After scouring Stark County and Northeast Ohio for three months looking for potential investors, after navigating a half-dozen federal bureaucracies to secure preliminary approvals, after recruiting experienced hometown managers and employees to staff their offices, Steven G. Pettit says of he and his partner, L. Dwight Douce, “We’re very much looking forward to becoming bankers again.”
Starting this month, they’ll get their chance. Douce and Pettit’s Ohio Legacy Bank, N.A., goes public April 14 on the Nasdaq securities market. Legacy will open in spanking new buildings this spring in Wooster, and soon afterward in Canton.
But while Ohio Legacy Bank will offer 1.2 million shares on the national market at $10 a share, Douce and Pettit’s round-the-clock local marketing campaign is designed to securely anchor the new bank in the Canton area local investors have already purchased 20 percent of Legacy’s equity.
“They’re all local people,” notes Pettit, the new bank’s Stark County region president. “Basically lived in this community all their lives.”
Ohio Legacy Bank president and CEO Douce says, “We could’ve taken the posture months ago that, ‘Look, we need $10 million,’ and scoured the country for 10 individuals out of state potentially to write $1 million checks. But we just didn’t think that’s the right approach if you’re truly trying to penetrate each one of these markets, and do it in a very local way.”
In February, Douce voted his confidence in the bank by investing $250,000 of his own money; Pettit has invested $20,000.
“So what we’re doing first is allowing the public in each of our communities to purchase shares, and allow them the opportunity to say, ‘This truly is my bank, because I own stock in it.’ It’s a longer process to do it that way, but we think it’s the right way to go,” Douce says.
The importance of being earnest
Douce and Pettit have known each other more than three years. Douce was chief operating officer at Signal Bank, N.A., when it was purchased by FirstMerit Bank, N.A., where Pettit served as senior vice president and loan officer.
Lately, though, they’ve become closer. During a recent interview, Pettit says, only half in jest, “We’re basically living with each other.”
Douce says, possibly joshing, “We probably know more about each other than we want to know.”
Ruefully, Pettit adds, “I can guarantee you, we’ve seen each other more than our wives have seen us.”
That kind of commitment will be necessary to make Ohio Legacy Bank a success, according to Harold T. Hanley, managing director at Keefe, Bruyette & Woods Inc., Ohio Legacy Bank’s underwriter.
“The key to the success of these community banks is the individuals,” Hanley says.
More than a decade of bank consolidations, mergers and acquisitions have drained local markets of their community banks, Hanley and others observe. Pettit and Douce, both well-known in their respective communities, have enlisted a “who’s who” of local business owners as investors and board members, Hanley notes. Those business people represent a vote of confidence in Legacy’s management talent, he says, and an important bridge of community support.
Their personal rapport will serve them well as Ohio Legacy Bank becomes established, Douce and Pettit believe.
“We’ve learned during this process that we are both persevering,” Douce says. “We’re both cut out of that mold, and we provide a lot of support for each other.”
Pettit agrees: “There have been days when things didn’t quite go as well as we’d hoped, and we need to buck each other up … motivate and support each other in what we’re trying to do.”
Putting the customer first
Community support isn’t just a vote of confidence in Legacy’s managers, however. It’s an expression of the sentiment among business owners that local decision-making and services could make the difference when promising new ventures apply for loans, or depositors need extra-mile service, says Bob Belden, president of The Belden Brick Company in Canton.
Belden says he’s heard the community’s yearning for a service-oriented community bank during numerous meetings with groups and individuals. He’s seen other financial executives proposing to fill that need come. And go.
“I never asked people what [customers] would pay” for those kind of local services, which Pettit and Douce promise will be at the core of Ohio Legacy Bank’s appeal. “I guess I made my vote by investing my money,” Belden adds, noting that he will serve on the new bank’s board of directors.
Pettit says, “I think not only local decision-making, but the local service aspect, is what we’re really trying to push. In many cases, with the larger institutions, if you have a question about any one of the current products of that bank, it seems you’re constantly dialing 800 numbers and talking cross-country about your specific need or problem.”
“What we’re trying to do,” Pettit says, “is create an atmosphere where our customers can come right into their branch, or call our bank in each community, and have someone there who can help you with that problem.”
Ohio Legacy Bank employees and executives will serve as much as possible as one-stop managers, not only for their customers’ business banking demands, Pettit says, but for home mortgage and other personal banking needs. Customers won’t be shuffled between departments for discrete services, he says.
“Most of our customers will be known by our bankers,” he says.
Belden notes that personalized service could well cost customers more. When MegaBank down the street offers a 6 percent loan, Belden wonders, will depositors sign for one with the local bank at 7 percent?
“People want all those things,” he says. “But when it comes down to paying for them, that’s another story.”
Community is key
Persevering to secure local commitment, service, and control has so far taken Douce, Pettit and their Ohio investors most of the way to making Ohio Legacy Bank a reality. But even Douce admits the recent performance of publicly traded bank stocks “has made it a little more difficult than we anticipated.”
Mike J. Marcotte, president of Marcotte Financial Relations in Rochester, Mich., says community commitment may make the difference for Legacy. Realtors, builders, and smaller businesses generally display a great deal of enthusiasm for locally-controlled banks.
But “a couple of bad loans can have a big effect on a new bank,” says Marcotte, who provides investor relations services for Legacy-size institutions.
It’s not the best of times for so-called “de novo” banks, Marcotte and others including Douce and Pettit acknowledge. Marcotte notes that publicly traded bank stocks are down about 12 percent in value compared with a year ago. Interest rate worries make investors skittish, even now when, as Belden says, “people seem fearless when it comes to investing.”
Brokerages are rethinking their earlier, bullish recommendations for bank stocks, Pettit says. Yet bank stocks are healthy, and most have met analysts’ earnings expectations, Pettit says. Stock prices are low, but that could mean a buying opportunity, Douce adds. A year ago, the environment for investing in bank stocks looked better, he says.
“I think we’ve concluded that we picked a very good time to start,” Douce says. “I think both communities are ripe for” Ohio Legacy Bank.
Marcotte believes Pettit and Douce’s legwork building community involvement and support should pay off.
“I don’t see anyone having trouble starting a ‘de novo’ bank, if you have the right executives and the right board,” Marcotte says.
Squire, Sanders & Dempsey, Legacy’s IPO law firm, and Crowe, Chizek and Company, the new bank’s auditor, are well-known and experienced organizations, Marcotte says.
“This is a pretty typical deal,” he adds.
Of course, Douce, Pettit and others acknowledge that there’s nothing to prevent Legacy from falling victim to the merger mania that has devoured other community banks over the past decade. But Pettit thinks that’s unlikely FirstMerit’s purchase of Signal netted it 27 new branches in Northeast Ohio, he says.
“With us being as small as we are, it probably really wouldn’t benefit one of the larger institutions to look at us, even four or five years down the road, when we have a small handful of branches,” Pettit says.
Douce says Ohio Legacy Bank hopes to turn a profit in about 18 months and local business owners and potential depositors are already approaching Legacy executives, asking when the bank will open in their neighborhoods.
Pettit says ‘de novo’ banks in Ohio have an impressive track record one in Columbus posted a profit after just nine months.
Marcotte says, “I think it’s an exciting time to see a new bank go up.”