Community banks grow with creativity

Friday, August 30, 2013, Vol. 37, No. 35
By Linda Bryant

Most community banks in Middle Tennessee don’t have the multi-billion dollar deposits of large national operations such as Regions or Bank of America.

They don’t have quick access to multiple branches all over the region or even have the most competitive rates on loans.

Yet, many community banks are finding customers – and plenty of them – by offering loans and services often overlooked by larger banks and by carving out special niches of expertise.

F&M Bank, a 107-year-old bank headquartered in Clarksville, could be mistaken for an event planning and travel agency. The bank organizes local, regional, national and international events, as well as trips at a discount for customers ranging from European cruises to excursions to local museums and theaters.

F&M customers are treated to a dizzyingly array of incentives, prizes and discounts. They host special events, luncheons and dinners, many of which take place in a ballroom on the top floor of the bank’s headquarters on Main Street in downtown Clarksville.

“We think on a grand scale,” says Fred Landiss, senior vice-president at F&M Bank. “We are constantly looking for unique ways to reach out to customers and retain them. We want your experience with our bank to be so good that you’ll never want another one.”

Over the years F&M bank has given away a Corvette, a Harley Davidson and $100,000.

F&M’s hometown charm and popular perks have paid off. With assets of $825 million, the bank has expanded in recent years to seven counties in Middle Tennessee.

F&M is continually on the lookout for new opportunities in neighboring markets. The mortgage division at F&M is growing quickly in Davidson, Wilson and Rutherford counties. The bank has been operating a tiny branch in Hendersonville, but is now planning a new bricks-and-mortar location in Indian Lake Village in 2014.

“The market has always been strong in Clarksville,’’ Landiss explains. “But we think big. We like to expand where it makes sense to expand. We are constantly in the process of marketing. That’s what you have to do to compete with the big guys.”

F&M also runs TV ads in Middle Tennessee, unusual for a small bank.

“We have branded our CEO and president Sammy Stuard as the spokesperson for the bank,” Landiss says. “People know him, feel like they know him and stop him in grocery stores and parking lots. He’s nationally prominent, too, in banking organizations and boards, and it’s because of our innovative programs.”

Catering to small business

With only two branches in Green Hills and Brentwood and about $180 million in deposits, Tennessee Bank & Trust has about one-half percent of the market share in Middle Tennessee. That’s not much when compared, for instance, to Regions Bank, which has 18 percent market share and about $7 billion in deposits.

The tiny bank is growing by reaching out to small businesses. All senior bankers at TB&T are former business owners.

Roddy Story, executive vice president of commercial banking at TB&T, says the bank’s strategy is to find commercial customers who need banking services and financial backing but who typically have a hard time striking deals with bigger banks.

“We work hard through networking to find our customers. As they say in baseball, we run out all ground balls,’’ Story says. “Since we first came to Green Hills in 2007, we’ve changed our focus from transactional retail banking to commercial loans. It’s worked out well.

“We figured out that there was a hole in the market for what I call a ‘one-off’ loan,” Story adds. “There may be something a little bit unusual about the loan that makes it not fit into a cookie cutter model of a typical larger bank. Of course, we can’t reinvent the rules of lending, but if a loan is a little bit different, but we know the customer is solid muscle, we’re OK with it.”

Franklin Christian’s ‘one-off’ loan

Hugh Harris, headmaster at Franklin Christian Academy, says the school was frustrated in its search of a construction loan for a new school in Williamson County. Then they met with the bankers at TB&T.

“Our deal was a little unusual, but they got it almost right away,” Harris says. “We were the square peg in the round hole and couldn’t figure out how to make things fit with a larger bank. We didn’t fit all their [big banks] criteria to a T.”

Franklin Christian Academy now has a $2.4 million construction loan through TB&T and plans to break ground on a new school near the Westhaven area of Franklin later this year.

Harris says his favorite thing about the bank is the accessibility of the bankers. He knows them and feels free to call them with any problems or concerns.

“They are the most encouraging people,” Harris says. “They are like throwbacks to my father’s bank. They have thrown their weight behind our school. It’s not marketing; it’s true friendship and customer relations. They have even attended our football games.”

Story says that close bond of professional support and friendship is perhaps the bank’s biggest selling point. In the case of Franklin Christian, a new school with several hoops to jump through to get a loan, TB&T decided the people involved gave the project credibility, adding, “We have a real flat structure and a lot of leeway and authority at the individual level,” Story says.

“There are no 800 numbers here,’’ he adds. “The decision level is often right at the level of the customer. In other words, the person dealing with the customer makes the decision on the loan. Sometime with a larger loan I might have to make one phone call, but there’s not going to be a big bureaucracy in the way.

“Customers like it when you know them,” Story adds. “They especially like knowing who’s making the decision about their loans. The big banks usually go about it quite differently, and there are levels of red tape to go through in the loan process.

Real estate focus

During the Great Recession many banks either ran away from real estate and construction loans, tried to dump their existing loans – or both. Franklin Synergy decided to continue making such loans during the downturn. It was a successful move, and the bank found its sweet spot.

When Franklin Synergy opened in November 2007, it was the smallest bank in Tennessee. Today the bank is in the top 25 of banks with headquarters in Tennessee, and almost all of that growth has been within Williamson County.

“Our decision to continue to make these types of loans during the Great Recession planted a firm foundation for our amazing growth,” says Richard Herrington, president of Franklin Financial Network, the parent company of Franklin Synergy Bank.

“At the same time, and as a by-product of our focus on residential construction, our mortgage department has had great success. In 2012, our mortgage team originated $209 million in home loans. We had a great first half of 2013 and will probably exceed the 2012 record production.”

Herrington, Story and Landiss all admit their banks might not be right for the customer who’s shopping for that extra one-eighth of a point on a loan or CD account. But they are finding customers who need them, still appreciate the value and customer service options they offer.

“Our perspective is that banking is all about relationships, and our success is a product of fostering long-term relationships with our customers,” Herrington says.

“Two key sources of new business for our bank have been referrals from existing customers and the outcome of our networking with movers and shakers within the community.”

Story agrees and says the ability to narrow a small bank’s focus is a key ingredient to long-term success.

“We have figured out what we can and cannot do,” Story adds. “There are a lot of good banks in the marketplace, but we found our hole in the market. That’s pretty much what you have to do. You find out the profile of the customer [that] you can do a great job for, and you go out and find them.”