December 2005 Outstanding Shares The 2005 FDIC market share report provide industry players another piece of the puzzle By Tabatha Thompson
Amid the ever-changing, merger-driven banking landscape, financial institutions clamber for market share. For some, the Federal Deposit Insurance Corp.’s bank market share report is an eagerly awaited yardstick, an indicator of how well their marketing efforts fared over the previous year. For others, including some market leaders, the report represents a piece of a larger puzzle. The bank market share report is essentially a one-day snapshot of the deposits in banks across the country, collected on June 30 and released in the fall. Deposits statewide totaled $95.2 billion, up $5 billion from last year.
First Tennessee Bank leads the state in bank deposits, according to the FDIC’s 2005 report, positioned well ahead in the Memphis (where its home office is located), Knoxville, Morristown and Johnson City metropolitan statistical areas. In Nashville-Davidson-Murfreesboro, Georgia-based SunTrust’s purchase of Memphis-based National Commerce Financial Corp. (NCF) pushed it to the top, ending a years-long reign by AmSouth (now no. 2). In Clarksville, a small, community bank maintained the number one position with a focus on organic growth.
While the market share report is indeed important and perhaps still the best gauge of how well each institution is doing, banking professionals are quick to point out that it doesn’t give a complete picture of the broad market defined by deposits. Influencing factors range from where deposits are booked on the day the FDIC collects information to differences in formulas banks use to report their numbers. Additionally, the market is bigger than just what is in the banks.
“It has value, but to really get a good idea about market share, you have to look at the report over a few years,” says Gary Grisham, president of BancorpSouth, the market leader in Jackson. “Plus, that only takes into consideration deposits—CDS, checking accounts, money market accounts and savings. It doesn’t take into consideration what’s sitting over at Merrill Lynch, in our trust department or any other investment company. But as a manager, over time you can see how you stack up against the other deposit gatherers in your community. A snapshot on June 30 on any given year does not have great value other than identifying the three or four top deposit gatherers in a given market.”
First Tennessee’s Nashville region president, Mike Edwards, also cautions against looking at one year’s report as a stand-alone indicator of who holds the money.
“The FDIC report doesn’t track all money,” Edwards says. “It tracks all the insured deposits. But no doubt, there’s money going in outside insured deposits. It’s indicative of what’s going on in the insured deposit industry, which is important to the total financial picture in the State of Tennessee. Many banks now sell insurance; some insurance companies now try to provide insured banking deposits. So those lines are no doubt blurred.”
Still, First Tennessee is proud of its standing as the leader in Tennessee.
“One reason is the acquisition of other banks in Tennessee by out-of-state banks and how it has distracted them and their employees,” Edwards says. “But we see it as a result of what we’re doing, and not what they’re doing or not doing.”
The following breakdown includes a look at the changing texture in each market, as shown by shifts in the FDIC numbers from a year ago.
Memphis
Hometown favorite First Tennessee nabbed 55.66% of the market in Memphis, up from 37.80% in 2004. The boost is easily explained by two notable mergers in the region.
“Regions and SunTrust are the two big ones everyone is aware of. Both of those companies have done a good job with what they’re trying to do. But while it’s an opportunity for them, it’s an opportunity for us, as well,” says Greg Paule, executive vice president of banking strategy for First Tennessee. “We hear stories weekly of customers who are ready to come over to the homegrown, stable bank we have been for over a hundred years now. We like to believe we’re the favorite in town and that we’re going to remain the favorite in town.”
Judging by the FDIC’s 2005 numbers, Paule’s assertions are correct. Number two Regions Bank, which gobbled up Union Planters, scored just 10.54% of the market. Number three SunTrust, which acquired National Bank of Commerce, claimed just 5.70%. In contrast, National Bank of Commerce and Union Planters had 18.19% and 15.36% of the market in 2004 for the number two and three spots, respectively. So, while Regions Bank advanced up the list from its from 1.21% hold in 2004 (no. 8 ranking), a good number of Union Planters customers shifted elsewhere. The same holds true for SunTrust.
