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VOL. 126 | NO. 35 | Monday, February 21, 2011


‘Big 3’ Reflect Local Banking Scene

By Andy Meek

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One of the most famous aphorisms about politics is that all of it is local. Bankers and other inhabitants of the finance world know the same often goes for them too.

In the run-up to the recession, financial services firms like Citigroup and Bank of America raced to gobble each other up and built sprawling financial supermarkets.

These days, all eyes are on Main Street – not so much Wall Street anymore – to determine the health of the financial industry, and with good reason.

Most of the nation’s several thousand financial institutions belong in the community bank category, institutions that live or die by the quality of the loans they make and the income they earn on the difference between the rates they charge and the rates they collect.

Unlike national competitors with sprawling ATM networks, credit card products and business units that include advisory services and investment banking, Main Street banks really do conduct the business of finance the old fashioned way.

That means customer service that includes learning names and faces, taking what would be rote transactions elsewhere and turning them into face-to-face relationship-building opportunities.

Local banks are arguably quicker to write checks that support schools, colleges and local sports and nonprofits.

The three largest banks based in Memphis – First Tennessee Bank, Independent Bank and Magna Bank – control about 36 percent of the local customer deposit share, according to the latest numbers from the Federal Deposit Insurance Corp.

At a little more than 30 percent, First Tennessee far and away has a lock on the largest local deposit share, almost double that of its closest competitor – Birmingham, Ala.-based Regions Financial Corp.

The three largest local banks offer a snapshot of one corner of the local banking industry, imperfect as it is since there are still dozens of other smaller banks in Memphis and beyond serving the same market.

The other large players that dominate banking in Memphis – such as Bank of America, Regions and SunTrust – have plenty of issues and concerns exclusive to their institutions. Bank of America, for example, is the largest U.S. bank by assets and acquired Countrywide and Merrill Lynch amid the 2007-2008 credit meltdown.

In contrast, you can count the number of Magna Bank branches on one hand.

Magna recently joined the Q10 capital network, an affiliation that gives the bank access to more sources of capital.

Q10 Capital LLC consists of 18 companies with 26 offices in 20 states. Those 18 member companies have relationships with more than 90 life insurance companies, pension funds and capital markets conduits throughout the country.

“It’s the daily interaction among the 135 commercial mortgage bankers within the Q10 network that delivers the most reward and satisfaction,” said Frank Stallworth, executive vice president with Magna. “Their knowledge, advice and contacts can all be used to help finance the various real estate projects for our customers.”

Magna added mobile banking capability for its debit card customers in early 2010. The bank’s small-business lending group, featuring loans guaranteed by the Small Business Administration, continued pulling in new business throughout the year.

And the bank said it’s also developing a new and more customer-friendly website.

“The core operations of Magna Bank showed improvement in the third quarter,” the bank told shareholders in its most recent quarterly update letter. “Net interest income grew by 2 percent for the quarter while non-interest income was up 8 percent due to fees generated from increased mortgage banking activity.”

Meanwhile, Independent Bank saw a nearly $3 million rise in income from 2009 to 2010. The bank also recently created Independent Wealth Management LLC, a financial planning division.

“If you examine Wall Street in general, it’s gravitated over the years from a major function of trying to build things and grow things and provide capital so new things happen to being a predominantly speculating business,” Independent co-chairman Chip Dudley said in a 2010 interview with The Daily News. “I want to make a bet on something. I want to make big bets. And I want to use leverage to make that happen.

“We’ve stuck to the banking basics and really haven’t strayed from that and have no intention of doing it.”

The identity of First Tennessee Bank is literally and metaphorically tied deeply to the communities it serves and, of course, to the state it serves them in.

First Tennessee’s logo includes a small piece of the state flag. The bank has the top market share in almost every major market in Tennessee.

Of the three largest Memphis-based banks, First Tennessee is the only one that’s part of a publicly traded company, its parent being First Horizon National Corp.

The company is still in the midst of a multi-year turnaround, a deep pruning of expenses from the organization that is resulting in an unspecified number of layoffs in some areas and hires in others as well as new investment in technology.

The company has some national fans. In an interview with First Horizon CEO Bryan Jordan on his CNBC program “Mad Money,” host Jim Cramer said, “I think the market doesn’t get it. ... I think you’ve got a good story.”

Hedge fund titan John Paulson upped his holdings of First Horizon shares in the most recent quarterly period, according to a regulatory filing.

Among recent developments, First Tennessee has created medical private banking teams to serve the medical community. The teams will be based in Memphis, Nashville, Knoxville and northeast Tennessee.

PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
BUILDING PERMITS 158 699 2,751