Quiet Giant

Crews Banking Corp. may be one the largest and best-managed banking companies on the Gulf Coast you've never heard of.

But with combined assets of nearly $1.2 billion, it would rank as the fourth-largest bank on the Gulf Coast, just ahead of St. Petersburg-based C1 Bank, the high-profile bank that's grown through a string of acquisitions. Including Crews Banking, only five Gulf Coast-based banks have more than $1 billion in assets.

Crews Banking is also one of the most profitable banks in the region based on any metric you choose: return on assets, return on equity or net income. In fact, Crews Banking has been profitable through the entire banking downturn, putting it in rare company among Florida community banks.

Based in Wauchula in Hardee County, just 50 miles east of Bradenton, Crews owns four banks: Charlotte State Bank & Trust, Englewood Bank & Trust, First State Bank of Arcadia, and Wauchula State Bank. At the helm of this enterprise is a spry 77-year-old banker, J.W. “Bill” Crews Jr., whose family has run the banking operation since 1932. Crews' father, J.W. Crews Sr., acquired Wauchula State Bank, a lender formed months before the stock market crash in 1929.

One obvious reason for the bank's success through the recent downturn was the fact that Wauchula State Bank and First State Bank of Arcadia make loans to agriculture-related businesses that weren't hit as hard during the recession. That balanced out more challenging situations at Crews' coastal banks in Charlotte County and Englewood.

But agriculture loans aren't the whole story. The fact is that Florida Community Bank in Immokalee also has its roots in agriculture and reached $1 billion in assets, but it failed spectacularly in 2010 after owner Stephen Price ventured to the coast with risky development loans. “We were losing a lot of loans to him,” Crews recalls.

One clue to Crews' success can be found in the crowded lobby of Wauchula State Bank. The offices are busy with clusters of customers and bankers sitting face to face conducting business, an uncommon sight in these days of Internet banking.

Crews greets customers as friends as he strolls through, exchanging smiles and friendly waves. Everyone knows where to find Bill Crews because his business card doesn't have a phone number, address or email. It just reads simply: “J.W. Crews, Chairman of the Board, Wauchula State Bank, Wauchula, Florida.”

“People like to deal with people they can talk to,” Crews explains. “Relationships really matter in this business.”

Roots in the Depression
It's no surprise that the bank's conservative culture is rooted in the Great Depression. Wauchula State Bank opened April 24, 1929, with total loans of $49,122. J.W. Crews Sr. acquired the bank on May 25, 1932.

“My dad made you turn off the lights when you left the room,” says Bill Crews Jr., who remembers short showers because hot water was precious. He was appointed president in 1975.

These experiences and the economic downturns that whiplashed Florida nearly every decade turned Crews into the conservative banker that he is. “I have the scars,” he chuckles.

But his customers have been resilient, too. “We were surprised our loans stayed current,” Crews says. Wauchula State Bank, the biggest of the four banks with $595 million in assets, lends to people whose families go back generations in the rural community. For them, handing the keys to the bank in foreclosure would be unthinkable.

“Their word is their bond and a handshake is a deal,” Crews says. “They weren't about to admit defeat.”

To be sure, Crews made some good calls during the downturn. Once real estate prices surged to unsustainable levels he capped lending on land, sometimes to the dismay of his customers. “Our customers were all hypnotized,” Crews says, warning them he'd seen land booms end badly before. “History will repeat itself,” he told anyone who would listen.

And Crews didn't lend to risky developers for acquisition and development projects like many competitors. “We'd been burned in the last cycle,” Crews remembers, citing the downturns of the late 1980s and early 1990s when commercial real estate crashed. “We made a decision to stay out of that,” Crews says.

While that safe strategy paid off in the downturn, it was hard to swallow during the go-go years of the real estate boom. “Our worst competition were other small banks that didn't know how to run them and were giving money away,” Crews says.

The conservative culture extended beyond the boardroom. Crews remembers when Craig DeYoung, the president of Charlotte State Bank & Trust, quit lending to borrowers who were buying multiple residential lots when prices surged from $1,500 per lot at the beginning of the cycle to as much as $50,000 at the peak.

DeYoung limited loans to one lot per borrower, a move even Crews thought was excessively conservative.

Crews had expanded to Charlotte County in the late 1980s when he formed Charlotte State Bank to take advantage of the coastal growth. “We felt there was a vacuum in Charlotte,” Crews says. He expanded into Englewood further up the coast for the same reason.

In addition, Crews says coastal areas provided diversification to its exposure in the agricultural inland communities. In Hardee County, for example, phosphate companies own half the land and they're mining it around the clock. “They're taking productive land out of usage,” Crews says.

Crews Banking Corp., the holding company, was formed in 1980 as an estate-planning tool that permitted J.W. Crews Sr. to pass on the bank to his children, including Bill Crews.

“We were lucky to be diversified,” says Crews. In 2012, Crews Banking posted net income of $13.9 million, earning return on assets of 1.19% and return on equity of 12.68%, according to the Federal Deposit Insurance Corp., placing it among the top-performing banks on the Gulf Coast.

The next generation
Unlike some competitors, Crews isn't launching into geographic expansion while real estate and banks trade cheaply. He says he only bid on one failed bank in the area — he won't say which one — but he was outbid by a wide margin.

“We have to be careful about tying up resources,” Crews warns. “I've been hanging onto our war chest.”

Fact is, keeping full control of the family-owned company makes it hard to raise outside capital. “We're slow grow,” Crews says. “We don't have the luxury of recapitalization.”

Crews says he's seen “numerous opportunities” to expand by acquisition or adding more branches, but he's held back to make sure all four banks remain well capitalized. “We earned it and spread it around to keep everybody in good shape,” he says.

Crews says the next generation is already making an impact by growing existing business. They include son-in-law Michael Aloian and grandson J.W. “Jake” Crews IV.

Aloian, an alumnus of Northern Trust, leads the company's trust and investment services. Such income helped the banks generate income from sources other than lending, providing diversification of revenues. For example, in 2012, noninterest income at Crews Banking rose 29% to $9.2 million compared with the prior year.

Lending has been slow. “It's still not anywhere near where it should be,” says Aloian, who has grown assets under management tenfold since he joined Crews in 2006. “We haven't seen the demand improve.” Evidence of this includes the fact that Crews Banking has about a quarter of its total assets in securities and not in loans, FDIC data show.

For his part, Jake Crews, vice president at Wauchula State Bank, has seen his share of bank failures as a state bank examiner for three years. Until he joined Crews recently, the younger Crews' Friday nights were spent closing failed banks. Those memories undoubtedly will be seared in his mind as he rises through the ranks of the organization.

Regulation is one of the reasons Crews Banking is so cautious about expansion and acquisitions. Thanks to Dodd-Frank, an avalanche of new federal banking regulations is about to rain down on the banking industry, making lending more difficult and costly for smaller lenders.

Crews Banking is large enough to absorb the administrative and compliance costs associated with those new laws, but it may have difficulty making loans to rural customers who earn seasonal income. Crews says new requirements will make it difficult to lend to such people, even though he says they pay their bills “like clockwork.”

Most bankers agree that the burden of government regulations will force many Florida community banks to consolidate, merge or sell themselves to larger rivals. But don't expect Crews Banking to be among them, even though the elder Crews jokes that could happen when he retires.

Jake Crews counters his grandfather's good-natured ribbing with an emphatic denial. “Banks like ours will stand out more,” he says.