Still confronted with weak loan demand and a lumpy recovery, a number of Georgia community banks that weathered the crisis are getting bolder in the search for new business.
Some are turning to lines of business offered more often by their big bank brethren like wealth management, corporate banking or mortgage lending. A few are even opening or considering new branches, though the industry trend in branching has been to shrink the number of outposts.
The moves are byproducts of a tough economy and a need to diversify revenue streams following the turmoil in residential and commercial real estate development lending. Development loans were a key cog in the business plans of many community banks before the crisis.
But slow economic growth has made replacing expiring loans with new ones more difficult.
“They’ve got to put their money in other places,” said Ed Snow, an attorney and chairman of the banking and real estate practice at Burr & Forman in Atlanta.
Georgia's banks turned a collective profit in the first 90 days of 2012, marking the fourth straight quarter in the black for an industry still healing from the financial collapse and Great Recession. The state’s industry wallowed in the red for 10 quarters from the end of 2008 through the first quarter of 2011.
The 237 reporting banks earned $423.3 million combined in the first quarter of 2012, though about two-thirds of that total was tallied by Atlanta-based SunTrust Banks and Columbus-based Synovus Financial, the two largest institutions based in Georgia. Eight in 10 Georgia banks were profitable in the first quarter, and the health of the state’s banking industry is critical to Georgia’s economic recovery.
The gains come largely because lenders are setting aside less money to cover bad loans.
Net loans and leases grew 2 percent at Georgia banks to $185.6 billion at the end of the first quarter, compared to the same period a year ago. But that category is nearly 13 percent lower than in first quarter 2008.
During the boom, steady profits for many community institutions came from funding construction and development of subdivisions and strip retail centers. Those profit engines broke down after the economic collapse.
The general rule for the industry over the past four or five years has been to downsize, cut costs, close branches and shed loans that soured when the economy turned.
But some banks are beginning to target new areas for revenue.
Community & Southern Bank, a bank that has been among the most frequent acquirers of failed Georgia banks over the past two years, announced this month it is starting a new wealth management division that will open next year. The division will serve well-to-do individuals.
Community & Southern and Atlanta-based Georgia Commerce Bank are among the institutions that have applied with state regulators for permission to open new branches.
Private Bank of Buckhead last week received federal approval to open a branch under a new division, Private Bank of Decatur, to capture business in the DeKalb County seat. Private Bank also is among the banks that have ramped up mortgage lending in the past year to 18 months.
Charlie Crawford, chairman, president and CEO of Private Bank of Buckhead, said the private mortgage unit -- launched about 18 months ago -- quickly became about 10 percent of his bank’s revenue in its first year.
“Because of the current environment, we’re trying to figure out how to do more business with our current clients as well as new ones,” he said.
Several others in metro Atlanta have announced beefed-up corporate banking, mirroring a trend among large banks to seek out commercial business.
Snow said overall loan growth is “fairly anemic,” but he’s seen a continued trend of smaller banks competing with regional and national players for the business of companies with $10 million to $500 million in annual revenue. Smaller banks are offering companies cash management services, revolving lines of credit and even loans for real estate when it’s a facility owned and occupied by the company -- something seen as being far safer than speculative real estate development.
“I think the shift to corporate lending is definitely a trend that is not going to go away,” Snow said.
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