For a start-up in a slow-growth market, Signature Bank in Toledo has set some lofty goals.
The 3-year-old, $240 million-asset bank recently completed a $5 million stock sale that Richard J. Brunner, its president and chief executive officer, says will help boost assets by about 20% this year. It is a growth pace Mr. Brunner expects to maintain for the foreseeable future.
The offering is meant to help Signature "continue to maintain well-capitalized status and allow us to continue to grow at the $50 million-a-year asset level," he said.
But can Signature achieve such goals in a market where the population is steadily declining? Mr. Brunner insists it can by being the hometown provider of basic banking services for businesses in Toledo. He points out that Signature has increased its assets more than tenfold since it was founded with $20 million of capital in April 2002 - even though the city's population has fallen by about 8% since 2000.
"We're the only bank headquartered" in the city of Toledo, he said. "The market is only served by larger regional banks. We have been successful in getting the account that wants a higher level of personal service."
Curtis Carpenter, a managing director with Alex Sheshunoff Management Services Inc. in Austin, said Signature's approach to attracting business typically works well for community banks seeking growth.
"People like to do business with decision makers, and, with a lot of these customers, they don't like to have to worry about impressing someone out of town," Mr. Carpenter said.
Banks like Signature can make money by charging more on the loan side for high-touch service while avoiding fee-income businesses to keep costs down, he said.
But for such a bank to get off the ground, it needs to be well-capitalized from the start, usually in the $20 million-$25 million range, so that it has enough size to make commercial loans. Mr. Carpenter said these types of banks also typically stay pretty lean in terms of costs; they tend to focus on commercial lending, because retail banking requires a lot of branches and automatic teller machines just to compete.
Before forming Signature, Mr. Brunner worked at Capital Bank, which was founded in the Toledo suburb of Sylvania, Ohio, in 1989 and sold to Fifth Third Bancorp of Cincinnati in 2001. Mr. Brunner, the senior vice president of commercial lending at the $1.1 billion-asset Capital at that time of the sale, said he saw an opportunity in being a locally based commercial lender in Toledo and decided to launch the new bank.
Mr. Brunner said that being local is a big selling point with businesses in Toledo, and when was Signature founded he thought it would have plenty of interested investors.
He pointed to the stock offering last month as evidence that his assumption was correct. Though it only needed $5.1 million, it got commitments for than twice that amount. "Our shareholders are primarily the business owners and professionals in the community; the offering being oversubscribed by such an amount shows their support of the bank," Mr. Brunner said.
John C. Donnelly, the managing director of the Grosse Pointe, Mich., investment banking firm Donnelly Penman & Partners, said that Toledo is a very loyal market, and that Signature's shareholders are a who's who of local business leaders.
"They have their own built-in sales force in their board and their shareholders," Mr. Donnelly said.
Signature has grown more quickly than most banks in Ohio. Its assets as of March 31 were nearly 33% higher than they were a year earlier. According to statistics from the Federal Deposit Insurance Corp., on a merger-adjusted basis, Ohio banks with under $250 million of assets grew by an average of 2.11% in that time, and national banks of the same size grew by 7.98%.
David A. Van Vickle, a Chicago regional manager for the FDIC's Division of Insurance and Research, said that even though the Toledo area has lost manufacturing jobs in the past few years, and personal bankruptcies are rising, there is still growth opportunities for banks in commercial real estate lending. Signature was the only bank formed in Toledo over the past six years and is one of only nine banks headquartered in the Toledo metropolitan area, he said.
Signature keeps overhead low by avoiding things like trust, brokerage, and insurance, and by keeping the number of shareholders low to avoid being forced to file with the Securities and Exchange Commission, Mr. Brunner said.
It also plans to keep focusing primarily on commercial banking, he said; 85% of Signature's loans and 80% of its deposits are commercial.
Mr. Donnelly said he expects Signature to continue to grow without needing to go public or sell anytime soon, since it has no problems raising money from its shareholders.
"It's kind of a vanilla story, but it's a damn good one," he said.
