His Ideas Changed Delivery of Financial Services
MEMPHIS, Tenn., April 24 /PRNewswire-FirstCall/ -- Thomas M. Garrott
announced today that he will relinquish his position as chairman of National
Commerce Financial Corporation (NYSE: NCF) in January 2003, but will continue
as executive committee chairman for both NCF and its lead bank, National Bank
of Commerce (NBC). He will also continue on the board of directors of both
organizations, and as a part-time consultant to the company.
(Photo: http://www.newscom.com/cgi-bin/prnh/20010510/NCBCLOGO
http://www.newscom.com/cgi-bin/prnh/20020424/CHW002 )
Mr. Garrott, 64, was president of the holding company from 1982 to 2000,
and has been chairman since 1993. Under his leadership, NCF became known for
industry-leading financial performance fueled by innovative financial service
delivery, pristine credit quality, and strategic growth. Among NCF's many
honors, U.S. Banker magazine's annual list of the nation's top-performing
banks ranked NCF among the top five every year from 1995 to 1999 -- including
two years as number one (1995 and 1998).
At the NCF Annual Shareholder Meeting held today in Memphis, Mr. Garrott
said "the time is right to step aside" given his confidence in the management
team led by President and Chief Executive Officer Ernest C. Roessler. Mr.
Roessler joined NCF after the July 2000 merger of the former National Commerce
Bancorporation (NCBC) and CCB Financial Corporation, the latter of which he
was chairman and chief executive officer. The merged company became known as
National Commerce Financial.
"I am grateful for all the men and women with whom I have shared a
career," Mr. Garrott told shareholders. "Collectively they are responsible
for the company's achievements, which are many. I have been, as chairman, a
visible symbol of our success, but the people serving customers throughout our
organization have made us what we are today."
Mr. Garrott continued, "It is gratifying that, not two years after a very
significant merger, our management team is working together at all levels.
Looking to the future, I have complete confidence in our executive team's
focus on our goals and ability to achieve them."
Low-Cost Distribution Fuels Performance
NCF's record under Mr. Garrott's leadership is remarkable:
* Since 1982, National Commerce Financial has achieved a
* 29 percent annual total shareholder return on NCF stock
* 17.6 percent compound annual growth rate in cash earnings per share
* 18.1 percent compound annual growth rate in dividends per share
* Cash earnings rose from $5.6 million in 1982 to an annualized $355
million at March 31, 2002.
* Cash earnings per share on a split adjusted basis have grown from $.06
to an annualized $1.72 at March 31, 2002.
* The company's cash efficiency ratio, the ratio of non-interest expenses
to net revenues, dropped from 77.63 percent at year-end 1982 to 46.54 at
March 31, 2002, and has consistently ranked among the lowest in the
industry.
* Assets have grown from $845 million at year-end 1982 to $20.1 billion
today.
* Return on average tangible assets and return on average tangible equity
were .71 percent and 12.18 percent, respectively, for 1982, compared to
1.89 percent and 25.66 percent for 2001.
"From 1982 to 2002, under the leadership of CEO Tom Garrott, National
Commerce has gained increasing visibility in the eyes of Wall Street, for its
superior and consistently above average revenue and earnings growth and, most
importantly, creation of shareholder value. Since 1982, the total return of
National Commerce stock has been simply remarkable at 29 percent versus the
S&P 500 index return of 6.82 percent," said Robert S. Patten, senior banking
analyst at UBS Warburg. "In addition, returns of 17.6 percent compound annual
growth in cash earnings per share and 18.1 percent compound annual growth rate
in dividends were all achieved during a steady pace of growth where assets
increased nearly 25-fold. This performance places NCF among the top of the
elite performers in the UBS Warburg 50 Bank Universe over that period. To put
these numbers in perspective, in 1982, National Commerce generated cash
earnings of $5.6 million on an efficiency ratio of 77.6 percent, which has
grown to $355 million annualized on efficiency ratio of 46.5 percent. The key
to these results were due in large part, to Tom's untiring efforts to create a
world class sales organization from a small bank in Memphis, Tennessee, and
today, his legacy speaks for itself," Patten added.
