Legacy Bank (LBOH.OB)
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Bank Experienced bankers and time saving services focused on a targeted business
and professional market
Bio of CEO,
CEOCFOinterviews: Mr. Groves please give us a brief history of Legacy Bank?
The company started in September of 1999, and as many start-ups in the 98/99
timeframe, we really are a product of consolidation. The larger players within the
industry consolidated, changed strategies and decision-making authority. Our idea was to
create a bank that dealt primarily with locally owned, privately held companies with
revenues in the one to twenty million in size, as well as professionals and professional
practices. The thought process was that if you look at the broad scale of what happens
with consolidation, that size client has a substantial change in the way their service
have been distributed by the large organizations. Specifically to that point-in-time, they
probably had a relationship manager with whom they had a long a good relationship; each
side knew each other and knew how to make the system work to their benefit. What they have
ended up with after consolidation is some 800 number, to some junior lender or officer in
Pittsburgh, Buffalo or Charlotte, who has no understanding of the history of the company,
no background on the management or owner and decisions are make purely quantitatively as
opposed to qualitatively.
CEOCFOinterviews: On your website you emphasize extraordinary personal service. Will you give us some concrete examples of what someone might find at your bank that they cant get from any of the banks around you?
Mr. Groves: What
we have tried to do is put together a team of exceptional people. The basic staff at
Legacy is a very experienced staff that is also well complimented by technology. The
benefit of a start-up bank such as Legacy in todays environment is that you can buy
technology for client purposes probably cheaper and better than the large companies. For
commercial customers, one thing that is an obstacle for changing banks is the
inconvenience. Most companies have their receptionist or bookkeeper take the deposits down
to the bank three times a week. If the bank is relatively close, it may only take an hour
to make the trip. To diffuse the question of inconvenience, at Legacy we offer an
internet-based cash-management service and we bolster that by having a courier service
that will come to a clients place of business on the day the client needs a pick-up for
any banking deposit. No one has to leave the office or is exposed to security problems. In
addition, you regain the time that they would have otherwise wasted and you have
technology convenience of the highest order.
CEOCFOinterviews: How do most customers start their relationship with you?
Mr. Groves: It typically starts with a client referral or a credit relationship and we work very hard once we have started the relationship to bring on a deposit relationship and whatever investment opportunities there may be, either on an personal or employee benefit basis.
CEOCFOinterviews: Is the online banking used increasingly by your people, and how important is it?
Mr. Groves: It is used substantially; about 40% of our commercial client base use our online banking service, well above the industry standard of 25%. We do that because we have a dedicated individual who will train and install the cash-management program for our commercial clients. They use it because it is a good program that gives them tremendous flexibility and efficiency.
CEOCFOinterviews: What is the economy like in your geographic areas?
Mr. Groves: We
started in Harrisburg, which is the state capitol of Pennsylvania. Approximately a year
and-a-half later, we added a branch office in Hazleton, PA, Luzerne County that is about
seventy miles north of Harrisburg on Interstate 81. On January 1, 2003, we completed the
acquisition of another de novo bank (a state member bank that has
been in operation for five years or less); Northern State Bank, headquartered in
Towanda, PA, with operations in Towanda, Williamsport, and Sayre, Pennsylvania, which
takes us to the northern tier of the central part of the state.
CEOCFOinterviews: Geographically, would you like to fill in some of these areas?
Mr. Groves: Yes, we would look to fill in over the next few years in the areas between Williamsport, Hazleton and Harrisburg. They form a rough triangle with about a seventy-five mile leg on each side of the triangle. We would also like to move further south than Harrisburg if we could find opportunities to do so.
CEOCFOinterviews: Do you expect de novo branches or would these be acquisitions or both?
Mr. Groves: Both. We have a branch opening scheduled for the West Shore of the Harrisburg area in April 2003. Harrisburg is on the East Shore of the Susquehanna River in Dauphin County, and other communities in the Capital Region are located on the West Shore, Cumberland County. We will probably look to another facility in the Capitol Region in 2005, maybe in the Hershey area. We will look to our northern markets for other de novo opportunities, and if an acquisition opportunity presents itself, we will give it extreme care and consideration.
CEOCFOinterviews: What decisions are made on the branch level?
