CHARLOTTE, N.C. - National Commerce Financial Corp., which has grown quickly in recent years in part by adding branches in retail stores, announced plans Monday to enter the Atlanta market and have 30 supermarket branches there by the end of 2003.
The Memphis-based company will open branches in stores operated by Kroger Co. of Cincinnati, a longtime partner. The first eight will open in April, National Commerce said.
Besides the in-store branches, the company plans to open as many as seven traditional branches over the next few years in the 12-county Atlanta area, according to its chief operating officer, William R. Reed Jr. That would be in keeping with the company's "hub and spoke" strategy of pairing three or four store branches with a traditional branch, he said.
The branches would be part of yet another growth spurt for National Commerce, which doubled its assets last year by acquiring CCB Financial Corp. of Durham, N.C., the parent of Central Carolina Bank.
Since then, under Ernest C. Roessler, its chief executive officer, the company has been extending its reach across the Southeast. It bought SouthBanc Shares Inc. of Anderson, S.C., last month. In August it agreed to acquire 37 branches that Wachovia Corp. is divesting as part of the Wachovia-First Union merger, and in July it announced an agreement with the Bi-Lo supermarket chain to open in-store branches in SouthBanc's territory.
National Commerce, the parent of the Memphis-based National Bank of Commerce, also announced plans Monday to open four branches during the first quarter in Kroger stores in Savannah, Ga.
That market would also be a new one for National Commerce, which will get three traditional First Union branches there as part of the Wachovia-First Union divestiture. That transaction is expected to close in mid-February.
Mr. Reed would not say how much National Commerce would spend to expand in Atlanta, but he said it would not be enough to affect the company's earnings.
National Commerce has been eyeing Atlanta for some time, and it has been gradually approaching the city as it has expanded in north Georgia, he said. "We've just been anxious to get in there. It's just such a major economy, and it's growing."
The company would likely be in the market to buy individual branches or perhaps a small bank to complete its Atlanta-area network, but it did not want to wait for an acquisition to enter the market, Mr. Reed said. "We'll focus on the one thing we know we can do right away and fill in with the others as the opportunity occurs."
National Commerce has had success using supermarket branches to expand into other new markets quickly and without major investments, he said. It can cost $2 million to open a traditional branch, but a supermarket branch costs about one-eighth as much to open, Mr. Reed said.
"Historically it's very efficient to go in with a large retailer," he said. "It's cost effective, and it's quicker. Once we get that going, we look around and identify what kind of hub locations would fit the network."
In-store branches remain an often-debated strategy, embraced by some large companies and avoided by others.
National Bank of Commerce was among the first banks to achieve success with store branches during the 1980s. Today, through a subsidiary called National Commerce Bank Services Inc., National Commerce advises retailers and other financial institutions on in-store banking
The last time National Commerce entered a major market this way was in 1997, when it agreed to an unusual partnership with the 27-store Ukrop's Supermarkets Inc. of Richmond, Va., that gave Ukrop's 51% ownership of a new company called First Market Bank.
National Commerce owns the rest of First Market, which now has $678 million of deposits, $390 million of loans, 17 in-store branches, and six traditional branches in Richmond, Mr. Reed said.
A variety of other large banking companies have in-store branches, including the nation's largest consumer banking company, Bank of America Corp. One in 10 U.S. households use in-store branches, and half of those users are between the ages of 35 and 54, according to a study last year by PSI Global Inc. of Tampa.
But not all bankers are enthusiastic about the idea. Last month SunTrust Banks Inc. of Atlanta decided not to acquire 43 supermarket branches from Huntington Bancshares Inc. of Columbus, Ohio, whose Florida banking network SunTrust is buying.
Even though SunTrust operates some in-store branches, a spokesman said last week that the Florida store branches "were not needed."
National Commerce will face heavy competition in Atlanta, where consolidation has left a handful of dominant banking giants. As of June 30 the old Wachovia and First Union led the market with about one-quarter of combined local deposits, followed by Bank of America and SunTrust, according to data from the Federal Deposit Insurance Corp.
BB&T Corp. of Winston-Salem, N.C., and two Alabama companies, SouthTrust Corp. and Regions Financial Corp., are also important competitors in Atlanta.
Meanwhile, banking companies from outside the region are also targeting the city, and especially its suburbs, because of its rapid population growth and attractive, upscale demographics. On Monday the Seattle-based thrift company Washington Mutual Inc. will open 20 Atlanta-area branches that will use the company's hip Occasio store design. Wamu plans to eventually have 60 to 80 branches there.
But Mr. Reed says he is unconcerned about competition in Atlanta. "There's competition everywhere. But there's so much going on in terms of an economic engine there [in Atlanta]. Typically we compete against the biggest banks, and we do well against them."
From Our Archive
