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What's Wrong with Kansas
By Francis X. Gilpin
Associate Editor
Jerry L. Neff had the kind of 2004 that bankers dream of. The state's leading industry trade group chose the Florida president of Gold Bank as banker of the year, partly due to his lobbying for the Florida Bankers Association. At Neff's own shop, Gold Bank just about doubled deposits in the Tampa Bay area while holding onto market share in highly competitive Manatee and Sarasota counties.
Gold Bank, a subsidiary of Kansas-based Gold Banc Corporation Inc., rewarded Neff by adding company-wide responsibility for personal banking to his business card.
Back at Gold headquarters in suburban Kansas City, however, it has been a nightmarish stretch.
Michael W. Gullion, architect of Gold Bank's multi-state strategy, was fired in 2003 after he was caught in an embezzlement scandal. The former chief executive repaid $3.5 million in restitution to Gold.
A year earlier, Gold was accused of charging excessive interest rates and fees on agricultural loans to Kansas and Oklahoma farmers. The bank, which didn't find out about the allegations in a sealed lawsuit until 2004, quickly settled with federal prosecutors for $16 million.
These and other setbacks have not left Gold's bottom line untouched. Net income for 2004 decreased by 35%, exacerbated by multimillion losses in Gold's investment portfolio.
"They had a lot of skeletons in the closet," says John Bergquist, a Midwest bank analyst in Chicago for Sandler O'Neill & Partners LP, which does investment banking for Gold.
This ugly picture led an investment group to back out of a proposed $682 million purchase of the holding company last fall.
Does any of this bother Jerry Neff at his Bradenton office? He claims not. "It was a blip on the radar screen," says Neff. "We're pretty sheltered from that here."
Doubters need only behold his expansion plans for the next three years along the Gulf Coast.
Gold hopes to open at least nine new branches in the Tampa, Sarasota and Punta Gorda metropolitan statistical areas, where it currently has 11 offices. Sites on Fruitville and Clark roads in Sarasota as well as another in Brandon will probably come on line first. Lakewood Ranch and Englewood are next after that.
Neff also wants to enhance Gold's presence in south Hillsborough County. A 7-year-old Ruskin storefront office, acquired when Gold bought Bradenton's American Bank in 2000, is to be moved to larger quarters that are more convenient for Apollo Beach and Sun City Center customers.
"Hillsborough is a great market. There's an awful lot of opportunity up there," says Neff. "We need to fill in some of the dots up there."
Indeed, Gold picked up almost $40 million in new deposits last year in the Tampa market. The deposit gain in the Sarasota market, which is smaller but where Gold enjoys a somewhat higher profile, was about $24 million.
The key to the Hillsborough results has been the office that Gold took over from Huntington Bank in downtown Tampa in 2002, which Neff says has been a magnet for new commercial business.
Still, the Tampa market represents just 2% of Gold deposits. Sarasota has 15% and Punta Gorda 4%, as of Sept. 30. The rest of the deposits come from Kansas, Oklahoma and Missouri.
Stung by the recent problems, Gold officials have decided to bounce back by selling rural offices on the Great Plains and funneling the proceeds into wealthier and faster-growing metropolitan areas where the bank can make more commercial loans.
Gold's four-county footprint on the Gulf Coast of Florida is at the top of its list for expansion. Average household income is $61,406, above that of the state and nation. The region's 8.4% compounded annual growth rate in deposits won't be harmed by a projected population increase of 11% by 2009.
Although he turned 63 in December, Neff is planning to stick around for the ride. "We're just in the best place in the banking business, in my opinion," says Neff. "I wouldn't want to be anywhere else right now in the banking business than the west coast of Florida."
Neff grew up in Illinois and followed his then-girlfriend and now wife's family to Florida. Until his recent added duties in Kansas, Neff had spent his entire 42-year banking career in Bradenton and Sarasota.
Most of that time, Neff worked in the trust and then commercial departments of a bank that eventually was swallowed up by Barnett Bank. He has surrounded himself with Barnett alumni at Gold, including his vice presidents for branch operations and Manatee community banking.
"It was Florida's bank," Neff says. "Barnett was its own competition. We measured ourselves against other Barnett units. We didn't pay much attention to the other competition."
Yet, when Neff's position was eliminated in the mid-1990s, he pitched his services to a young Bradenton bank that he knew from his market research at Barnett was struggling.
"There was absolutely a mortal fear of the word 'sale' or 'sell,'" Neff says he observed at American Bank. "They were paranoid about it."
To whip American Bank into shape, founder Gerald L. Anthony hired Neff, who retired from the Florida Army National Guard at the rank of brigadier general. "Nineteen months later, I took his place," Neff recalls of Anthony's ouster, "which I had no intention of doing when I came there."
Five years ago, Gold purchased American Bank for $78 million in order to enter Florida banking. Neff credits his emphasis on sounding out existing American Bank customers about new products - without being obnoxious about it - for Gold's unusually high depositor retention rate.
"If you have a 20% runoff, it certainly affects the value," Neff says of a typical slice of depositors who flee after a merger. "It means you paid for something you didn't get."
Neff downplays Gold's Kansas roots and claims the bank's hierarchy is flexible enough to serve Florida customers with speed and efficiency. "We have lots of decision-making authority locally," he says.
Nevertheless, his ability to keep Florida on track for Gold, despite the problems at the home office, has won Neff two free trips a month to Kansas City. Neff donned the additional Gold hat of chief personal banking and wealth management officer for the entire bank last October.
Neff says he took on the extra job because of his professional relationship with Malcolm M. Aslin, 56, who had to clean up after Gullion. "There's a mutual trust there between us," Neff says of the Gold CEO. "He doesn't try to second guess the decisions I'm making."
Sandler O'Neill analyst John Bergquist is also impressed with Aslin.
"It's a company headed in the right direction," says Bergquist, "if they have everything out and there are no more newsworthy blowups."
Bergquist has a "hold" recommendation on Gold, owing to valuation concerns. The stock has a price-to-earnings ratio of 29 and is trading at 13 times the consensus earnings estimate for the next year.
Gold remains a takeover candidate, according to Bergquist. He identifies one possible acquirer as the Bank of Montreal, which is scouting for a partner in the Kansas City area.
Jerry Neff says his promotion doesn't foreshadow a permanent move for him to Kansas City.
"I will not do that under any circumstances," says a smiling Neff. "I grew up in the Midwest. I moved to Florida right before my 21st birthday and I have no desire to live in the Midwest whatsoever. This is a tropical paradise right here."
What Neff would like to do is see Gold's Florida expansion plans through.
As he works out these days at the Bradenton Country Club, Neff can take pride in three things: He is keeping his New Year's resolution to get in better shape, he is the FBA's reigning banker of the year, and he is keeping Gold in the growth game that is Gulf Coast banking.
"I'm going to be at this a while," Neff predicts.
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