Thoughtful Banker

Thoughtful Banker

BANKING by Mark Gordon | Managing Editor

The threats to community banks - credit unions and regulation, to name two - remain the same. But now the fighting voice is different.

By just about any measure, Charles Brown III would seem to be a smart choice to represent Florida's community banks on a national scale. For starters, the president of Sarasota-based Insignia Bank is a self-described SOB: A son of a banker.

When he was named president of Port Charlotte-based Charlotte State Bank in 1994 at 29 years old, he became the youngest bank president in Florida. He then led that bank's transformation from a facility that focused on U.S. Small Business Administration loans to one with more reach in larger, and more lucrative development and commercial markets.

More recently, Brown, now 41, founded Insignia, a bank known in the Sarasota market for both its high-powered board, which includes advertising executive Tim Clarke and Realtor Cheryl Loeffler, as well as its quick ability to raise significant funds in its early formation stage - $25 million in six weeks last summer.

Brown has occasionally used his local experience outside the Gulf Coast. He's spoken to groups about the dos and don'ts of disaster recovery plans, for example, leaning on his Hurricane Charley experience with Charlotte State. A few years ago, he was a featured presenter with then-Homeland Security director Tom Ridge for the kick-off of www.ready.gov.

Brown's latest assignment, outside of running Insignia, is as a member of the Community Banker's Council of the American Banker's Association. Brown is one of three Florida bankers appointed to the council, which essentially serves as the community-banking arm, and conscience, of the ABA, one of the most powerful lobbying groups in the banking industry.

Brown's role includes assisting ABA staff with research, coordinating training programs and testifying before congressional panels. He recently sat down with the Review to talk about the issues facing community banks on a national stage.

"The goal is to represent community bankers in the ABA," says Brown. "If not, we could get lost in the mix among some of the mega- banks."

Here's an edited version of the conversation.

Competition

Brown says one of the biggest threats to community banks, besides each other, comes from credit unions. Says Brown:

"It is a constant challenge for the banking industry to make sure there is a level playing field. The banking industry is OK with a lot of the smaller credit unions, the folks that truly serve the modest means of their membership.

"What they have a problem with is some of the multi-billion credit unions that are masquerading as banks right now. The banking industry just wants those groups to be held accountable for what their initial charter was. While credit unions continue to try to expand their reach, they have had a significant style drift."

Brown also commented on pending federal legislation that would expand the types of loans, products and services credit unions could provide:

"We certainly have plenty of competition when it comes to financial services, but one has to question whether or not expanding services for credit unions would actually make sense for what's basically a tax-free industry.

"As long as credit unions are filling their primary purpose, which was to serve those with more modest means, which is why they were given a tax break in the first place, it's OK."

Regulation

Late last year, Brown served on a panel of the ABA representing community banks in responding to the Federal Deposit Insurance Corp. when the regulatory agency was considering imposing guidelines on banks in commercial real estate lending.

The ultimate FDIC guidelines, imposed Dec. 6, call for holding construction and land development loans under 100% of overall equity capital and keeping commercial real estate loans under 300% of equity capital.

Brown says the Community Banker's Council was integral in showing the FDIC the sense in making the guidelines flexible, not rigid.

"This can not be applied to one size fits all. That battle cry was issued in the guidance over and over and over again. We were very concerned from a regulatory perspective that it would be used as a hard ceiling.

"[The final guidelines] said this was not meant to be a limitation. That was put in there absolutely due to the Community Banker's Council interjecting its opinion."

Security

The issue of how secure community banks are, both in terms of crime prevention and disaster preparedness, is a trendy topic nationwide, says Brown.

"Congress, especially the House, continues to look at this. But [community banks] already have intense regulation put upon us as it pertains to privacy. We have to prove to regulators on a regular basis that we have certain controls in place, things like firewalls and monitoring services.

A common misconception is that community banks might be behind the technology curve. Most employees that come over from some of the larger regional banks find that our technology is more advanced than what they've had before. At a larger regional bank, you have so many people to move, it's like moving big ship. You could only move so many at a time."

The market

Brown believes 2007 will be a good year for community banks, just not when it's judged against the previous three years, especially 2004 and 2005.

"It will be a more controlled year. [The years] 2004 and 2005 had reached a pace that was hard to make sense out of at times, and if you look back at '01, '02, '03, those times made a little more sense from a banker's standpoint, because you had a more manageable escalation of values.

"One of the things that did stop about year ago was the phone stopped ringing with out of state investors who just thought they would bundle a bunch of lots and flip them very quickly. That's a plus because I'm not so sure we were creating any vital economic benefit to the area, when lots where just being flipped from one owner to the next.

"Now we are finding much more informed investors coming forward and applying for loans and taking on commercial projects. You have more thoughtful investors in commercial real estate. People are very concerned if the property is going to make money from an income standpoint as well as an appreciation standpoint."

REVIEW SUMMARY

Who. Charles Brown, III

Industry. Community banking

Key. Brown is one of three Florida bankers recently appointed to speak for the local industry on a national stage.