BusinessReport.com

Hold hands with the Ghost of Banking Past and fly over downtown Baton Rouge. The year is 1983, and the local banking market is dominated by names that today would draw a quizzical look from a new Baton Rouge resident seeking a place to deposit a paycheck.

Louisiana National Bank. Fidelity National Bank. American Bank and Trust. Capital Bank and Trust. City National Bank. Baton Rouge Bank. Bank of the South.

They are gone—some long gone—but, at the time, they were the titans of Third Street, the people to know if you needed a loan and the decision makers who would guide the local institutions through a time of great change in the banking industry.

The banks cast their respective nets over the area when the industry was heavily regulated, creating an atmosphere of limited products but personalized service and, for the most part, hassle-free profits for the institutions. In a short time, bank leaders were faced with not only the new opportunities of deregulation, but also with legislative changes that ushered in multiparish and interstate banking.

When multibanking became a reality in Louisiana, the local reaction was mixed. In August 1984, Business Report queried local banking leaders on how they perceived the market would be affected by the legislation. (By that time, Louisiana National Bank, the city’s first billion-dollar bank, had already announced a deal to merge with two North Louisiana banks to form a $2.7 billion banking entity.)

“I really don’t perceive there will be a substantial difference in banking as a result of the legislation,” First National Bank CEO S.R. Levatino told the magazine. “I don’t think it’s going to be as good as the proponents feel it will be or as bad as the opponents feel it will be.”

But the thoughts of Donald Haney, president of Baton Rouge Bank, were quite different. “Yes, multibanking will bring dramatic change in the banking industry in Louisiana. With growing frequency, there will be announcements of planned mergers and acquisitions prior to the January 1, 1985, effective date. It follows, therefore, that there will be fewer independent banks over time.”

Capital Bank President and CEO Richard Easterly, in one sentence, predicted the direction the banking industry would head over the following two-and-half decades. “I think the effect on the banking industry will be that there will ultimately be fewer but larger banks controlling the majority of the deposits in the state,” he said.

Market share information gathered by the Federal Deposit Insurance Corporation (FDIC) shows over time, local community banks are losing their prominence in the Baton Rouge Metropolitan Statistical Area (MSA), while large national and regional banks gather more market share.

The FDIC provides information dating to 1994, a decade after the legislation passed. Local banks were still market leaders then, with seven of the top 10 and 27 of the top 35 banks in terms of market share operating exclusively in the Baton Rouge MSA. Hibernia National Bank, with $965 million in deposits, held the largest market share at 17.29%. Eighteen banks could claim at least 1% of the market share.

A decade ago, Hibernia remained at the top, having increased its deposits in the area to nearly $1.4 billion and its market share to 22.27%. Only three of the top 10 banks in market share were doing business exclusively in Baton Rouge, although City National Bank had moved up to second on the list in market share. The entire market had been reduced to 35 banking organizations, with 24 operating exclusively in Baton Rouge.

At the turn of the century, Baton Rouge was the exclusive home of only two banks in the top 10 in market share. Bank One leapfrogged Hibernia as market leader ($1.8 billion in deposits), and the two institutions combined for 50% of the market share. The number of banks with at least 1% of the market share had fallen to 12.

The early part of the 21st century was as active as any time since multibanking launched in terms of mergers and acquisitions. Between 2003 and 2005, it was estimated more than 80% of deposits in the Baton Rouge market either changed institutions or were held by institutions that changed names.

The latest FDIC market report, market share as of June 30, 2006, has JP Morgan Chase Bank holding a whopping one-third of the deposits in the market, or almost $4 billion. Capital One and Regions combine to hold the next 30% of the market with $2.2 billion (19%) and $1.3 billion, respectively.

SETTING SUNBURST: After acquiring Capital Bank in the late 1980s, Grenada, Miss.-based Sunburst Bank was acquired in 1995 by Union Planters, which later became apart of Regions Bank.

Despite the trend of large national and regional banks gobbling up market share, new banks continue to come into Baton Rouge. This is due in no small part to the city’s population growth and the sudden increase of cash deposited following Hurricane Katrina. The most recent FDIC statistics show 46 separate banks in the market, the highest amount during the time period available on the organization’s Web site. During the past year, the market saw the new arrival of such institutions as Business First, Capital One, MidSouth, Gulf Coast, Investar, Omni Bank of Baton Rouge and State-Investor banks.

Community banks are still fighting to uphold the standard set by their predecessors. Technology has allowed them to stay competitive with the larger banks on a variety of fronts, while they can still tout the advantages of having a business where it is isn’t out of the question for customers to routinely have contact with the bank president.

“We are competitive, and we do compete aggressively on the product level,” says Meg Anderson, executive vice president and COO of Fidelity Bank, “but people still want to be treated as a person.”