Independent Banker - July 2018 - 20

PORTFOLIO
expertise to support a diff erentiation strategy.
" Whatever lending you do should complement other
services. I'm against one-off lending, " Schaus says. " Say
you're a bank that focuses on nonprofi ts. In addition to
loans, you should off er deposit products and services that
support them. You want the whole relationship. "
The $14.5 billion-asset South State Bank, headquartered
in Columbia, S.C., fosters relationships by off ering a
host of niche loan products, says John Bowers, dealer relationship
manager. He oversees two of the niches: marine
loans for amounts up to $250,000 and loans for manufactured
housing. The bank also off ers RV loans, motorcycle
loans and personal watercraft loans.
" Manufactured housing lending is good business for
us, " Bowers says. " In resort areas, many people have manufactured
homes as vacation homes, and as a result, we
are able to reach customers other banks can't. These loans
are a relationship builder with customers who might not
already be familiar with South State. "
South State's lending programs allow it to serve customers
far beyond the bank's branch footprint of the Carolinas,
Georgia and Virginia, Bowers says.
" We often hear customers say, 'When will you open
a bank here?' as a result of the service they've received
obtaining one of these niche loans, " he says. " In many
cases, we start a relationship with a customer because of
one of these loans, and then they open other accounts or
other loans with us. "
The lending programs also perform well thanks to expert
underwriting and sales teams who ensure the loans are a
good fi t for the consumer and for the bank, Bowers says.
" For other banks considering niche loans, the lesson
learned is that they can be good relationship builders, "
he says. " My team has decades of experience in these
Case study: Bank of Montana
How does a bank with one branch and $86 million
in assets become one of the best-performing banks
in the country? By having some stellar niche lending
programs, including " government-enhanced loans, "
says Thomas R. Swenson, president and CEO of Bank
of Montana in Missoula.
This niche product is for companies that want to
build or expand their headquarters or manufacturing
facilities. The loans are typically part of a larger
financing package that includes tax credits, equity
from pension funds and other types of financing,
Swenson says. Bank of Montana often organizes
consortia of community banks as participants to fund
the senior debt portion of these projects and serves
as a facilitator of the entire package.
" We're the lead bank in the participation, " Swenson
says. " Larger banks come to us because we have the
expertise to put together capital stacks, and because
the deals typically have a long gestation period of up
to three years. We're known across the country for
being able to handle such deals. "
Swenson, a former economic development
corporation executive, formed an investment banking
company in 1998. In 2007, the firm added a bank
charter to better deliver financial products.
Bank of Montana's share in the loan participations is
typically small due to its asset size, but the bank also
charges advisory fees, which bring in a significant
amount of revenue. It's such a profitable niche that in
2017, the tiny bank was the 11th-highest-performing
bank out of all U.S. banks, with a 47 percent return on
equity, according to usbanklocations.com.
Bank of Montana off ers additional niche
loans, including aff ordable housing lending
on a national platform, and aircraft lending to
companies that need a fleet for industrial use
or for individuals who want a personal
aircraft. Swenson and his team
particularly love that niche, as several
of them own aircraft themselves.
Swenson says he has talked
with many community bank
CEOs who have bolted
on lending to specialty
groups but never turned a
profit in their endeavors.
In his experience, a
community bank should
" grow its own specialty
departments based on
passions, experience
and aptitude. "
Thomas R.
Swenson
20 Q ICBA Independent Banker Q July 2018
http://www.usbanklocations.com
Independent Banker - July 2018

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