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January 2013
Banking on a Community
By Barbara Fagan

     The story of Park Sterling Bank is actually two stories. The first story is about the startup and growth of a bank from the idea and vision of a handful of people. The second story, as important as the first, is about a sense of community and an understanding of a region. Where these two stories intersect is Park Sterling Bank.

     Park Sterling Bank, founded in 2006, is a Charlotte-based commercial bank that offers both consumer and commercial products and services including traditional deposit and loan services as well as wealth management, residential mortgage and commercial and industrial lending services. But its goal and beginnings are what makes its story.

 

From a Seed

     The seed of Park Sterling began with Bryan Kennedy. Kennedy helped start Park Meridian Bank in 1991 where he served as executive vice president. Prior to Park Meridian Bank’s sale to Regions Bank in 2001, Kennedy served as North Carolina president at Regions. But in late 2005, other bankers around him started suggesting it was time to, once again, start another bank.

     “You start a bank,” Kennedy explains, “because you think you can put together the right people and resources to deliver a higher level of service to the customer than they can currently find in the market. Our founders saw a need for a more comfortable, more personal banking solution.”

     With that intent, Kennedy, as CEO, put together a board of directors, some from the old Park Meridian Bank, and started raising capital in March of 2006. By June, they had finished with the largest startup bank capital raise in North Carolina history—$45 million. Park Sterling Bank officially opened for business in October of 2006.

     Kennedy is serious about his responsibilities to Park Sterling’s shareholders. “When you sit across from folks and say, ‘I want to start a bank. Please trust me with your money and I’ll do something good with it,’ you feel a real obligation to do just that. We never forget that we need to make a return to our shareholders.”

     Kennedy had the intention of growing the bank quickly and had a definite strategy to do it. “I put an infrastructure in place that would support growth. You can either put the right people and the right technology into place from the beginning or you can try to shortcut things and have people wear different hats, none of them well, and continuously play catch up.”

     Kennedy’s plan for Park Sterling’s growth got an unexpected boost in 2010 when an industry associate introduced him to Jim Cherry and David Gaines. Cherry had spent more than three decades in banking in both North Carolina and Virginia for the former Wachovia Bank working as head of trust and investment management and as chief executive officer of Mid-Atlantic banking.

     He also served as president of the Virginia Banking Association and even after officially retiring from his day job in 2006, Cherry stayed on to chair the association.

     “I wanted to remain involved,” Cherry says. “I continued to look for ways to get back into banking. I started meeting with people in the industry. Meanwhile, we had the economic crisis of 2008. At the same time, in the banking industry, it was clear that there was going to be a unique opportunity for consolidation. A combination of low interest rates and an increasing regulatory environment was making the small banking business model untenable.

     “I began by recruiting David Gaines who is now Park Sterling’s CFO. He was the controller for legacy Wachovia and their chief risk officer for corporate and investment banking after their merger with First Union, so he had significant finance, merger integration and risk experience.

     “We started talking with regulators and other bankers and realized there was a void of regional banks in the Carolinas and Virginia. This was surprising since this area used to be the home of the regional banks—NCNB, Wachovia, First Union, BB&T, Southern National, CNS, Sovereign and Signet. There was just a whole cadre of regional banks and all of them, either one way or another, merged or consolidated or grew up and for some reason, unlike other regions of this character or size nationally, no one had followed in between. There were virtually no banks in this area in the $5 billion to $20 billion in asset size.

     “This was significant because those were the banks that were typically large enough to have a broad array of products and services and some geographic diversity but still small enough to serve customers in a community banking framework. We recognized we had an opportunity to fill a need.”

 

A Shared Vision

     Cherry wanted to partner with a bank to take advantage of that opportunity and in anticipation of that, Cherry and Gaines recruited a prestigious prospective board including Walter Ayers, retired president and CEO of the Virginia Banking Association; Jeffrey Kane, retired senior vice president of the Charlotte branch of the Federal Reserve, and Bud Baker, former chairman and CEO of Wachovia.

     At the time that Cherry and Gaines met with Kennedy, Park Sterling was three and a half years old with about 50 employees, $500 million in assets and offices in Charlotte and Wilmington, N.C. It was a good match with shared philosophies on risk and customer service and Cherry admits he was impressed with the “smart things Bryan had done up front with Park Sterling.”

     “It was state of the art,” Cherry says, “with a technology platform ready for growth and a quality management team in place.”

     When an offer to partner was extended, Kennedy says he and the Park Sterling Board had to “do some soul searching.”

     “It came down to our mission,” says Kennedy. “Was this the best thing for our shareholders? Should we go with a slower growth strategy, raising capital in small chunks or change direction, partner, and go with a larger capital raise? In hindsight, the decision to partner was 100 percent the right choice.”

