time explaining who we are and where we are from."
But the name change could also be viewed as a concession to critics who say the bank should not call itself a bankers' bank if it is not going to act like one.
Bankers' banks are owned by other banks and have historically had a narrow mission: provide correspondent banking services to community banks in designated geographic markets. They typically do not deal with the general public or encroach on one another's turf.
In recent years, though, some bankers' banks have been entering new markets and competing with other bankers' banks for loan participation deals, none more aggressively than the Atlanta bank.
It started opening offices in other Southeast cities in 1994, and a decade later it launched a major national expansion that took it into cities including Chicago, Denver, and Seattle. In 2005 it established a subsidiary called Specialty Finance Group LLC that makes direct loans, primarily to the hotel and restaurant industries.
With its business model changing, in August the Atlanta bank switched from a special-purpose bankers' bank charter to a commercial banking charter, which freed it to make even more direct loans.
In an interview this week, Mr. Bryan said "the overwhelming majority of our business will continue to be participations bought and sold with independent banks."
But "there may be occasions where large development or construction loans surface that our community banks wouldn't ordinarily look at," he said. "We might consider those if no community bank was competing for it and then underwrite it and sell participations to community banks in the area."
The name change could allay other bankers' banks' concerns about the Atlanta bank's direct lending to the public. Executives at several bankers' banks have said that community banks' trust in bankers' banks could be diminished by an organization that calls itself a bankers' bank and makes loans directly or even accepts deposits from the public.
"A bankers' bank does not compete with its clients," said Bill McFadden, the president and CEO of the $136 million-asset Community Bankers' Bank in Midlothian, Va. "You have a safe haven with your correspondent work."
The Bankers' Bank Council is pushing Congress for legislation that would require bankers' banks that strayed from the traditional mission to remove that term from their names.
"We are still pursuing legislation to protect the bankers' bank name," said Jon Evans, the trade group's chairman, noting that those dealing directly with the public or not bank-owned are not authentic bankers' banks. "Our shareholder banks joined because we didn't compete with them," he said. "They can bring a loan participation to us and not worry that we are going to compete with them. That's one of the big draws of a bankers' bank."
Mr. Bryan said that the Atlanta bank has no intention of competing directly for loans with community banks and that it is only looking to book loans that they typically would not want or see, Mr. Bryan said.
"Most of our lenders were trained from large banks," he said. "We have the opportunity to compete for the loan, but our community banks, probably for their size, would have never been shown that credit. … If we find out one of our banks is working on the credit, we immediately withdraw or let them lead the credit."
Mr. Bryan said that since community banks typically have no interest in lending to hotels and restaurants, he does not view Specialty Finance as a competitor to community banks. He noted, however, that a large portion of the loans Specialty Finance originates are shared with community banks. This year the bank has originated $600 million through Speciality Finance, and about $250 million worth of those loans were shared with community banks.
With its new charter, though, the bank no longer has to make direct loans through its subsidiary. In fact, Bankers Bank itself has already made commercial real estate loans totaling roughly $40 million since the August charter switch. Community banks have participated in half of those loans, Mr. Bryan said.
But executives at several bankers' banks said that as the Atlanta bank continues to go after more traditional banking business, it makes sense that it would begin to accept and need deposits from the public. "Sooner or later they will be taking retail or corporate deposits," said Bill Rosacker, the president and CEO of the $353 million-asset United Bankers' Bank in Bloomington, Minn. "If I am going to loan" to a company, "I am going to ask for its deposit accounts. That's how a normal banking relationship would be."