Vanessa Mambrino, Senior Consultant, Capital Performance Group LLC, Washington, DC, a firm providing advisory, planning, analytic, and project management support to the financial services industry. www.capitalperform.com
RepublicBankAz of Phoenix, AZ, the top performing non-subchapter S-corporation with total assets of under $100 million, is one of the youngest banks profiled this year. The bank has been in operation for six years and operates a single branch and an LPO in the greater Phoenix/Scottsdale metro area. This market has seen both booms and busts during the recent financial crisis - and through it all, RepublicBankAz has thrived.
The bank's success has been driven primarily by its focus on commercial lending and, more specifically, SBA lending. Just under 74% of the bank's loan portfolio is in either CRE or C&I loans, compared to 31% of the portfolio of the average top performing small non-S-corp and 33% of the portfolio of the average small non-S-corp. RepublicBankAz originates both 7(a) and 504 program loans and then sells the guaranteed portion of the loans. Revenues from servicing and sales accounted for 52% of total revenue at the bank in 2012. The bank frequently sends its lenders to specialized training programs to ensure that they are up-to-date on all of the latest SBA programs, products, and the nuances thereof.
The bank's business model, however, is not just about commercial credit. "We always try to capture the business deposit relationships and/or the personal side of the relationship," notes Rod Larson, CEO. In addition, increased home purchase activity in the Phoenix market has caused RepublicBankAz's residential real estate portfolio to expand. One-to-four family loans increased from 10% of the bank's loan portfolio in 2011 to 18% by year-end 2012. Overall, loan balances increased by 37%, year-over-year, compared to growth of 4.15% at the median top performer and a 0.26% decline in loan balances at the median small non-S-corp.
RepublicBankAz has some challenges ahead for 2013. As Larson and his colleague, Joel Gallon, CFO, both noted, the young bank will be a taxable entity for the first time in 2013. Local competition is increasing as community banks in the area recover and as Phoenix's growing SBA market attracts other institutions of all sizes. Nevertheless, as Larson points out, "Having people with expertise puts us a little ahead of the competition."