Growth Potential: Commerce Bank Doubles Loans

When Kansas City, Mo.-based regional giant Commerce Bank Inc. and Tulsa-based Bank South joined forces two years ago, R. Carl Hudgins called the merger “a great opportunity.”
He was right.
Despite the current economic downturn, the Tulsa division of Commerce Bank has more than doubled its loan portfolio since the merger. Bank South held about $113 million in loans when the banks merged, said Hudgins, who was president and CEO of Bank South. The Tulsa market portfolio now stands at about $240 million.
The bank, exploring opportunities to grow, sees the potential to build the Oklahoma portfolio to $1 billion in the next decade.
“We have been very fortunate in growing in the last two years,” said Hudgins, chairman and CEO of the Tulsa market for Commerce. “We have been able to take advantage of some opportunities we had with existing relationships to expand due to the products that Commerce brought to the table. We have also seen regular expansion within our customer base, as well as adding guys like Chris (Amburgy), who brought a different type of expertise to the table, and we have been able to expand through them.
“We have actually been able to double the loan size of the Tulsa market since we merged. That has been very gratifying.”
Amburgy, a member of the Tulsa Business Journal’s 2008 Class of 40 Under 40, was recently promoted to executive vice president and manager of Commercial and Industrial Lending in the Tulsa market.
He joined Hudgins, Steve Austin, CEO of the Tulsa market and executive vice president and Bruce Humphrey, chief lending officer, Tulsa market, executive vice president, as members of a management team formed in anticipation of opportunities to grow.
“We were a pretty horizontal organization,” Hudgins said. “Organizing the market into groups gives us a better chance to focus on those different areas and use the expertise we have. It also gave us an opportunity to form the management group of the four guys responsible for the Tulsa market.”
Amburgy’s focus is commercial and industrial lending; Austin’s is private banking, mortgage, health care and specialized lending, and Humphrey concentrates on commercial and residential real estate lending.
“The most important thing is that we are a team,” Austin said. “We are going to work together to grow the market.”
“As you grow you have to put in place a structure that supports that future growth,” Amburgy said. “We have doubled the size of the bank in the last two years and over the next decade, Commerce believes that Oklahoma can be a $1 billion market for the bank, so we want to put in place the structure that supports that future growth.”
Business Beginnings
With 40 years experience in the Tulsa banking market, Hudgins built Bank South primarily to serve the commercial needs of professionals, the building industry and small business, but also to serve the wealth management needs of a large client base of executives and professionals.
“We are a commercial bank, but one of our best kept secrets is we are also a sizable private bank,” said Austin. “Banks say they want to serve the executive and professionals – they want to, we do. I think that is a big difference.”
Hudgins started Bank South in 1998 after his ownership group sold Southern National Bank and realized “there was an opportunity for us to start another bank to take care of the needs of our specialized customers.”
They formed Bank South with $4 million in capital and grew it to $12 million capital.
“We had to make a decision how we were going to grow from that point,” Hudgins said. “We had an opportunity to partner up with Commerce bank – their footprint was a lot of what we like to do. They had a super community bank and we considered ourselves a community bank. So we felt like the products and services that they provide would help expand our customer base. It has been a real good situation for our existing and new customers.”
The merger with Commerce Bank, a subsidiary of Commerce Bancshares Inc., a $17.9 billion regional bank holding company, not only gave the former Bank South access to additional services and expanded lending capabilities, but the stability of a strong capital ratio and reputation in retail banking.
In its second quarter report, Commerce Bancshares Inc. reported net income amounted to $37 million compared to $30.8 million in the previous quarter and $56 million in the same period last year. For the quarter, the return on average assets totaled .84 percent and the return on average equity was 8.9 percent. During the quarter, the ratio of tangible common equity to total assets increased from 8.2 percent to 8.9 percent.
For the six months ended June 30, 2009, net income amounted to $67.8 million in the first half of 2009 compared with $120.1 million in 2008, or a decline of $52.3 million.

Diversified Plan for Growth
Commerce Bancshares operates more than 370 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado and received the highest overall rating for the Midwest Region in the J.D. Powers and Associates 2009 Retail Banking Satisfaction Study two years in a row, tying with Harris National this year.
“Commerce is fairly new in the market, but once people find out the wonderful things we can do,” Austin said. “Like the J.D. Powers award, it is pretty amazing that Commerce has that sort of presence in the retail organization. That will certainly add to what we want to do.
“We are still primarily a business-oriented bank, but because Commerce has a strong retail side and retail services, we have strengthened our retail group here in Tulsa and we plan to expand in the retail area,” he said.
The management team has developed a diversified strategy to develop growth opportunities, Austin said.
“Back when we were the old place, we pretty much made loans, collected deposits and a little fee income,” he said. “Now we have all these ways to diversify what we can do to help people.”
With two locations in Tulsa – 2054 Utica Square and 6130 E. 81st St. – expansion locally and even Oklahoma City is part of that growth strategy.
“That certainly is on our screen of things that we want to do,” Hudgins said. “We are looking at opportunities as they come up. We certainly want to expand in Tulsa, and are looking at locations as we speak, but we don’t want to just jump out and take something.”
“The market provides us a lot of opportunities here as well as Oklahoma City,” he said. “Timing is everything.” ?′



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