Yes, Ron Paul loves Washington, and no, he doesn't have multiple personalities.
The Ron Paul you're thinking of is a Republican presidential candidate who rails extensively against the excesses of Washington, calling for the elimination of the Federal Reserve and a return to the gold standard. Some community banker he'd make.
But the other Ron Paul, the chairman and chief executive of Eagle Bancorp Inc., lauds the Washington area, touting its relative economic health as key driver of growth at Eagle, based in nearby Bethesda, Md. Contrary to the message heard from other community bankers, he bemoans Eagle's weak supply of deposits, adding that it could stymie an ability to make more loans.
"It's difficult, when you have 25% loan growth, that's a lot of deposits," said Paul, who is also the president of the $2.3 billion-asset company. "Everyone is talking about having excess deposits. We're at about 98% loan-to-deposit ratio."
To be precise, Eagle had a net loans and leases to deposits ratio of 99.98% at June 30. The national average at midyear was 72.25%, according to the Federal Deposit Insurance Corp.
Eagle has 14 EagleBank branches in metro Washington, with a focus on its home area of Montgomery County, Md. The company unveiled plans to expand south of the Potomac River in July, agreeing to buy Alliance Bankshares Corp. of Chantilly, Va., for $31.2 million in a deal set to close next quarter. (Alliance's loan-to-deposit ratio at June 30 was 76.64%, according to the FDIC.)
Paul has little interest in expanding beyond the Washington region. The Alliance acquisition is part of his strategy of "circling the Beltway," referring to the freeway that rings the perimeter of Washington.
"There are a lot of people who live in Maryland, who work in northern Virginia, who work in DC, who live in Montgomery County," he said during an interview at a FIG Partners LLC conference in Atlanta last Tuesday. "It's the opportunity of branding, of being around the entire metro area that we felt was very important."
Paul's professional career includes a stint as a real estate investor in the Washington area, and he said his management team includes other professionals with experience in the local market. He said such familiarity with the local real estate market gives EagleBank an advantage over big banks.
"The nimbleness is just a major, major advantage for us," Paul said. "We can turn around a loan in 24 hours if we need to. You're not going to get that from the big banks."
Eagle felt good enough about its lending prospects that it applied for, and received, $56.6 million from the Treasury Department's Small Business Lending Fund. It is among the largest amounts granted thus far under the program.
Eagle benefits not only from the strength of the Washington market and the experience of its management team, but also the blunders being made by big banks, said Carter Bundy, an analyst at Stifel, Nicolaus & Co.
"You'd think some of the largest players there would have gotten their act together," Bundy said. "But from a large-cap perspective, you've got to think that in the back of the minds of the big banks, they have got to really think about new capital requirements and there's a lot more pressure."
While the large banks are distracted by bigger issues, Paul said the opportunity for EagleBank to steal market share is somewhat like picking low-hanging fruit.
"The exciting part for me is, having such a small part of the market share right now, and every day knowing that I can take market share from others," Paul said. "Stealing market share from big banks now is a fairly easy thing to do because of the dysfunctional side of them."
Capital One Financial Corp. is the market leader in metro Washington with 16% deposit market share, followed by Wells Fargo & Co. and Bank of America Corp., according to June 2010 data from the FDIC. EagleBank placed 14th, with 0.95% of the market, but the figure should rise to 1.24% after the Alliance deal closes. (The data excluded E-Trade Financial Corp., which largely takes in deposits via an online platform.)
One way Eagle Bancorp could handle its loan demand is through participation loans, which Paul said he would seriously consider.
"Most quality banks in the D.C. area are in a similar situation as we are," Paul said. "We can participate in loans with other banks throughout the country."
While Ron Paul the banker hasn't called for abolishing the Fed, he nevertheless has opinions for how Washington's policymakers should handle the banking industry. His biggest declaration: don't treat all banks as though they are the same.
"The federal government needs to differentiate between the big banks and the community banks," Paul said. "We're really painted with one brush, and that's just very, very inaccurate."