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Small fish in a great blue sea Featured

9:51am EDT July 22, 2002

George Mayer knows a thing or two about the banking food chain — he spent 38 years watching the industry’s large fish gobble up the smaller ones. After a lengthy career which started at a tiny independent Vermilion bank in 1960, Mayer retired a little more than a year ago from one of the largest banking institutions in the nation.

That progression up through the industry ranks was not part of Mayer’s great aspirations. His upward mobility was the result of those rampant bank mergers that characterize today’s world of finance. With each acquisition, however, Mayer noticed a disturbing trend — whenever there were cuts, bank tellers and account representatives were usually the first to get the ax. Those layoffs paved the way for another trend — electronic banking.

This industry transformation, Mayer says, disheartened customers and set the stage for the nation’s recent surge of start-up community banks.

“Every time a merger takes place between banks, usually some customer dissatisfaction will arise because things get lost in the consolidation,” he says. “I don’t want to knock the big banks, I’ve worked most of my whole career with one, but I know how big business is and there is no question about it.”

That is why Mayer is hunkered down this morning at a desk piled with paperwork in a modest two-room office on North Ridge Road in Lorain. It is 51 days before Buckeye Community Bank’s self-imposed September opening date.

Mayer, the new bank’s president and CEO, is busy juggling Y2K concerns and preparing for the next day’s meeting with the bank’s board of directors. The office phone rings frequently, but he is the only one there to answer it. The two other bank employees who work in the office are out of town on business.

The sparse office environment is an example of the streamlined operation Mayer is launching, and speaks volumes about the volatility of the enterprise. Buckeye Community Bank will experience an operating loss for at least 18 months after its doors open to the public. That is the best-case scenario, and could rapidly worsen if the bank does not generate assets quickly enough. But Mayer and the board of directors believe there is room and, indeed, a market demand for a bank built on a cornerstone of customer service and a stake in local small business investment.

The 65-year-old Mayer, dressed casually in khaki pants and a blue and white Nautica golf shirt, readily admits he never imagined himself orchestrating such a venture. But that all changed when Lorain developer Bill Roland approached him in June 1998 and shared his plan for a new community bank in Lorain County.

“Of course, at that time, I really had no immediate plans to get back into banking,” says Mayer, who speaks with a steady deep voice that sounds like it belongs on radio. “But the more I thought about it, the more I thought what a nice challenge this might be. There’s not too many bankers walking around on the street today that have ever done anything like this.”

Mayer likes to tell a story about a group of doctors who needed to borrow $100,000 for a new piece of equipment soon after the doctors’ bank completed a merger.

When they contacted their commercial lender, they discovered he was gone. Their connection to the bank was lost, and the doctors drifted along, unable to get a straight answer from anyone else. Ultimately, the group became fed up and walked away.

“This is a true story,” Mayer says, as if he can’t believe it himself. “It just took so long to get any kind of approval, they decided to go to another bank. They just gave up on it.”

Buckeye Community Bank will carve its local niche by going after the small business market, focusing on companies with $15 million or less in annual sales. The idea is to key in on a segment of the business world that can most often get lost in the age of large banks.

“You just have more local control over influencing decisions in the local market, there are no questions about it,” he says, describing the community bank’s competitive edge. “Whether it would be a major corporate pledge or a decision on a loan. It’s more responsive.”

Providing quality customer service will be an across the board bank philosophy, meaning there will be a live operator who will direct calls, not an automated phone system. Customers will not be penalized for using tellers instead of ATMs, and Mayer will make himself directly available to the public.

“I will very much be involved as far as going out on calls on small business and commercial clients with our lending staff,” he says. “I’m going to be accessible.”

Buckeye Community Bank is not exactly venturing out into uncharted waters with its plan for a kinder and simpler bank. In 1998, there were 216 new bank charters granted nationwide and although there are no exact figures, it is a commonly held belief that many were community banks. In comparison, there were fewer than 50 new bank charters issued in 1992. However, the number has climbed steadily every year since then, reaching 150 in 1996 and just fewer than than 200 in 1997.

For most start-up community banks, securing the necessary capital is a colossal and many times crippling challenge. Federal banking guidelines require $5 million be set aside, plus all operating costs the bank will incur while it organizes.

In most cases, raising that kind of money takes between six to nine months. Buckeye Community Bank found its private investors in slightly more than 90 days.

“This was just a total board involvement,” Mayer says, explaining the quick success. “The board basically went out and contacted their acquaintances and their friends to invest in the bank. It was a major undertaking to raise the capital.”

When one looks at the local business owners on the bank’s board of directors and knows a little about the county’s business climate, it is little easier to see how the impressive feat was accomplished.

The six-member board is a diverse and well-connected group, and includes Robert Cook, president of Beckett Gas, Don Sprenger, co-owner of a local assisted living and nursing home chain, and Chairman Bill Roland, whose Starland Investment company is building hundreds of homes on the west side of Lorain.

Buckeye Community Bank was an attractive investment because massive bank mergers in Lorain County during the past 10 years left Lorain National Bank the last independent in the local market.

“If you go back just 10 years as ago you had the Central Security Bank, EST Bank, City Bank, Lorain County Bank and Lorain National Bank,” says Mayer. “What you’ve got now is Lorain National Bank and First Merit. A major consolidation has taken place here in the market and we feel there is room.”

One of the reasons start-up community banks can turn a profit is there is not much fanfare put into their creation. There is usually no enormous brick and mortar investment, and they are routinely opened in defunct branch offices of other banks.

Buckeye Community Bank is no different.

The bank’s board of directors signed a lease for a 4,500-square-foot building on North Ridge Road — a heavily commercially developed area which serves as a borderline between Elyria and Lorain — that was already equipped with safety deposit boxes, teller windows and a vault. To avoid crippling capital expenditures, Buckeye Community Bank outsources its data processing.

“There is no way we could begin to buy the fixed assets, hire the skilled people and have an in-house data processing system,” says Mayer. “We have it all done outside and at a very low cost.”

The real question becomes how Buckeye Community Bank will market itself with only one office and 11 employees.

“We recognize up front we cannot become a major player in the Lorain County market with one single banking office,” concedes Mayer. He is cautious, however, about talking too much about future expansion. “I think at this point we have to make sure this bank is profitable before we begin thinking about other areas.”

On this July morning, the two requirements left for Mayer and the board of directors are obtaining FDIC insurance and undergoing a final test run to gain state approval once all of the employees are in place. Then, it will be left up to the market to decide whether a small community bank can survive in a land of giants.

How to reach: Buckeye Bancshares Inc., (440) 240-9481

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.