Fitch Prefers Independence

June 14, 2002
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CALEDONIA — Looking back, Lawrence Fitch thinks pure good luck probably played a role in his career choice.

He was attending the University of Michigan on a co-op program under which students alternated working for a semester with going to school for a semester.

The school offered him two options: one was a job at the Ford Motor Co. and the other a job at the former Detroit Bank & Trust Co., now Comerica. Though he hadn’t previously given any thought to a career in banking, he decided to go with Detroit Bank & Trust.

He liked banking from the get-go, and in his current role as president and CEO of the State Bank of Caledonia, he continues to enjoy it 31 years later.

Fitch stayed with his first employer, Detroit Bank & Trust, for 17 years, growing up on the commercial lending side of the business.

In 1987, he moved from Comerica to the presidency of Arcadia Bank and Trust Co. in Kalamazoo, a bank started by some local investors.

“Being hired by Ron Bieke for that position was probably my big break. We grew that bank from scratch,” he recalled. In 1996 Arcadia was sold to First Michigan Bancorp, which in turn sold to Huntington Bank in 1997.

“That’s when I decided to make a change because I didn’t want to work for a big corporation like Huntington,” Fitch remarked. “FMB had 14 subsidiary banks and they ran them all pretty independently.

“I prefer the community banking orientation and I prefer having the kind of control I have as president of the bank. I like making decisions and I like running my own show. I’ve been running my own show for so long that I don’t think I’d last 30 minutes in a big bank.”

In late 1997 he took over as president and CEO of Caledonia State Bank, which was founded in 1904 by a group of townspeople. The bank opened a Dutton branch in 1985 and a Middleville branch in 1989. After Fitch joined the bank, he started another branch in Kalamazoo to maintain and capitalize on the relationships he had already formed through Arcadia Bank.

The bank’s general coverage area is Kent, Barry and Kalamazoo counties. It’s currently owned by 265 shareholders, almost all of whom have roots to the community, Fitch pointed out.

“We’ve been locally owned for almost 100 years and I think that’s pretty unique today.”

During Fitch’s three-and-one-half-year tenure, the bank has nearly doubled in size. The bank had assets of $90 million when he started in late 1997, and its assets are now approaching $176 million. About 85 percent of the bank’s assets are loans, and nearly 85 percent of its loans are business loans.

The bank had a record year in 2000, with net income of $2.2 billion, which represented an increase of 29 percent over the year before. Earnings per share increased from $2.64 in 1999 to $3.40 in 2000. As a measure of the bank’s efficiency, assets per employee grew from $1.9 million in 1997 to almost $3 million by fiscal 2000.

In 31 years of banking he’s seen plenty of changes in the industry. Years ago, financial institutions had a very defined, narrow scope of activities in which they were allowed to engage. Although they’re still highly regulated today, the scope of activities they can now choose to engage in is almost unlimited as long as the activities are financial in nature, he said.

“That’s been a huge change from the days when banks were defined as those financial institutions that take in deposits and make loans,” he said.

Players in the industry are much more competitive today even though there are fewer competitors than there were before. Some 14,000 banks were operating in the U.S. 20 years ago compared to about 9,200 now.

“You have to be a lot sharper on pricing,” Fitch observed. “Pricing has been driven down and margins tightened up. Margins are far thinner today than they were 20 years ago.”

But even in an era of big bank consolidation, the smaller, locally owned banks can both survive and thrive because there’s always a slice of the population that prefers dealing with a local bank, he said.

Historically, there has always been a customer segment that is more dependent on bank services than the population in general, and those customers want to be able to deal with a bank where the bureaucracy is low, where the bank knows who they are, and where their business seems to matter to the bank, he explained.

On the business side, for example, some customers won’t go to a large bank because they’ll be one account out of hundreds of thousands. And the perception — sometimes it’s correct and sometimes it isn’t  — is that the big bank doesn’t really care whether it gets your business or not.

Customers of smaller banks may also feel they can have more influence on the bank’s decisions. Fitch has commercial customers whom he has dealt with for years who are now handled by other lending officers at the State Bank of Caledonia. If they don’t particularly like what a lending officer says, they call Fitch directly to talk about it. They can’t do that in larger bank.

“I think that in a small bank people feel because they know the president or the chief operating officer and the lenders that they’ll get a better hearing in terms of what it is they want to try to accomplish. In a larger bank I think they have the feeling that the bank has certain canned, standard ways of doing business and if they don’t fit into one of those, they’re out of luck.

“I think there’s a perception that we can and will be more flexible as well. I know that’s the truth because there are some days when I think we don’t have anything that’s standardized when it comes to commercial loan customers. It’s a different deal for everybody.”

Customers may see community banks as having little or no bureaucracy and a very small hierarchy. At Caledonia State Bank, officers and staff can be responsive; they can act quickly because they don’t have to jump through a lot of bureaucratic hoops, Fitch said. If the bank decided this afternoon to introduce a new product, it could probably deliver it to customers within a week, he added.

Fitch feels fortunate to have very high quality managers working for him — people with the kind of experience and intellect you’d expect to find in a much larger organization, he said.

“I think we have very high quality, customer-oriented officers and staff. A lot of that has to do with training and hiring practices,” he said.

“It’s not like we have some magic product that some other bank doesn’t. In the final analysis, it really comes down to the people. I think our numbers reflect that, too.”   

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