"It has been my privilege to serve on the holding company board since
1976. During that time, our holding company has been blessed with exceptional
leadership. In the final analysis, however, corporate America evaluates the
success of corporate leadership based upon 'financial performance,'" said NCF
Director Emeritus James E. McGehee, Jr. president of McGehee Realty &
Development in Memphis. "Tom Garrott's contribution and influence began with
his being named president at the end of 1982. If, on that occasion, one had
invested $1,000 in our holding company stock, it would have grown to more than
$132,000 by mid-April 2002. It is virtually impossible to find any other
major financial services organization whose performance compares to this
amazing return on investment. Tom single-handedly transformed us to a far
more balanced total service financial organization through his emphasis upon
retail services because, when he joined the senior management team, we were
basically a commercial lending organization. His exemplary and dynamic
leadership will be sorely missed. Fortunately, however, he will continue his
presence in the form of chairman of the executive committee," he added.
In commenting on NCF's financial results under Garrott's leadership, Jon
Balkind, banking analyst with Fox-Pitt Kelton said, "Tom Garrott has been one
of the true visionaries in the banking industry throughout his career. Tom
took his experience in the super-market industry and applied the distribution
principles of that business to the banking industry, creating a unique
distribution model that has only been replicated by a handful of banks. As a
result, Tom transformed National Commerce from an inefficient, commercial-
banking-focused company in the 1980s to a high-growth, super-efficient,
consumer-driven company, far outpacing the performance of almost all of its
peers. Tom has always been an advocate of the shareholder aligning both
company interests and his own with NCF's investor base. As a result, National
Commerce shareholders have been rewarded significantly during his tenure,
outperforming peer banks and the market indices by a wide margin."
The stock's increasing value has benefited NCF shareholders and employees,
including Ruth Bernstein, who concluded a 33-year career in 1993. "My profit-
sharing gave me a cushion of security so that when I retired, I didn't have to
cut back on my lifestyle," Ms. Bernstein said in 1998. "I feel very darn
lucky."
Speaking prior to her retirement in early 2002, Barbara J. Lane, first
vice president and long-time branch manager said, "I've been at NBC a long
time and, thanks to the stock ownership and retirement plans, when I retire,
my quality of life will be exactly like it is now -- it may even be better. I
have no worries. It's a good feeling."
Mr. Garrott said stories like Ms. Bernstein and Ms. Lane's, of which there
are many, are especially gratifying as he completes his NCF management career.
"It has been my goal that our associates share the rewards of our success by
means of stock ownership," he said. "In doing so their interests are aligned
with those of our other shareholders -- building shareholder value over time."
The company's employees have in fact built shareholder value. In a report
issued on April 3, 2002, Prudential Financial Analyst David Trone said, "Over
the past five years, National Commerce Financial has consistently ranked among
the top financial performers among the 30 mid-sized banks, thus warranting its
premium valuation, in our view. The 'new' National Commerce ranks first
overall in earnings per share growth and is among the leaders in overall
revenue growth and operating efficiency, while maintaining credit statistics
that are consistently better than peers'."
Sabbatical Side-Tracked
A graduate of Vanderbilt University and the Wharton School of Finance at
the University of Pennsylvania, Thomas M. Garrott was elected to the NCBC
board of directors in 1977 while an executive with Malone & Hyde, Inc., a
diversified food wholesaler and specialty retailer. In 1982, having become
Malone & Hyde's chief financial officer and executive vice president of
finance and administration, the 44 year-old Garrott announced a yearlong
sabbatical to contemplate "a mid-course correction in my career."
The sabbatical was postponed however -- and the mid-course correction
accelerated -- following a visit over coffee with then-NCBC Chairman Bruce E.
