New Banks of Different Stripes
Two new banks emerged in Alabama since 2008 — a traditional community bank that merged for more clout, and an internet bank retooled to fund business expansion.
In five years, AloStar Bank of Commerce CEO Andrew McGhee has guided his bank from a startup that took over failed Nexity Bank to the state’s top community bank.
Only two new banks have been started in Alabama since the financial crisis of 2008, and each has taken a different approach to the business of banking.
In April 2011, AloStar Bank of Commerce raised $160 million through private equity firms and bought up the remains of Nexity Financial Corp. Using “correspondent” banking in lieu of multitudes of branches, it has grown to be the largest community bank in Alabama.
Generations Bank was chartered in Centre on Oct. 6, 2008, with $46 million in deposits and $53 million in assets. Generations grew its assets over the course of six years, then merged into Peoples Bank of Alabama, headquartered in Cullman.
AloStar Bank of Commerce
AloStar Bank of Commerce entered the banking scene on April 15, 2011, as it acquired the deposits of Birmingham’s failed Nexity Bank, in a deal assisted by the Federal Deposit Insurance Corp.
The Birmingham-based bank does business nationally and has depositors in all 50 states, correspondent banks across the Southeast and a national lending base, with a commercial office in Atlanta.
With assets of about $919 million, as of last September, it ranks first among Alabama’s community banks.
“Nexity had a long history of raising deposits on the internet and did a good job of reaching across demographics, so we have a nice diverse group of clients in our deposit base,” say AloStar CEO Andrew McGhee.
“We fund ourself through a number of different avenues: one is our borrowing clients that we lend money to, another is through our correspondent banking network,” says McGhee. “We have relationships with correspondent banks, and they provide deposits to us as well. Then we do have the internet side of the equation.”
Internet banking may awaken images of millenials — generally defined as people born between 1982 and 2004 who are increasingly online and on social networks — but McGhee says most of AloStar’s clients don’t fit that description.
“Our platform is: We go out across the country looking for opportunities to provide capital to operating companies. So we push that we have a lot of experience inside the company with people who have backgrounds that will allow them to add value to our client base, whether there is an acquisition or a turn-around story or generational transition of ownership or something like that, where our team can really add value. That’s where we are more likely to win new business.”
The internet side of the bank, McGhee says, has a “couple of peak business hours. It’s around lunchtime and then around dinner time, when people are getting breaks in their schedules and they have time to go through some things.”
As an online bank, McGhee says, cyber security is a huge part of the bank’s focus. “We are constantly making sure that all of our systems, policies and procedures are up to date. We have a great team that is dedicated 24 hours a day, seven days a week, to making sure that we keep all of our clients’ information safe and that we are protecting them the best we possibly can.”
What AloStar doesn’t have is branch banks. Are they in AloStar’s future?
“Well, you never say ‘no,’” McGhee says, “but we like the platform that we have right now. We think that in this rate environment it delivers a very efficient model as far as bringing on new clients.”
McGhee says Alabama’s state banking department was instrumental in getting AloStar up and running.
“We have a great partnership with the state and with the state regulatory bodies,” McGhee says. “They played a great part in our success, and we have worked hand-in-glove with them. We were one of the few banks that got started and we were able to foster a very good relationship with the state board of Alabama and the FDIC. John Harrison, superintendent of the department, and Trabo Reed, deputy superintendent, were especially helpful.”
Generations & Peoples
“Peoples and Generations were owned by the same people, the same holding company, so we did it to create efficiencies in the bank. With all the regulations banks are facing and increasing costs, we felt it was the thing to do,” says Tim Williams, formerly CEO of Generations and now president of Peoples.
At the time of the merger both were owned by Altrust Financial Services Inc.
Generations had grown to $79 million in assets, with branches in Gadsden, Centre and Cedar Bluff.
Peoples Bank of Alabama, based in Cullman but originally Peoples Bank of Holly Pond, now has more than $600 million in assets and has branch locations in Blount, Cherokee, Etowah, Jefferson, Marshall and Morgan counties, in addition to those in Cullman County.
Bill Gerdes is a freelance writer for Business Alabama. He is based in McCalla.