ABA Banking Journal - May 2007 - (Page 30)
COVER STORY I’m not the contrarian Joe Reid’s de novo strategy builds banks around talented bankers, keeps them small and locally focused, and keeps more coming. Capitol Bancorp just passed the 51-bank mark I IT’S ALL ABOUT LETTING GO. At Capitol Bancorp Ltd., from time to time bankers reach a point where their territory gets chopped. Someone else gets a chunk of it. And they are happy when this happens. If that doesn’t make sense to you, then you don’t know Joe Reid and his company, nor do you get his concept of being a “bank development company.” You aren’t alone. It steams Reid that some Wall Street banking analysts don’t “get it,” either. “Every time I go to New York, somebody asks me, ‘What’s your exit strategy?’ Generally I look at him and say, ‘Same as Microsoft’s’,” says Reid, chairman and CEO at the $4.1 billionassets company. “They wouldn’t dare ask Microsoft that question. Why the hell do they ask me that question? We don’t have an exit strategy.” That’s because Capitol Bancorp isn’t about rollups. It isn’t about bulking up. It is, refreshingly, about banking. There is no exit strategy because Reid has no plans to exit. Capitol Bancorp, and Joe Reid, to the many people, present a By Steve Cocheo, executive editor contrarian face, and even where Capitol’s aims match those of typical banking companies, management’s way of achieving those aims often differs from the norm. In some ways, Reid’s model may be the elixir vitae that many smaller banks need to retain what is most important to them, and about them, in a time when many institutions with less than $100 million in assets fear for their independent futures. Capitol Bancorp, with headquarters in Lansing, Mich., and Phoenix, has built a sprawling collection of community banks. The map on page 34 gives you an idea of where Capitol’s strategy has taken it thus far, and where it is heading. It currently has 51 banks (or loan production offices) in 14 states. In many cases the banks are clustered in and around certain markets. Capitol affiliates handle credit decisions, local pricing, customer development, staffing, and all the other issues on which successful implementation of a business plan hinge. The holding company provides support functions. No control freaks need apply At Capitol, “you know that you’ve been successful when the amount of turf you used to have has been reduced,” says Reid. “That’s because we’ve had to bring somebody else in, to split the 30 MAY 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html
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