BANKING ON A RECOVERYWhen Louisiana bank executives gathered two months after Hurricane Katrina, uncertainty and even fear were the uninvited guests in the room, says Paul Bonitatibus, senior executive vice president for branch banking and wealth management for the banking segment of Capital One. No one could predict what the future held for the region’s banking industry – one which had to contend with a scattered customer base, flooded buildings and a city knocked to its knees.

Today, the picture is clearer – and a lot brighter, bankers say. The same storm that battered the Gulf Coast has brought checks from the government and from insurance companies to fatten deposits, along with an unprecedented demand for building and renovation loans.

BANKING ON A RECOVERY(First NBC President and Chief Executive Officer Ashton Ryan)

The future could be brighter still, if and when the billions of reconstruction dollars promised, but as yet undelivered, begin hitting local banks and savings and loans. As a result, the mood was decidedly more upbeat at a recent get-together of the Louisiana Bankers Association, Bonitatibus says. “I didn’t see that fear anymore. I saw a lot of optimism.”

Optimism is one reason the city’s newest bank (borrowing partially from an old name) wasn’t derailed by the hurricane. Plans to create First NBC Bank, which opened in May, were in the works well before Katrina hit, says Ashton Ryan, the bank’s president and chief executive officer. First NBC began with more than $60 million in capital, the largest initial capitalization by any financial institution in Louisiana. A few initial investors dropped out after the hurricane, Ryan says, but others stepped in because they believed the devastation in housing and commercial real estate would create a strong opportunity.

“Our No. 1 product is going to be a bridge loan,” Ryan says. People are borrowing money so they can get the construction ball rolling, he says. They will use their insurance checks or Road Home money to pay back their loans.

First NBC joins the ranks of the city’s community banks, which in advertising typically stress their local ownership and strong ties to the community. Peter Ricchiuti, a finance professor at Tulane’s A.B. Freeman School of Business, says that despite the many mergers and acquisitions in the banking industry, community banks are experiencing good times.

“People like to deal with local entities,” Ricchiuti says. Community banks in the New Orleans area are thriving post-Katrina, thanks to the deposits for thousands of insurance checks and the prospect of thousands of rebuilding loans. “Local banks are the envy of the rest of the country,” he says.

J. Michael Brown, president and chief executive of First Bank & Trust, agrees. First Bank, founded in 1991, experienced tremendous growth before Katrina and expects that growth to continue. The bank has a presence primarily in Orleans and Jefferson parishes and in Baton Rouge, and is expanding to meet the needs of its customers – especially those who have relocated. In addition to beefing up its Baton Rouge operations, First Bank is opening loan production offices in the Houma/Thibodaux market and in Lafayette.

“I’m very positive about where we’re headed,” Brown says. Most of First Bank’s customers are small businesses, and Brown says he hasn’t seen the wave of business failures many expected after the hurricane. Some companies have been forced to shut their doors because their buildings were destroyed, he says. But those, which were able to open up, have enjoyed great success.

First Bank has also become the exclusive banking partner of the New Orleans Saints. Brown says his bank’s ties to the local community help drive business his way. “Many, many clients still need to speak to a banker,” he says.

Omni Bank, headquartered in Metairie, forges its bond with the community in a variety of ways, says Todd Murphy, senior vice president of marketing and community relations. “When times were really tough, we were there for our customers,” he says, referring to the aftermath of Hurricane Katrina. “We’re grounded here. We don’t rely on our main office understanding the situation during an emergency by watching CNN.”

Omni Bank is also reviving a television spot called “Making the Grade.” Omni is seeking good news about public and parochial schools in Orleans, Jefferson, St. Tammany and St. John parishes, and is partnering with Saints star Drew Brees, who will tell the positive stories in both broadcast and print spots.

The challenge at Whitney National Bank is to keep their local ties strong even as the bank extends its footprint, says Biff Motley, senior vice president of marketing and retail banking. One way to “behave locally,” Motley says, is to hire local bankers; as Whitney expands into Texas, Florida and Alabama, the bank tries to retail local bankers to service customers they already know.

“We use the approach that bankers are more important than banks because people do business with bankers,” Motley says.

Motley says he was surprised at how quickly business rebounded once Katrina hit. Whitney’s deposits grew tremendously in the quarters following the hurricane, he says; the money is now beginning to be withdrawn as people make decisions about rebuilding.

