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February 2006
Banking on Small Business
By Ellison Clary

Wes Sturges and start-up bank seem synonymous. The three-decade veteran of Charlotte financial institutions will be opening his second bank in 10 years on February 7, 2006. But perhaps small business and Sturges is an even closer association. After all, he’s concentrated on serving entrepreneurs since even before he birthed First Commerce Bank in 1996 to key on that market. Now, with Bank of Commerce, he’s poised to solicit mom’n’pop companies anew.

“It’s important for Charlotte for that niche to be healthy,” Sturges says of the small- and medium-sized business market, pointing out there are 22,000 area companies with 50 or fewer employees.

Sturges (and shareholders) sold his first start up, First Commerce Bank, to Bank of Granite in 2003. He sees Bank of Commerce, which will open with 14 employees in a single office at the corner of East Third Street and Queens Road, as a worthy successor in that it will be even more small-business oriented.

Sturges defines a small business as an operation with sales of less than $10 million a year and a medium-sized business as one with under $50 million in annual sales.

While Charlotte might seem an unlikely spot for a new bank, given that it’s headquarters for Bank of America and Wachovia and supports large offices for regional institutions such as BB&T, First-Citizens and others, Sturges sees things differently. Bigger banks seek profits in volume, Sturges says, and have a hard time making money with small businesses.

Sturges enjoys figuring out how to help these small firms, which he likens to the crossword puzzles that have him hooked.

“No matter how well the puzzle is done,” he says, “there are probably some things that still could be done better. I enjoy getting to know the business owners, many of whom have become my friends. When I see a business that I made a loan to grow to be extremely successful, I get a lot of fulfillment out of that.”

Sturges points to Jeff Hunt, who with wife Diane was struggling to get his Competitive Edge Sports, Inc. business operating smoothly. The company works in screenprinting, embroidery and promotional items.

Sturges met the Hunts back in his First Commerce days. He remembers sitting on boxes in a sweltering basement in Matthews with Jeff Hunt, working on a business plan. Ultimately, Hunt says, Sturges made his company a $500,000 loan that ensured success.

“The big thing about Wes is he looked at our business idea and our attitude and he really got his teeth into our business,” Hunt says.

Today, Hunt’s entity operates from a 20,000-square-foot facility in Indian Trail and has about 20 employees.

“You won’t find a better person to start a small business bank,” Hunt says. “Wes believes in people. He wants to know details and he wants to help you as a customer.”

 

An Entrepreneurial Approach

Sturges, although seemingly a banker, is himself an entrepreneur. But he took a circuitous route to becoming one.

A graduate of Charlotte’s Myers Park High School who earned a bachelor degree in Economics at the University of Virginia, he spent 17 years with United Carolina Bank as a commercial lender, often serving small business clients. He was Charlotte city executive by 1995. That year, UCB instituted a downsizing and, Sturges grins, “I got to participate.”

It didn’t take Sturges long to formulate the plan for First Commerce. He and his investors capitalized the bank with $8 million. First Commerce stock began trading at below $10 per share and reached $19 in July 2003 when the Bank of Granite deal closed.

At the time, octogenarian John Forlines Jr. had been the long-time chief executive of Bank of Granite and Sturges was a strong candidate to replace him. But Sturges, Forlines and Charles Snipes, 71, who had taken the helm at the Bank of Granite when Forlines stepped down, had a well-publicized falling out. Sturges left Bank of Granite with a financial settlement and an 18-month non-compete agreement, which has since expired.

Asked if he thought he’d run Bank of Granite, Sturges pauses and says, “Uh-huh.” Another pause and he adds, “Yes.”

Will it be sweeter to raid a customer from Bank of Granite? Sturges, 56, smiles and chooses his words. “It will be fun to renew some relationships,” he chuckles.

Then he clears up what he feels is a misconception that his new bank will compete with community institutions such as Scottish Bank, American Community Bank and First Trust, whose space at 100 Queens Road ,incidently, the Bank of Commerce will fill when First Trust moves to a new home on nearby East Third Street:

“Each of us small banks has such a tiny slice of the pie that we don’t run into each other as much as we run into the large banks,” he says. “They’ve got most of the business, but it can be a challenge for them to keep the small businesses when they are competing with a community bank.”

Small businesses need credit, but their owners often don’t know how to use it properly, Sturges says. “The strength of a small business is the owner,” Sturges explains, “so we need to get with the owner and devise a credible loan package that serves the company needs and is a credit-sound package for the bank.”

When hiring, Sturges says, he looks for attitude, for those who have a passion for small businesses. “I do better with people who first have the consumer focus, the desire, those who attain their success by helping someone else be successful.”

