Practically anyone can walk in the door and open an account at the friendly looking Enterprise Bank, a new financial institution housed in a former brick post office building on a calm stretch of Mount Royal Boulevard.
But Enterprise Banks most coveted customer is the closely held business, a customer with distinctive banking needs that often demand close, trusting relationships with a banker and fast access to capital.
Unfortunately for closely held businesses, those relationships have been harder to come by in recent years. As large banks have taken over many community-based institutions, some business people who once had a close face-to-face relationship with their banker have found that those ties have been eroded. Smaller institutions that had close connections to their communities, where bank presidents could get an answer quickly for a loan applicant, have been supplanted by large, centralized operations with approvals sometimes coming from offices in other cities.
Small-bank presidents who stuck around have turned out to be local branch managers who dont have much say in loan approvals. The founders of Enterprise Bank see an opportunity to capture that segment of the market and create a profitable book of business for themselves and their investors not to mention a relationship-building opportunity for local business owners.
Ive believed for a long time that business owners dont bank with the bank, they bank with the banker, says Donald Whitehead, president and co-founder of Enterprise Bank. When you develop a relationship with a banker, you dont want to be told, Well, I cant help you with that RV loan, I cant help you with your childs education [loan], I cant do that home equity loan. Youll have to call so-and-so over in consumer lending.
Quickly, local business people catch on, adds Whitehead, a 14-year veteran of PNC Bank and one of the founders of Pennsylvania Capital Bank, another bank start-up. Soon, they realize that theyre dealing with someone with little authority, he says
The bureaucratic mire that often trips up loan approvals for closely held businesses is cleared significantly by Enterprise Banks current five relationship managers, skilled and experienced bankers who provide personalized service to the banks customers. By creating a single point of contact for its business customers in the form of its relationship managers, Enterprise Bank believes it will be able to cultivate lucrative long-term relationships with closely held businesses.
The relationship managers spend much of their time outside the bank, meeting with their customers and cultivating new business, most of which comes from referrals. Three-quarters of the loan agreements are closed at the customers place of business.
Enterprise Bank joins the ranks of hundreds of new banks growing out of the bank consolidation efforts of the past few years. American Banker reports that 290 banks were chartered in 1998, an increase of 27 percent over the previous year and almost three times the number chartered five years ago. That trend is expected to continue as big bank mergers squeeze out bank executives, who, in turn, seek out opportunities to use their experience in new ventures.
But before you think you might want to jump into the banking business, keep in mind that its an expensive up-front proposition. Whitehead and his 10 fellow investors first had to come up with $500,000 to finance the start-up and regulatory costs. Thats before they sold a single share of their stock to the public. And, had they not cleared the regulatory hurdles, the venture would have failed before it even started.
Enterprise Bank opened its doors last October, and to date, its doing better than projected. Its first quarter report reflected assets of $13.9 million, $1.5 million over its projected goal. The bank is on track to become profitable in 12 to 14 months, its original target, and in about a third of the time it takes the typical new bank to climb out of the red, Whitehead says.
Enterprise Bank has structured itself for success by maximizing opportunities for its officers, investors and relationship managers. Some of the features of that plan are:
- Build in incentives. Relationship managers are virtually business owners themselves. There is no ceiling on their incomes, but they each have to cover virtually all of their expenses, including their support staff, and even share in loan losses. As a result, they are motivated to seek out the most credit-worthy prospects and sell other bank products to their customers besides loans. Weve made entrepreneurs out of them, Whitehead says. The founders have had a powerful incentive to maximize shareholder value, as they each hold warrants to purchase bank stock in the future at its original price.
- Cater to all of the banking needs of the target market. Enterprise Bank is offering a full array of services to its customers, including checking accounts, consumer loans, major credit and bank debit cards. However, its offering those mainly to the owners of closely held companies and their employees.
- Emphasize service and fast turnaround. Whitehead says owners of closely held businesses have special needs when it comes to banking that large banks often are not equipped to fill, even though business owners are hungry for it.
They want personal service and appreciate the value of it, which is another way of saying they are willing to pay a fair price for it, says Whitehead. If a customer is expecting a large receivable from a credit-worthy client to come in on Friday, but needs cash to cover the companys payroll on Friday, he needs his banker to act fast. In most cases, says Whitehead, a two- or three-day turnaround on a loan request is not unusual.
In the end, however, the fundamentals of banking havent changed much, and Whitehead says Enterprise Banks ability to be successful is closely tied to its ability to attract deposits and make profitable loans. Making loans is easy, very easy, says Whitehead. To get paid without trouble is much, much more difficult.
How to reach:: Enterprise Bank at (412) 487-6048 or on the Internet at www.enterprisebankpgh.com.