Summit Bank Bucks Slow Start, Downturn with Move into OKC

As plans advanced earlier this year for single location Tulsa commercial lender Summit Bank to step into the Oklahoma City market, officers of the bank could not foresee the economic collapse that has tripped up the nation.
But the same reasons that made the Oklahoma City market attractive to the business and professional bank have allowed the move to find solid footing with only a slight slippage in timing and goals, said Charlie Crouse, president of Summit Bank, Oklahoma City.
“We technically executed a lease on space in May, but for all intents and purposes did not get up and running until mid-July, which was about four months behind what we originally scheduled,” Crouse said. “We have booked probably $3.5 million in new loans and have a pipeline of probably another $3.5 million that we expect to close by the end of the year – roughly half of the budgeted goal we were going for – which prorated out is just about right when you look at how late we started versus where we thought we would be.”
The bank was also able to capitalize the branch with its own shareholders through a secondary stock offering.
“When we started making plans for this in the January timeframe, the timing seemed great. Things did a 180 on us very quickly,” Crouse said. “Luckily, the Oklahoma economy, and Oklahoma City and Tulsa economies in particular, are still pretty resilient. It makes you feel pretty good about being able to raise capital in this environment and have initial success in loan production.”
Summit opened the branch at 6440 N. Avondale in the Nichols Hills Plaza as a loan production office and started deposit production operations started in October, Crouse said.
“We’ve successfully completed a secondary stock offering from local business leaders, are forming an advisory board from these new shareholders and are now searching for a permanent, full service location,” he said. “We hope to have our full service facility open in mid 2009, with the target location somewhere in northwest Oklahoma City.”
Wade Edmundson, CEO of Summit Bank, 5314 S. Yale Ave. said the break from the single location bank model that Summit has followed since it opened in 2002 does not reflect a change in the bank’s strategy.
“We will keep with the niche that we know best, being a business and professional bank,” he said. “There are many similarities between OKC and Tulsa, which we think we can operate successfully in, but at the same time there are some differences, which provides us and our shareholders some geographic diversification.”
Edmundson said Summit will operate the bank like an autonomous unit.
“We are trying to be locally owned and locally managed in Oklahoma City just as we are here,” he said. “It is a market-based bank.”
Crouse, who joined Summit in 2003 and was senior vice president of commercial lending, said the bank had been considering the move for 2-3 years.
“We have been looking for a critical mass point that says, OK, it’s time to enhance our shareholders’ value even further and spread the franchise of our bank,” he said.
Since Summit’s business model, using electronic remote deposit capture, courier and lockbox services, is designed to service its marketplace out of one location, the logical step for an expansion was into a separate metropolitan area, Crouse said.
“Our shareholder group, our board and our management have quite a few ties in Oklahoma City so it made a lot of sense once we decided we were going to expand to do it here,” he said.
At least three regionally-based bank-holding companies have decided not to participate in the Treasury’s Capital Purchase Program, an element of the Troubled Assets Relief Program (TARP) intended to provide banks with additional capital.
Tulsa-based BOK Financial Corp., Oklahoma City-based BancFirst Corp. and St. Louis-based Commerce Bancshares Inc. have rejected participation in the program, which was approved by Congress in October to strengthen the banking system by providing banks with additional capital to increase lending capabilities.
BOK Financial President and CEO Stan Lybarger said, “We studied it closely as a potential option to supplement our existing strong capital position, but we determined the additional funds were unnecessary. Our current capital levels are well above government requirements and we have access to additional private capital, uniquely positioning the company to continue growth plans without the additional capital provided by the program.”
On Oct. 29, BOK Financial reported 2008 third quarter earnings of $56.7 million or $0.84 per diluted share, net interest revenue of $164.3 million and fees and commissions revenue of $126.7 million. The company and each of its subsidiary banks exceeded the regulatory definition of well-capitalized at Sept. 30, 2008, with the company’s Tier 1 and tangible capital ratios at 9.25 percent and 7.16 percent, respectively.
BancFirst Corp, also cited the strength of its capital ratio in rejecting the program. BancFirst has a Tier One capital ratio of 12.4 percent as of Sept. 30, 2008, with capital ratios exceeding regulatory requirements, the bank said in a release.
In addition, BancFirst noted Congress has expressed concern about financial institutions accepting funding from the U.S. Treasury to fund the acquisitions of banks. BancFirst believes acquiring banks in a troubled economic environment is apotential business opportunity, the release said.
“Commerce carefully studied the program, and while we think it is good for our industry and the economy, we have made a business decision not to seek federal CPP funds,” said Commerce Bancshares Chairman, President and CEO David W. Kemper. “Commerce’s earnings, capital and liquidity are strong and sufficient to grow our business and take advantage of new opportunities.”



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