A Surprise Coming At Republic Bank

June 17, 2002
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GRAND RAPIDS — A decision by Republic Bank to pull advertising in Michigan should not be seen as a harbinger of major change in the banking industry, according to the bank’s local president.

The T.S. Jenkins Advertising Agency of Flint last week notified the Business Journal, among others, that the agency was canceling all of Republic Bank’s advertising effective at the end of June.

But the Business Journal and other Grand Rapids media outlets are not the only ones affected by the decision. According to the ad agency, all the bank’s advertising contracts for Michigan, Ohio and Indiana are being shut down.

Republic operates 103 offices and 130 ATM sites in the three-state region.

While it’s not unusual for an advertiser to drop a single medium or even a cluster of them in a geographic region, Republic’s far-ranging actions do raise some other possibilities in the ever-changing world of banking, especially on the merger and acquisition side.

The announcement seemed to raise a minimum of three possibilities concerning the 16-year-old firm:

  • Republic Bank is merely going to change its advertising tactics, and this announcement, therefore, is really a non-story except among media firms that will lose the reallocated revenue.

  • Republic Bank is such a healthy fish that some whale in the industry wants to gobble it up.

  • Republic Bank is cutting costs because it’s in financial trouble.

William McGee, president of the West Michigan region of Republic Bank, says it’s probably item No. 1 and absolutely not No. 3.

“If you’ve looked at our financials,” he said, “you can see that this is a very, very healthy company.

“I don’t think it (news of the advertising cancellation) is anything more than what it seems to be,” he said.

“This is a normal process and I imagine we’re revisiting our advertising strategy to make sure we’re getting the most bang for the buck.”

Regarding the possibility that some larger institution is trying to buy Republic, he said, “Your question is a perfectly reasonable one to ask, but there’s no reason that I know of to believe that we’re in that mode.”

But with huge banks such as Wells Fargo rumored to be looking for a stronger Midwest presence, maybe even in West Michigan, Republic’s network might be a tempting target.

McGee is quick to point out, however, that advertising contract cancellations wouldn’t be the typical sign of any sort of big consolidation.

McGee said that Republic conducted a heavier-than-usual advertising campaign during the end of last year and the early months of this year.

“And now I suspect we’re just taking a look at that,” he added.

McGee agreed with the suggestion that every healthy corporation is for sale for the right price, but he stressed that he knows of no negotiations with any prospective buyer. Indeed, he really isn’t at the site where such negotiations, if any, might occur.

While Republic Bank is headquartered in Lansing, the firm’s holding company, Republic Bancorp, is based in Ann Arbor. The holding company’s chairman, also Republic’s founder, is Jerry Campbell. The bank’s president and CEO is Dana Cluckey of Owosso.

Campbell founded the bank in 1985 with $1.5 million in capital.

Today — variously reported with $4.4 billion or $4.7 billion in assets — Republic is reported to be the state’s third largest banking firm and the nation’s 84th largest bank holding company.

Both Fortune and Working Mother magazines label Republic as being one of the nation’s best places to work. In terms of dollar volume, it also is Michigan’s largest Small Business Administration lender.

But a key element of its business is the company’s mortgage operation located in Farmington Hills.

More than half of the company’s loans consist of residential mortgages and more than 90 percent of its entire loan portfolio is secured by real estate.

The bank’s president is fond of saying, “We lend on the dirt,” relying upon real estate’s tendency to retain its value during times of economic fluctuation. Moreover, the firm makes no loans on projects it doesn’t know, and as a matter of policy lends nothing on projects more than a 90-minute drive from any of its offices.

As a consequence, the firm’s spokesmen say that over the past several years its losses because of bad loans are only about a third of those of other banks of similar size.

Republic’s reputation as a workplace ties to a culture in which about half of its employees’ compensation derives from bonuses, commissions and other incentives. Base pay is lower than at competing banks, but the idea is that the better the bank does, the better the employees do.

Employees also get a share of company stock each year and, after the first year with the firm, have stock option privileges.           

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