     “Bryan and the board had an even larger purpose to consider,” adds Cherry. “Which way would better serve the customer? How could they provide more products, services and capabilities to a growing customer base without more capital and other resources? It really was a continuation of the original vision but it was an acceleration of it. When most banks were retreating, this was an opportunity to advance. We agreed we had a vision to create a regional bank in the Carolinas area.”

     In August of 2010, Park Sterling Bank became Park Sterling Corporation, trading on NASDAQ, and raised $150 million in an initial public offering. “It was one of the last and largest successful bank IPO’s in the current credit cycle,” explains Cherry. “As part of that capital raise, we were hired by Park Sterling.”

     Kennedy left his position as CEO, becoming president and Cherry was named the new CEO. Gaines came on as the new CFO, a position previously held by Steve Arnold who became treasurer. The board was reconstituted but much of the key management was retained.

     “We immediately began a two-pronged strategy,” Cherry explains. “First to expand in Charlotte and Wilmington, and go into other high growth markets like Raleigh, Charleston and Greenville, S.C. and recruit what I call the ‘A’ talent in those markets. We’d look for the very best people who were already doing business there and well regarded in that particular market, to build the Park Sterling franchise.

     “The second part of the strategy was to use our capital and industry knowledge to partner with other banks in order to gain deposits, talent and other products and capabilities for our customers.”

 

Partnering for Growth

     Park Sterling’s first partnership with Community Capital Bank in upstate South Carolina closed in November of 2011. Not only did the 25-year-old Community Capital fit well with the investment Park Sterling was already making in the Greenville market, it also brought them a mortgage brokerage product, a wealth management and a cash management product that they could now import into other markets.

     Plans for their second partnership with Gastonia-based Citizens South came in March of 2012. Citizens South, which began in 1904 as Gastonia Mutual Building and Loan Association, had, prior to the merger, $1.1 billion in assets with 21 offices located in Gaston, Iredell, Rowan, Mecklenburg and Union counties in North Carolina, York County in South Carolina, and Towns, Union, Fannin and Gilmer counties in Georgia.

     The merger further enhanced products, providing more robust cash and wealth management and providing capabilities for C&I (commercial and industrial) lending in addition to the real estate lending previously available to Citizens South customers. The merger also expanded the Park Sterling footprint into a new state—Georgia.

     When it closed on October 1, 2012, the acquisition of Citizens South made Park Sterling the largest community bank in the Charlotte metro area and next to Bank of America, the second largest bank headquartered in Charlotte.

     With current assets of $2 billion, Park Sterling’s acquisitions have essentially caused it to twice double in asset size in the last 14 months.

     But along with growth, something else is just as important to Park Sterling’s management. “Because the banks we’ve acquired are community banks, they share our commitment of service to our area,” says Cherry. “This is our home. We grew up here and spent our careers here. We love this area and we know the people here and understand their needs and want to be a solution for them.”

 

A Solution for the Community

     “Banking is a people business,” Cherry continues, “and people like doing business with people they know that live and work here and care about their community. We want to be an alternative to the larger, more impersonal banks. Our objective, in its simplest form, is to be large enough to help our customer achieve their financial aspirations and still small enough to care that they do.”

     Their message appears to resonate with customers. Bill Crawford, who is founder of Wilmar Leasing and current chairman of the board for Wilmar Inc., has been a customer of Park Sterling since its beginning.

     “We’re a vehicle leasing company so we use Park Sterling’s lending services,” says Crawford. “It’s been a wonderful experience. They have a great group of people. Bill Newbold handles our account and he’s the finest commercial loan officer I’ve ever worked with. He knows our business better than anybody and represents us well to the bank. With a community bank, character matters. When we meet with Park Sterling’s credit committee they know who we are, they know our business; they know our character.”

     “With Park Sterling, relationship banking is not just something printed on a business card,” says Bob Salvin, founder and CEO of Salvin Dental Specialties, Inc. “Park Sterling took time to get to know us and establish a solid relationship. Several members of their management team, including the CEO, came out to our business to get to know us. They understand business entrepreneurs and, unlike some of the big banks, they view our business as unique.”

     Customer Chris Moffat says he’ll “never go back to a big bank.” He uses Park Sterling not only for commercial banking and corporate borrowing in his role as vice president of Morehead Properties but also his personal banking. “I like their people,” he says. “They know us and anticipate our needs.”

     Park Sterling currently has 44 branches with 17 in the greater Charlotte area and while further expansion may be in their future, Kennedy assures that there is “no build and flip strategy here.” “We want to build something we can turn over to the next generation of leadership,” he says.

     “All of our executive management have had full careers in banking,” Cherry adds, “and have achieved their career aspirations. Now we share a common motivation. We want to recreate a strong regional community bank here. We’ve all come together to create something special in this community.”

 

 

Barbara Fagan is a Greater Charlotte Biz freelance writer.
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