MEMPHIS - Never one to honor the banking industry's conventional wisdom, Thomas M. Garrott is now considering a plunge into complete heresy.

The iconoclastic Mr. Garrott introduced National Commerce Bancorp to supermarket banking in the mid-1980s, before the concept was cool. More recently, he's led the Memphis-based bank into consumer finance and transaction processing for the trucking industry.

Now he's contemplating the ultimate contrarian move: taking National Commerce out of the banking business altogether.

Mr. Garrott, chairman, president, and CEO of National Commerce, is so pessimistic about the prospects for his industry that he is considering dividing the company into two subsidiary holding companies - bank and nonbank - under the umbrella of one "grandfather" holding company.

That's step No. 1, which is probably a few years in the future. Looking even farther down the road, Mr. Garrott wants the option, if Congress doesn't provide the industry with more powers, of selling off the banking piece while keeping the nonbank financial services part, which presumably would command a higher stock-market multiple.

"That's where I think we're headed," says Mr. Garrott. "We haven't yet made that choice, but I'm going to begin to do the legal and financial engineering."

Mr. Garrott, 57, took his first steps in the direction of a two-company structure in August, when National Commerce announced an executive reorganization that placed several nonbank units, such as investment management, under chief financial officer Lewis E. Holland.

Pulling out an organizational chart during an interview in his office, Mr. Garrott ticks off the names of other units - consumer finance, telephone-electronic banking, and transaction processing - that will eventually move over to Mr. Holland's chain of command from their current location under executive vice president William R. Reed Jr., who runs the high-profile supermarket banking operation.

Behind Mr. Garrott's rejiggering of executive responsibilities at National Commerce is a conviction that the commercial banking industry is headed for extinction, perhaps only a decade or two behind the S&Ls. He worries that nonbank financial institutions have stolen away the most profitable business segments, leaving bankers with only their monopoly of the payment system, which provides very thin margins.

"We have no deep profit lines in banking, so we're not able to compete with the nonbank banks in many of our traditional services," Mr. Garrott says. "We've gone from being a very important financial industry to a roughly unimportant industry, relative to the nonbank banks."

"It's very late in the day," he adds.

Mr. Garrott's 12-year career at National Commerce has focused on insulating the company as much as possible from the problems inherent to a commodity-type business. His formula for survival: If money is generic and brand-name relatively unimportant in banking - all things being equal, customers will gravitate to the best rate - then the only way to distinguish your company is to become the low-cost provider.

National Commerce has done that with a vengeance. Expanding mostly via the supermarket branches, which can cost as little to operate as 10% of traditional offices, and at the same time avoiding dilutive acquisitions, the company drove its efficiency ratio down to an industry-beating 53.5%. The median efficiency ratio for 41 southern regional banks followed by Keefe, Bruyette & Woods Inc. is 62.2%.

And Mr. Garrott doesn't intend to stop there. He expects to attain an even more miserly 51% to 52% range this year and between 47% and 48% by 1996.

"The question," says Keefe Bruyette analyst Kay Lister, "is what don't they do well? They have great revenues and, all the while, keep their eye on costs. They cover all the bases exceptionally well."

Michael Stead, portfolio manager for the Sife Trust Fund, is also a believer, although Sife - one of the company's largest shareholders - has been lightening its position in National Commerce for technical reasons. Taking profits from a peak of 800,000 shares last year, Sife has since worked itself down to about 500,000 shares.

"We really like management and we really like what they've been doing," says Mr. Stead, who is based in Walnut Creek, Calif. "We just think the market got a little ahead of itself."

While supermarket banking gets most of the credit for National Commerce's stellar performance, other factors can also be cited besides driving down costs and expanding retail revenues. For example, the company's conservative lending culture keeps losses to a minimum.

National Commerce now has only one nonperforming loan on its books, totalling $58,000. The ratio of nonperforming loans to total loans is, for all practical purposes, zero.

Much of the credit for the bank's rigorous underwriting standards goes to John S. Evans, who retired in February as senior credit officer after 31 years with the company, although he remains on the loan policy committee. Whether National Commerce will be tempted to relax its defenses in the absence of Mr. Evans' direct supervision remains to be seen.

Some people think that wouldn't be a bad thing. "I sort of ask myself, how much good business has been turned away?" says Mr. Stead, the portfolio manager.

Conservatism runs deep at National Commerce. The lead bank, National Bank of Commerce, has long been known as the bank for Memphis' "carriage trade," the place where wealthy people place their deposits and trust assets. Not surprisingly, NBC manages the estate of Elvis Presley.

But as National Commerce entered the 1980s, growth had slowed in the company's traditional commercial middle-market business. Casting about for alternative strategies, then-chairman and CEO Bruce E. Campbell Jr. tapped a board member, Mr. Garrott, to be the new president and chief operating officer in 1982.

On the surface, this appeared to be an astonishing choice, since Mr. Garrott had no banking experience. He was a top executive at Malone & Hyde Inc., the nation's third largest food wholesaler.

But Mr. Campbell was looking for someone with broad retail experience to expand National Commerce's consumer banking operations. Mr. Garrott had also been trained in finance at the University of Pennsylvania's Wharton School and had contemplated a banking career before being diverted into the grocery business.

Mr. Garrott seized upon the experimental concept of in-store banking to drive his expansion program. National Commerce opened its first grocery store branch in 1985 in a Memphis Kroger and hasn't looked back. The company now operates 62 in-store branches of its own in three states, compared with only 16 traditional branches, all in Tennessee.

Mr. Garrott said he plans to open 24 branches next year - all in-store.

The program completely flipped around National Commerce's profile from commercial to retail bank. By the end of last year, its loan mix was 59% retail, against only 30% 10 years earlier.

Competitors find little to criticize in the strategy. An executive with another Memphis-based bank, who did not wish to be named, says National Commerce's intense focus on retail banking "does make them a little more vulnerable on the commercial side" in terms of diverting away management's attention.

But, he adds, "they're still a formidable competitor."

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