The new bank’s chief financial officer and top lending officer were with Sturges at First Commerce. “We know better who we are,” Sturges says. “We’ll focus even more than last time on small business, though 75 percent of our loan portfolio at First Commerce was small business.”

During his 18 months away from banking, Sturges says he and wife Claudia, daughter of Ken Iverson, who steered steel company Nucor to prominence from Charlotte headquarters, spent time with their two grown children and at their mountain retreat in the Blowing Rock area. Besides learning that he didn’t want to be a full-time golfer, Sturges says, he determined that he wasn’t ready for retirement.

 

Birthing Another Bank

In coalescing the new Bank of Commerce’s shareholders and initial board of directors, Sturges called upon more than a few acquaintances. Some were prior loan recipients from his former bank like George Doggett of Doggett Advertising, who is a charter shareholder, and Dick Handshaw of Handshaw Inc., which develops Web-based training programs and systems for banks and other multi-location companies, who is a director.

Others were holdovers from the First Commerce board who are now Bank of Commerce directors including Bill Staton of Staton Financial Advisors, Bill Loeffler of Sinclair Loeffler Advertising and Marketing, and Jim Smith, a retired dairy executive.

Earl Leake, vice president of human resources and organizational development at Lance Inc. is chairman of Bank of Commerce, after serving as vice chairman of First Commerce.

“The community bank model that we use, focusing on the smaller business customer and giving them outstanding service, I think that works,” Leake says. “I’m pretty excited about moving forward. I think we’re going to be successful.”

Sturges maintains that the Bank of Commerce will grow differently than his former bank. Rather than focusing on opening in other locations, Bank of Commerce will rely more on technology to serve customers in various locations. “We’ll be much more aggressive in getting out to the customer’s place of business,” he adds.

Easily doubling his capitalization for First Commerce, Sturges raised more than $17 million from Bank of Commerce investors. That gives Bank of Commerce a legal lending limit of more than $2 million and should ease a frustration from the first time around.

“We’d take the risk, get the business started,” Sturges remembers. “They’d grow and they’d grow and suddenly they’d need to borrow $2 million. We had to wave goodbye to them after doing all the work to get them there. So this time we have more capital we can loan and we have a stronger network of correspondent banks so we can make the loan and have them take a portion of it on their books.”

 

Banking on Commerce

Asked to describe his projected typical day at the new bank, Sturges details a schedule that starts with an early morning business breakfast and runs through several in-person client calls and internal meetings before ending with an evening civic function. How many hours is that? “Enough,” he laughs.

“I do plan to be hands on,” he adds. “I think one of the important things a community bank does is give the client access to the decision maker. I’ll have my office right out in the front lobby. I’ll answer my own phone.”

When it comes to how fast Bank of Commerce will grow, Sturges paints with a broad brush. “I would hope we would be over $200 million in assets in five years,” he says.

And if, later on, someone wanted to buy Bank of Commerce, selling would be a possibility, Sturges says. “We’ll be expensive,” he adds. “We’re going to have earnings that demand a higher price.”

But a sale isn’t a certainty. “I’m very comfortable with 10 to 15 years continuing to run this bank,” Sturges says. “I’ve got a good management team, people who can step up and take my role and other roles in the organization. We will be able to continue to grow and enhance shareholder value and serve our clients for 20 years down the road.”

Though he’s sold one before, Sturges maintains he couldn’t start a bank if selling it was the primary mission. “I think you have to believe in the product you’ve got and pursue that,” he says.

A former chairman of the North Carolina Bankers Association, Sturges feels the Tar Heel state is only “moderately banked” and he’s certain there’s room for Bank of Commerce in Charlotte. For years, the Charlotte region lacked sufficient venture capital for entrepreneurs, he says. That situation has eased recently, he allows, but then he asks, “What happens after the venture capital?”

That’s when bank credit is important, he answers. “That’s where banks like ours can come in and make this a healthier community.”

Sturges quickly voices confidence in the Charlotte region’s economy. Its vibrancy traces to a diversity of firms and the plethora of smaller companies, he says. “We’re continuing to see small businesses wanting to expand,” he adds.

That feeds a hunger for an institution such as Bank of Commerce, he says, adding that the community’s anticipation of the new bank is palpable.

“In the First Commerce startup, I had to call every investor to get them on board,” Sturges recalls. “This startup, they’ve been calling me. A lot of the calls have come from former customers. ‘We want a bank like yours back in the market,’ they tell me.”

Ellison Clary is a Charlotte-based freelance writer.
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