In the fall of 2007, on the eve of the worst financial crisis in U.S. history since the Great Depression, a group of Birmingham bankers set out to raise capital to start a new venture called Oakworth Capital Bank. They aimed to create a privately held company for successful businesses and families who require services beyond simple check cashing, deposits and savings accounts.
Although they encountered a few skeptics, says Scott Reed, Oakworth Capital’s senior managing director and chief executive officer, they believed that their bank could beat the competition when it came to offering high-income clients a greater level of personal attention and coordination of services.
“When we went out to raise capital, we got one of two reactions, ” says Reed. “It was, ‘Wow, does the world need another bank? Things are starting to look shaky. You guys must be crazy.’ But the more common reaction we got was, ‘Now is a great time to do this, because it seems like the banks have gotten really loose with credit, and there may be a pay day for that.’”
The vast majority of Oakworth’s investors have been individuals, says John Norris, an Oakworth managing director and the head of wealth management.
“We don’t have any hedge funds or any private equity firms, ” he says.
Among the early prospective investors was the Jemison Investment Co. Inc., in Birmingham. After listening to a vigorous pitch by the bankers, says Jemison’s Chairman James Davis, there was a sense that the upstart venture had a shot at carving out a place for itself.
“The banking environment in Birmingham had changed quite a bit, with mergers and consolidations and a lot of changes in personnel at the various financial institutions, ” says Davis. “We liked the niche that they were going for, dealing with smaller companies and family-owned types of businesses.”
By March 2008, the bankers had exceeded their initial goal of raising $25 million and procured $37.6 million, Reed says. Oakworth Capital Bank was chartered on March 31 that year.
Oakworth Capital Bank’s high net worth clientele includes owners of privately held businesses and manufacturers, doctors, lawyers, CPAs, the principals of those practices and families around Jefferson and Shelby counties with complex banking needs related to business ownership or having wealth, Reed says.
With 38 employees, Oakworth has only one branch, located at 2100 Southbridge Parkway in Birmingham. Its streamlined set of services include private and commercial banking and wealth management. But because Oakworth is a privately held company, says Norris, it is not beholden to quarterly earnings estimates demanded by outside analysts. As a result, Oakworth is able to follow its own business plan, he says.
That business plan includes offering each client more personal attention and convenience, an effort made easier because Oakworth has fewer clients, says Reed. It is a sentiment that is expressed on the company’s website, where it says, “We bring the bank to you.”
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“We try to focus our investment and time and effort on face-to-face contacts with people. Because our model is relatively fewer clients, we really make our investments in our people. So our people are our biggest assets, and we want them in front of our clients, whether it’s in their offices, where they live, their place of work or we can set up a conference at our main office, ” Reed says.
Oakworth assigns to each client an advisor who coordinates with other Oakworth professionals to handle the client’s need for services.
Regarding wealth management, Norris says, “We do full trust services. We offer investment management. We handle all forms of trust accounts. We can serve as executor of an estate, money management, handling IRAs, pensions and endowments, individual management accounts, and we can consult on aggregate portfolios, pensions and 401K plans.”
The bank has no ATM network. So, as an added perk, Oakworth customers can draw from any ATM from any bank at no charge, says David Driscoll, head of technology and operations.
Oakworth also places a heavy emphasis on electronic banking services, he says. Busy clients can sign up for a free mobile banking app that works with their iPhone, iPad or Android.
“Through this app, customers can see their balances, make transfers, make remote check deposits and pay bills, ” he says.
The bank also offers another app that allows clients to aggregate and view accounts not proprietary to Oakworth, such as their investment and credit card accounts.
To protect customers’ online transactions and personal information, Oakworth contracts with cybersecurity companies, a practice that supplements the bank’s small staff, Driscoll says.
“We have a third party that monitors all communications inside and outside of the bank, 24-7, 365, ” Driscoll says, “and [it gives] immediate alerts if there is anything that needs to be looked at.”
After seven years, Oakworth has maintained strong financials. In 2012, the website MSN Money named Oakworth as one of the “359 Safest Banks in America” out of more than 7, 300, based on a formula known as the Texas Ratio.
The formula, developed by Gerard Cassidy, of RBC Capital Markets, is a ratio of non-performing loans plus real estate owned divided by tangible common equity and loan loss reserves. The closer the ratio moves toward 1, the greater the risk of failure.
Oakworth was the only Alabama bank to make the Safest Banks list.
More recently, this January, Oakworth received a five-star rating of excellence based on stability and earnings measurements from Weiss Ratings, an independent provider of ratings and analysis of various banks and financial institutions.
According to the most recent figures available from the Alabama State Banking Department, Oakworth Capital has close to $260 million in assets and $220 million in total deposits as of March 31, 2014. The bank’s equity capital in December 2013 was at just over $41 million, according to the last report by the Federal Deposit Insurance Corp.
Oakworth has a lending limit of $9 million, with commercial lending making up about 70 percent of all of the bank’s lending, says Sam Scalici, Oakworth’s head of banking.
“We offer traditional commercial products, such as working capital lines of credit, equipment financing and leasing, term real estate financing and investment property, ” he says.
Reed says the bank’s success is partly due to a prudent loan underwriting philosophy. “We want to invest in clients who see the value of our relationship beyond just being the cheapest money in town, and so that’s our approach, and it pays off in a lot fewer losses from our loan portfolio, ” Reed says. “The better you know your clients, the less likely you’ll be surprised by something.
“We don’t do a lot of standard advertising, ” says Reed. “Our primary form of advertising is referrals from prospects and clients. So we’ve added people in the banking and wealth area who have the primary responsibility to go out and network with people who fit our target profile.”
Scalici says the bank also engages in sponsorships.
Gaining new customers could eventually mean expanding to other cities, Reed says. The company is now at a point where it can begin exploring options for expansion, which he says could include acquiring another financial institution.
“We’re very interested in growing in Alabama first, ” says Reed, “and potentially the surrounding states.”
Gail Allyn Short is a freelance writer for Business Alabama. She lives in Birmingham.
text by Gail Allyn Short • photos by Art Meripol