Will Whitney eventually be folded into a larger financial institution, as local banks First National Bank of Commerce and Hibernia Bank were? “We are real good bankers, and we make very good profits, and our stock profits are high,” Motley says. “For a bank to come into New Orleans to acquire the Whitney would be expensive.”

Few community banks have faced as great a challenge as Liberty Bank, which has reopened only four of its eight branches since Katrina. Alden McDonald Jr. has been president and chief executive of the bank since it was founded in 1972.

“We certainly took a hit during the storm,” McDonald says. “A lot of our customers were within the flooded-out areas. We are adjusting our customer base, trying to service them wherever they are.”

Although he sees some action in eastern New Orleans, he expects the rebuilding there to be a three- to five-year process – and even then, he doesn’t expect the numbers to be what they were.

McDonald says he is heartened to see how many of Liberty’s customers have remained with the bank even though they have moved out of town. He credits that loyalty to the fact that even before the storm, Liberty had strong local ties. “Our policies were designed based on local knowledge,” he says. “Local community banks can adjust to the customers’ needs.”

Bonitatibus of Capital One says banks don’t have to have local ownership to keep local ties. Capital One completed its acquisition of Hibernia National Bank in November 2005, and locals used to the green Hibernia Bank signs are adjusting to the Capital One blue.

But Hibernia’s strong presence in the local economy will remain, Bonitatibus says. Most of the employees at big banks began their banking careers at community banks, he says, and they carry over their emphasis on personal service.

“We bring the combination of two things,” he says. “We were skilled and trained in a small-bank environment, but we have big-bank capabilities.”

Locals worried that once Capital One acquired Hibernia, the New Orleans area would lose one of its stronger community partners – Hibernia, for example, had sponsored the Saints. Bonitatibus says that fear has proved unfounded; Capital One recently donated $3 million to area organizations, including $1 million to the University of New Orleans Charter School Center, $1 million to 20 area nonprofits and $1 million to community agencies across Louisiana.

Bonitatibus is optimistic about the region’s economic future, pointing to this year’s quiet storm season and the promise of Road Home grants as positives. And because Capital One has branches in places like Gonzales and Houston, the bank will be able to retain customers who decide to establish homes in other cities rather than return to New Orleans.

He sees the New Orleans market as a “bit overbanked” right now because of population drop. Whether or not that remains the case depends on how many people move bank into the New Orleans area – and how many banks eventually reopen all of their branches.

(Hibernia Homestead and Savings Association President and Chief Executive Officer Peyton Bush)

Mergers and acquisitions are less common among homesteads and savings and loan institutions, which generally are established to support the growth of the community in which they are located. These financial institutions are the vehicle through which most people get the financing they need to buy a home, and they usually concentrate on just one market. Gerry Gilbert, a financial consultant who works with many regional banks, says this local tie is being touted big time right now by homesteads eager to capture the business of residents who were turned off by their experiences with national lenders post-Katrina.

Financial institutions have restrictions on their loan-to-deposit ratio, Gilbert says. If demand becomes very high, these companies bundle and sell their loans. If the servicing of the loan is sold as well, borrowers can find themselves dialing an 800-number when they need help.

“During Katrina, that mattered a lot,” Gilbert says. “A home, for most people, is their major asset. If there’s a problem, they want a friendly voice to talk to.

”That’s the thinking at Hibernia Homestead and Savings Association. Peyton Bush, the company’s president and chief executive officer, says Hibernia Homestead was founded locally in 1903 and has remained local. The homestead has focused mainly on the Orleans and East Jefferson Parish markets, but since the storm it has done business in Baton Rouge, on the north shore and in West Mississippi.

Bush says customers have told him they like the fact that their loans remain local. But, he says, you can’t ask people to make a monetary sacrifice to do business with a local bank or savings and loans. Smaller local financial institutions still have to offer the types of services people want – such as ATM networks and on-line bill pay – and they have to offer them at competitive rates.

Sometimes the choice between a local and a national financial institution is more a matter of perception than anything else, says Peter Ricchiuti, finance professor at Tulane’s A.B. Freeman School of Business. People in Louisiana are friendly, and they like the feeling that at their bank, just like at their bar, everybody knows their name. – J.R.

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