Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010 - (Page E56)

Page E56 CRAIN’S DETROIT BUSINESS May 3, 2010 25 Years of Change: Finance Large nationals dominate state banking BY TOM HENDERSON CRAIN’S DETROIT BUSINESS TOP BANKS THEN AND NOW Few area banks made Crain’s top-ranked lists in both 1985 and 2008 — consolidation in the industry meant many local institutions were acquired or went out of business. Here are the top 15 from each year. Non-Michigan based banks have an asterisk. Assets in millions: 1985 NDB Bancorp Inc. Comerica Inc. Michigan National Corp. Manufacturers National Corp. Security Bancorp Inc. United Midwest Bancorp Ltd. Omnibank Corp. Citizens Trust First Macomb Corp. First State Financial Corp. First National Bank-Mount Clemens Kasco Financial Corp. Alliance Financial Corp. National Bank Wyandotte-Taylor Trenton Bank and Trust Co. Total assets Assets $16,676 $9,770 $7,252 $6,980 $2,060 $358 $348 $292 $260 $253 $240 $224 $219 $130 $126 $45,188 2008 Comerica Bank* Flagstar Bancorp Inc. Citizens Republic Bancorp Inc. Fifth-Third Eastern Michigan* TCF National Bank Michigan* Huntington National Bank* Northern Trust* Michigan Commerce Bank First Place Bank* Dearborn Bancorp Inc. The Private Bank* Sterling Bank & Trust FSB First State Financial Community Central Bank Corp. Arbor Bancorp Inc. Total assets Assets $19,786 $14,204 $13,086 $6,800 $2,679 $1,800 $1,284 $1,272 $1,126 $1,122 $1,088 $677 $664 $557 $489 $66,634 O ther than automotive, no Michigan industry has had more change and drama over the past 25 years than banking. Subprime? In 1984, that was just about the best cut of meat you could get. There were bank headquarters on just about every block in downtown Detroit. You needed 10 percent down to get a home loan, and the bank that gave you the loan held onto the note and looked forward to getting your check every month. In the quarter century since Crain’s was first published, the staid, quiet, buttoned-down world of local banking has been turned upside down by a cascade of C’s: consolidation, Comerica, community banking and the credit collapse. Consolidation Patrick McQueen, state banking commissioner from 1992 to 1999 and now chairman emeritus of The PrivateBank-Michigan in Bloomfield Hills, said consolidation was on the horizon when he began his banking career in 1970. “What was interesting is, in 1970 the first thing we talked about was the upcoming consolidation in the industry. We knew it was coming,” he said. “We talked about it and talked about it, but it took longer to happen than we thought.” Consolidation began in the early 1980s. Detroit Bank & Trust changed its name to Comerica in 1982, just ahead of buying Bank of Commonwealth. But consolidation didn’t really get rolling as a trend until the 1990s, when banks changed names as fast as they could put up new signs. The National Bank of Detroit became First Chicago, then Bank One, then Chase. Security Bancorp became First of America, then National City, then PNC Bank. Old Kent became Fifth Third. National Australia Bank bought Michigan National Bank, which later became Standard Federal, then became LaSalle, then Bank of America. First Federal became Charter One. According to the Federal Deposit Insurance Corp., the 10 largest banks in Southeast Michigan by deposit market share as of June 30, 1994, in descending order, were Comerica, NBD, First of America, Standard Federal, Michigan National, First Federal, Huntington, Great Lakes Bancorp, First Nationwide and Society Bank. As of June 30, 2009, the 10 largest were Comerica, Bank of America, Chase, National City, Flagstar, Charter One, Fifth Third, Huntington, TCF and Citizens-Republic. Just two names remained. But here’s a more striking metric. According to data provided by The reality, though, was their David Sowerby, chief market analyst in the Bloomfield Hills office CEOs — Gerald MacDonald of of Loomis Sayles & Co. L.P., the comManufacturers and Eugene bined market capitalization for Miller of Comerica — had been the 10 largest banks headquarbehind closed doors in a rented tered in Michigan at the end of motel room over the preceding 1989 was $7.5 eight months billion. working out At the end the biggest of 2009, it was consolidation a small fracin state banktion of that — ing history. $1.6 billion. On Sunday, NBD was Oct. 27, their the largest in boards ap1989, with a proved what market cap of was described $2 billion. as a merger of Chemical Fiequals. On nancial of MidMonday, the land was No. deal was an10, with $189.7 nounced. The million. deal closed Twenty early in 1992, years later, and MacDonthe only bank ald was named in the top 10 MARK LEWIS/CDB Crain’s Newsin 1989 that Comerica has a downtown Detroit maker of the was still on branch and other local operations, but the list was Year for 1991. its headquarters has moved to Dallas. Chemical FiBut the next nancial, which was No. 1 at $523 Comerica blockbuster got even million. Large national banks bigger headlines and shocked the had conquered the market. business community. Sowerby said that if the 10 Early in the morning on March largest banks headquartered in 6, 2007, company officials anMichigan had appreciated at the nounced that the bank — which same rate as the Standard & Poor’s traced its Detroit roots back to index over those 20 years — 61.2 March 5, 1849, when, as the Detroit percent — their market cap Savings Fund Institute, it took in $41 would have totaled more than