March 28, 2024

Banking

Banking, Retail-Style

Commerce Bank took market share from big, established banks in Philadelphia and New York and is bringing its strategy to Florida.

Mike Vogel | 7/1/2007


Commerce's Presence

Headquarters:
Cherry Hill, N.J. Markets: Metro Philadelphia, metro New York, metro Washington, southeast Florida

Banks
Total: 445 | In Florida: 13

Deposits
Total: $42.7 billion | In Florida: $367 million

Assets
Total: $47.4 billion (doesn’t break out Florida numbers)

Employees:
Total: 14,500 | In Florida: 320

Instead, Commerce grows by taking market share, as it did with notable success after First Union (now Wachovia) mishandled the acquisition of Philadelphia’s CoreStates in 1998. Commerce is now a top five bank in the Philadelphia metropolitan area. Commerce also prospered following Boston-based FleetBoston Financial’s (now Bank of America) acquisition in 2000 of New Jersey’s Summit Bancorp. “Sink the Fleet” was what Hill dubbed his internal marketing campaign to win unhappy Summit customers.

Commerce “did a pretty good job,” says analyst Gary Townsend of Friedman Billings Ramsey in Arlington, Va. “They do try to suck all of the oxygen out of the atmosphere as far as competitors are concerned. Commerce is quite formidable. What we can expect (in Florida) is Commerce will have a good degree of success.”

Commerce moved into Florida in 2005 with the purchase of the small ($370 million assets), seven-branch Palm Beach County Bank for $110 million. It closed two branches, opened the new one in Boynton Beach and one in Boca Raton, renovated the other five and started building its network. (Commerce moved into D.C. the same year.)

Unlike Commerce’s other markets, Florida is known for savers sensitive to the best rates. John Tolomer, Commerce’s Florida president, says that while it’s rare for Commerce to have the highest rates, it doesn’t charge fees other banks do and offers conveniences others don’t. Florida also is known for its fragmented market and a relatively large number of startup banks that are acquired by others — making for the kind of dislocation Commerce thrives on. Hill predicts bank formation will slow as smaller banks find it impossible to cover the compliance costs of anti-money laundering laws. And there’s the real estate crunch. “I literally get a book about a bank in Florida for sale every week,” Hill says.

Tolomer led Commerce’s expansion into Westchester County, N.Y., and Fairfax County, Conn. Hill believes that it’s easier to teach a Commerce veteran a new market than teach a local banker the Commerce way, but Commerce will hire its branch managers and many employees away from other banks in the market and send them to its own training institution to learn its culture. Commerce rarely advertises on rates but instead focuses on the retailing ethos, with a retailer focus on things like no ATM fees and instant credit and debit card issuance when opening accounts.

Commerce is under scrutiny by federal regulators over real estate deals between it and businesses involving Hill, who was paid $3.6 million in salary and other compensation last year.

In addition, the four largest banks in south Florida deposit market share, Wachovia, Bank of America, Washington Mutual and SunTrust, together have nearly 800 branches in south Florida and can be expected to defend their shares. The competing banks for the most part declined to comment on Commerce’s arrival. An exception, Gene Schaefer, Bank of America’s president for Miami-Dade and Monroe counties, says Bank of America’s national franchise is “unparalleled” for customers and that the coming of Commerce is “a sign that Florida is a great place to do business, and we welcome the competition.”

Hill sees his model marching along as Commerce completes nine branch openings from Boca Raton to South Beach with a goal of 15 to 20 by year-end. The “hot money” at the acquired Palm Beach County Bank — deposits that chase the highest rates — ran off but has been replaced with lower cost deposits, he says. “We’re growing very nicely,” says Hill. “You’ll continue to see lots of these new buildings coming up.”

Tags: North Central, Banking & Finance

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