Banking: Big vs. small

Big vs. small

John Crinklaw, newly with Crown Bank, knows both lender types

by Beth Ewen   Most small-business owners have felt the changes among local banks in the last few years, as giant out-of-town banks bought large and small banks here, and a half-dozen new banks were started by those displaced.

John Crinklaw has an insider’s view. He helped start Windsor Bank in the early 1990s, and stayed with Windsor when the large Wisconsin-based Associated Bank bought it a few years ago. Now he’s left to open a new downtown Minneapolis branch for Crown Bank, started as a “de novo” or new bank in Edina in 2000.

The plus side for owners, regardless of their preference for big bank vs. small: lots of choices, according to Crinklaw.

Upsize: You’re back with Crown, one of the Twin Cities’ de novo banks.

John Crinklaw: I had heard that the Twin Cities market is second highest in de novo banks in the United States, after Chicago. These were started primarily by bankers that came from banks acquired by large banks. It gives small-business owners a wonderful opportunity and a variety of options.

Upsize: Why did so many local people start banks? There’s been lots of bank consolidation around the country.

Crinklaw: I wonder why there’s such a high turnover from these acquisitions. You can define two types of acquisitions. In one a large bank acquires another large bank, and then the cultures are more similar. But when you get a large bank acquiring a small bank, the culture changes so drastically.

Upsize: You’ve experienced both.

Crinklaw: Windsor got acquired by Associated about five years ago; Riverside got acquired six months or so after that. I think it’s a wonderful opportunity to be back with a smaller bank. The down side is in the smaller banks, the amounts of money to lend, we focus on smaller businesses.

At Associated we had the capacity to lend up to $35 million, that was on a Friday. Then on a Monday I was here. We have the legal limit to lend up to $2 million. We’re focusing on those companies that borrow from $100,000 to $2 million, so that’s a drastic change.

Upsize: Have the small-business customers changed from when you were lending to them at Windsor?

Crinklaw: When Windsor started in the early 1990s, we were coming out of a recession. The larger banks became conservative.

Any company that had anything to do with real estate was non gratis at the large banks, just categorically.  They went in and said, we don’t want to be in that business. Everyone got painted with the same brush.

Windsor was the first de novo bank that had started at the time in a long time. We were an alternative, and we had a lot of ties connecting us to real estate people. Today, coming out of a recession, I think what business owners are requiring is somebody who is not going to paint everyone with the same brush.

Upsize: Is it tech companies now, who are non gratis?

Crinklaw: Yes, certainly the tech start-ups. At Windsor, we lent to people who borrowed money to invest in tech companies. They’d start with the idea, build and sell it, and that type of business has evaporated. We’re not seeing any activity like that now.

In real estate, I’m surprised that it’s held up as well as it has, despite the vacancy rate in some of these sectors.

Apartments vacancies, for example, are 20 percent and yet we have people coming to us and saying they want to get a deal and buy and increase occupancy. But there are no deals out there.

Upsize: What else is active?

Crinklaw: Another case is the housing business downtown, with the condos. I’m amazed at the number of projects projected in the downtown area.

Upsize: Why is Crown opening a downtown branch?

Crinklaw: Crown is an offshoot of Windsor, and a lot of the clients of Windsor are downtown. In 2000, when Crown opened, the rental rates were too high, so it made sense for a de novo bank to open in Edina. Now it’s better.

Upsize: There’s a lot of competition.

Crinklaw: I don’t know of many de novos that are downtown that have the prime location we have. We’re at 6th and Marquette, first floor. We’re going to have visibility.

It’s never been more apparent to me, coming from a big bank, in a smaller company the atmosphere of the workplace is so important. I’ve forgotten how it was to work for a smaller organization. You can’t hide in a small place. So having happy employees to me is the biggest issue.

Upsize: So you like the smaller better?

Crinklaw: Oh, sure. That’s the reason I came. There was certainly a financial aspect to it and I had to re-examine all the time. It was a three-and-a half-month process as I decided. I would waver, and say do I really want to do it? I always came back to, do I enjoy going to work each day and the answer was no.

Upsize: Why was that?

Crinklaw: I was personally losing control of the customer. In a large bank you get so departmentalized. You control only one aspect of the relationship; in my case, the lending part. I can’t say I’ll waive the service charges for you because someone else is accountable for those service charges. All of a sudden there are more fingers in the pie, and you’re not controlling the relationship.

Upsize: But don’t you miss the big deals?

Crinklaw: The down side is I can’t lend $20 million any more and I had built that type of customer. I can’t compete to get that business. But those companies also have smaller needs and those business owners do too.

Upsize: How do you choose which customers get a loan?

Crinklaw: To be honest with you, you get a gut feel on the first initial meeting. We’re all human, and you have a human response. You don’t make a decision on that alone.

How well a presentation is made, how organized. I’ve said before that I think bankers can be really hoodwinked if somebody comes in with a business plan, financial statements, how it’s going to get repaid, all put together.

Generally you have to ask for those things, and they go back and get it and come back in.

Upsize: So a business owner stands out who’s well prepared.

Crinklaw: Definitely. Also, that’s what sets apart a regular banker from an entrepreneurial type banker, a banker that gets an excitement. Too many times the bankers get into the numbers so much as opposed to the people parts.

Upsize: How financially stable are the small-business owners you see?

Crinklaw: We’re always telling our customers, “You do need to keep some of the money into the base of the company. You’ll need to leave some capital in because there will be bumps in the road.” Those that did leave capital in could rely on it.

Those companies that made adjustments faster than others survived. It’s hard to make those decisions, like layoffs. Those business owners who survived are certainly a lot smarter today, they’re very conservative in hiring and spending.

Upsize: What about going forward?

Crinklaw: We’re very optimistic about the economy, that it will continue doing well. The one that we always forget about is another terrorist attack. Are we prepared for that? I don’t know.

I have to say that loan demand hasn’t been there. We were disappointed at Associated with the loan demand, I know US Bank was disappointed. Why is it down if the economy is improving?

Companies are continuing to get more done with the same number of people As we get more confidence they’re going to have to start hiring and spending.

[contact] John Crinklaw is president of Crown Bank-Minneapolis: 612.746.5050; jc*******@********nk.com; www.crown-bank.com