Mr. Groves: The decisions for deposit products and personal loans are made at the branch level. Because we are a commercial oriented organization, we make commercial decisions above a half-a-million dollars on a central basis with participation from each of the markets in which we serve.
CEOCFOinterviews: How are you doing on non-performing loans compared to your competitors?
Mr. Groves: Our asset quality is strong. We havent had much experience with non-performing loans. As we speak, we have just planned our first write-off after three and a quarter years, at year-end for $225,000.00 for the unguaranteed portion of an SBA (Small Business Administration) loan. Im sure we will have others in the future; that is the nature of the business. But, we havent been burdened by having to deal with alot of non-performing loans to date.
CEOCFOinterviews: Is SBA a big factor for you and do you deal with much start-up business?
Mr. Groves: SBA is becoming a more significant portion of our credit function, because it facilitates financing, start-up, acquisition and expansion of small businesses. We feel the extended terms and business programs offered through the SBA serve our clients well. Our experience to date allows us to pursue the SBA Preferred Lender Status designation. We probably do twenty SBA loans annually. Those results put us in the top twenty in the Philadelphia SBA region. We have in-house expertise at the lending and administrative level on SBA procedures and the preferred status is validation of the quality we can ensure to our clients.
CEOCFOinterviews: The employee benefit plan that you offer is something fairly new, how is that going for you?
Mr. Groves: It does quite well because, on the commercial side of the bank, the product of consolidation on the employee benefit side, has been roughly the same. For example, lack of local service and having to call an 800 number for account information. As you probably know, a business owner wants to make sure his employees are happy and not grumbling about their employee benefit plans, especially in todays market with so many uncertainties on the equity side, there is extra hand holding required. We have the ability to provide that locally as opposed to an 800 number. It has gone quite well. We have approximately $75 million of assets under management in a trust company and about half of that is employee benefit business.
CEOCFOinterviews: Can you explain why youve opened a trust only office?
Mr. Groves: That newest Legacy office is in Pottsville, PA We are opening a trust only office there because we have had a great deal of experience in the Pottsville, Schuylkill County market and we have gotten a great deal of business from that, operating from the Hazleton office. When we looked at the potential for growth we decided that a trust only office in Pottsville made some sense. That opened up effectively today.
mission statement says, Our community is the most valuable legacy of
all. Will you tell us about community involvement and what you do there?
CEOCFOinterviews: I noticed that you also talk about creativity and innovation, what are you doing with regard to that?
Mr. Groves: I am
not sure we have invented the world again, but what we are trying to do is not present to
the client a package, that one cannot vary from, rather we try to determine what the needs
of the client are and put together a creative package that provides the solution. One of
the things that we found in our first three years is a lack of a strong balance sheet
strategy on the part of our clients. The predecessor bank, has just sold additional loans
without stepping back and saying how do we structure this in the most effective
CEOCFOinterviews: How do you prepare for situations such as rate cuts?
Mr. Groves: We read the papers and all of the predictions so we can have some degree of preparation about rate cuts or rate environments. We tend to try to be pre-emptive in designing our approach. On the liability side, we try to anticipate rate changes and to deal with them in anticipation rather than in waiting for the event to occur. On the loan side, just like everyone else we have been challenged by our clients telling us, the rate environment is alot different today than when we booked this loan. Generally through the process of negotiation, we are able to come to something that accommodates and benefits both sides. It s a matter of being prepared on the liability side and making decisions for that preparation, as well as working with our clients on the asset side.
CEOCFOinterviews: In closing, what would you tell potential investors about Legacy Bank, why should they be interested?
Mr. Groves: Our
stock price remained stable for the three years that we have been in existence primarily
because we have communicated well with our investors and we have delivered substantial
growth to the organization. I think our organization has reached a level of critical mass,
has a substantial distribution, has broad scale of deposit gathering capability, and they
should expect increasing profitability over the next couple of years as we grow the
profitability to fit the size of the organization. What we have demonstrated is that we
have a management team alert to opportunities who will take those opportunities if it is
beneficial for the organization. Because of the markets that we operate in we are a very
attractive organization with the potential for another organization to have an affiliation
with us either way. Hence, we believe that there are many ways that investors have the
potential to be rewarded in the future.
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