But Paule recognizes that the bank market share report can show
“a spike in an individual year” and says he looks for “consistent, steady performance year after year.”
For that, he says, it’s important to be consistent in customer service.
“They are strategies we’ve been consistent with over the past several years. First is convenience. We know it’s the number one reason consumers select a bank, and we continue to take advantage of it. We’ve expanded the number of branches, the hours of service and added to the sales force with relationship managers,” Paule says. “Another thing we do better than everybody else is focus on employees. We’ve been recognized by many different magazines for the value we offer our employees.”
Nashville
SunTrust shifted into first place, knocking long-time leader AmSouth into the second spot.
“Annual FDIC deposit numbers are a snapshot of a constantly moving process,” says Rob McNeilly, president and CEO of SunTrust Nashville. “Our merger with NCF last year added to our market share. We were able to enhance our existing branch network and retained roughly 88% of the former NCF clients. We are glad to be in the number one position in Nashville but don’t hang our hats on those numbers.”
Regions Bank (2.18% in 2004) gained considerable ground by taking over Union Planters, which had 4.66% in 2004. Relative newcomer Pinnacle Financial Partners, moved up three spots to number nine.
Jackson
BancorpSouth is based in Mississippi, but the president of the bank’s Jackson office, Gary Gresham, says it’s the hometown appeal that brings him customers.
“If I ask someone who their bank manager is and they don’t know, I know that person is a prime candidate to become a new Bancorp customer,” Gresham says.
The bank retained its number one spot with 23.31% of market share.
Aside from relationships, Gresham says the bank doesn’t focus on a
particular area.
“The banking industry is still a people business. The products tie them closer to the bank. Our customer is spending money on the product somewhere; it can be here.”
Regions Bank captured 17.89% of the market share, taking over the number two place held by Union Planters in 2004.
Clarksville
Of all the markets, Clarksville divides the market share pie into the slimmest pieces among its 15 banking institutions.
One of the most influential factors across all industries in this Tennessee-Kentucky border town is its strong, transient military population.
“Right now, approximately 20,000 soldiers are gone, so it has an impact on the market,” says Sammy Stuard, president of Farmers and Merchants Bank (F&M), which increased its lead over Branch Banking and Trust (BB&T) slightly from 2004. Stuard is able to take advantage of F&M’s longstanding presence in Clarksville.
“Of course, we’ve been a community bank for nearly 100 years. I think one of the things is the customer has a feel and perception that they can get faster, more immediate service in dealing with someone who has a local bank,” Stuard says. “We give enough room for our managers and employees to make decisions for their offices.”
F&M is in the process of building a new corporate headquarters in Clarksville. They have a newly opened branch and they just broke ground on a new office in Mt. Juliet.
Knoxville
Indicating a relatively quiet year, market share rankings here are nearly identical to 2004, with First Tennessee claiming the top spot at 21.93%.
First Tennessee’s Paule says the focus on employee satisfaction holds true across the state. Knoxville is no exception.
“You’ll find that we are consistent with our strategy,” he says. “And it has paid off. We’re consistently number one in East and West Tennessee. And with the addition of Mike Edwards in Nashville, we’re gaining ground there, as well.”
As in most other markets, Regions Bank gained ground related to its acquisition of Union Planters.
SunTrust (14.86% in 2004) came in just behind First Tennessee with 17.45% of the market. AmSouth (17.19% in 2004) grabbed 16.30% of the market.
Chattanooga
Three banks claimed nearly 60% of the market share here, with numbers almost identical to 2004. SunTrust keeps the top spot for the eighth year in a row.
Most community banks remained steady or gained slightly.
FSGBank jumped five spots from 2.42% to 4.17%, while Cornerstone Community Bank went from 2.84% to 3.52%. In keeping with its gaining trend across the state, Regions Bank went from 1.7% to 3.12%.
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