in deposits — was moving its $12 billion. headquarters to Dallas. “Not having the top-level The move was mostly symbolic. banking executives living here Just 200 top management emaffects lending and it affects corployees were involved. The bank porate giving and community inwasn’t closing down any state volvement,” he said. “And it branches. It was leaving its huge makes it harder to recover from data centers here. It would rea recession.” main as the second-largest bank in Michigan by deposit share. Most of its national employee It was October 1991 and Comhead count still would be concenerica and Manufacturer’s National trated in Michigan. Bank were, it seemed, locked in a But in an area rocked by one fierce competition for market subad-news business headline after periority. another, and in a state that had Manufacturers had $12.5 bilfor years been in a single-state lion in assets, a market cap of recession — soon, sadly, to be $1.1 billion and 6,300 employees. joined by the 49 other states — Comerica had assets of $14.3 bilthe news was a body blow to the lion, a market cap of $1.3 billion and 7,200 employees. business community. Community banking Comerica As national banks swooped into Michigan, a niche was created and filled for those wanting more personal service. Community banks filled the void. They had no trouble attracting investors to finance their startups or initial public offerings. They had no trouble attracting local businesses and no trouble quickly Subprime loans. Alt-A loans. building loan portfolios. Liar loans. Collateralized debt The large banks took care of the obligations. Credit default home mortgage and refinance swaps. None of those terms were business; the community banks part of the banking nomenclatargeted commercial real estate. ture 25 years ago but — to disasCommunity Bank of Dearborn, trous effect — became pillars of now Fidelity Bank, was one of the the housing boom. first. One used to have to go to a It was joined by Community Cenbank and apply for a loan. Seemtral Bank of Mt. Clemens; several ingly overnight, the model banks affiliated with Lansingchanged. Banks came to you, in based Capital Bancorp, including the form of mailboxes stuffed the Bank of Auburn Hills, the Bank of with preapproved offers with 800 Michigan in Farmington Hills and numbers to the Detroit Commerce Bank; Huron call to get a Valley State Bank of Milford; New check sent out Liberty Bank of Plymouth; the Main today on the Street Bank of Northville; and equity you more recently by Level One Bank in claim you have Farmington Hills, Lotus Bank in in your house. Novi, First MichiWant a new gan Bank in car? Refi. Troy, Nstar Maxed out on Communiyour credit ty Bank cards? in BingRefi. ham Want a Farms flatand the screen Bank of TV? BirmingRefi. ham. John Donnelly, Donnelly, Penman & Partners “The Those good that were public saw their share news is, prices rise — until the housing we’re reboom turned into the housing turning to the babust, and the commercial real essics,” said Brian Pollice, partner tate boom busted soon after. and head of the financial instituMain Street Bank was closed tions practice at Southfield-based by federal regulators in 2008, and Plante & Moran P.L.L.C. “Loans will several other community banks be priced based on risk. Banks were forced to sign cease-and-dewill be compensated for credit sist orders promising to shore up quality. Before, they were just their credit standards. chasing revenue. As of Dec. 31, 2009, just eight “Five to 10 years from now, Michigan banks were failing a mark my words, banks will be key credit metric monitored by healthy and making good profits.” the FDIC, and all were communiTom Henderson: (313) 446-0337, ty banks in Southeast Michigan. thenderson@crain.com The metric is called the Tier I capital ratio; all eight had ratios of core capital to risk-weighted assets of less than 6 percent. Main Street soon will be joined by other community banks, said John Donnelly, managing director of the Grosse Pointe investment banking firm of Donnelly, Penman & Partners, which has helped community banks across the country raise startup funds. “Community banks will continue to go through what I call the FDIC car wash,” he said. “They’ll get absorbed.” Survivors of the FDIC will thin their ranks through mergers or acquisitions, said Donnelly. “Other bankers will say, ‘Hey, this isn’t as much fun as it used to be, and it will behoove my shareholders to look for economies of scale and consolidate,’ ” he said. “When two community banks merge, they eliminate one CEO, a CFO, an auditor, an attorney, an IT department. They end up saving millions.” Donnelly said his firm will continue to emphasize community banks but will find buyers and merger partners instead of find startup investors. Credit collapse Community banks will continue to go through what I call the FDIC car wash. They’ll get absorbed. 

Table of Contents for the Digital Edition of Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

Crain's Detroit Business 25th Anniversary
Looking Forward
25 Companies to Watch
25 Mainstays
25 People Then and Now
25 Scandals and Dubious Deeds.
25 Philanthropic Gifts
25 Newsmakers of the Year
25 Big Stories
25 Innovations
25 Gone But Not Forgotten
Health Care
Defense
Suppliers
The Internet and Communication
Energy
Finance
Signs of the Times

Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

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