Campbell Jr.
At the time, the $800 million-asset NCBC had one banking subsidiary,
National Bank of Commerce, operating solely in Memphis. With a commercial
banking focus and minimal consumer deposits, the company had lower profit
margins than its peers, whose greater consumer deposits provided less
expensive loan funding.
Recognizing the need for retail deposits, Campbell took an unusual step
that would be a harbinger of things to come. He hired Garrott, a
wholesaler/retailer with no banking experience, as president of NCBC, and
charged him with developing the retail banking business. Garrott said he was
"overwhelmed" by the offer at the time, but came to realize it was the career
change he had been seeking.
Transforming the Bank and the Industry
From his Malone & Hyde experience, Garrott quickly spotted the
similarities between the grocery business and banking. "Banking is like
selling coffee, tea or milk, only more so," Garrott noted in an interview.
"It is a commodity business ... the only way to separate yourself is by having
lower costs than the next guy."
In banking, Garrott believed the future belonged to the opportunistic.
With that belief as a guide, he championed in-store banking as a new, lower-
cost way to distribute financial services throughout the NCBC marketplace. It
was a bold move at the time, and one that would change the industry.
The numbers behind the strategy were compelling. The fixed cost of
opening an in-store branch is about 10 percent that of a traditional bricks-
and-mortar facility and operating costs can be even lower. In-store banking,
Garrott believed, offered low risk and high return.
NCBC reached an agreement with The Kroger Co. to establish banking
facilities in supermarkets in Tennessee and surrounding states. In August
1985, NCBC opened its first in-store branch in a Kroger store in Germantown,
Tenn., near Memphis. A month later, the bank expanded de novo into Nashville
by opening several supermarket locations simultaneously.
"Due to the relatively low fixed costs, our strategy has been to open
multiple in-store branches in one day to quickly gain critical mass," says
Garrott. "Then, we price products more competitively than other banks --
something our low-cost delivery system allows us to do -- and provide our
customers with more convenient locations and hours."
Taking the In-store Model Worldwide
Though in-store banking made sense on paper, Garrott knew that real
success would require cultural change. Busy supermarkets, home to some of the
world's most aggressive marketers, were no place for banking's passive
traditions.
"Bruce Campbell and our board of directors gave us a green light," Garrott
recalled. "We got behind it, we committed to it, we looked at it as a primary
business line and delivery channel, and we kept on trying to make it run
better."
Adds William R. Reed Jr., chief operating and senior banking officer, "The
philosophy from day one was that banking had to be different in the store; it
had to be mostly a sales office. Our prototypical retail banker is a young,
aggressive person who knows how to sell."
The strategy worked. Leveraging access to 18,000 to 20,000 people in each
in-store bank's 'lobby' every week -- most of them competitors' customers --
NCBC built the business. The company used its multi-branch, de novo-entry
strategy for entering Knoxville in 1986; Roanoke, Virginia in 1993; Raleigh-
Durham, North Carolina in 1994; North Georgia in 1996; Charleston, West
Virginia in 1999; and Atlanta in May 2002.
Recognizing that other banks could learn from his company's experience,
Garrott launched National Commerce Bank Services, Inc. (NCBS) in 1987 to sell
the now-proven model to competitors. Like in-store banking itself, NCBS has
been hugely successful, counseling more than 300 national and international
banks and 50 retailers in all phases of the delivery system, and adding a
significant source of non-interest income to NCF's bottom line.
Another First in First Market
Garrott still wasn't finished breaking new ground. In 1997, in Richmond,
Virginia, NCBC opened First Market Bank together with Ukrop's Super Markets, a
mainstay in the Richmond community. Ukrop's wanted to be more than a
landlord, and got its wish with 51 percent ownership of the bank -- the first
such arrangement in the United States (and last for the foreseeable future,
due to a change in banking law).
Driven by Ukrop's enthusiasm and NCBC's expertise, First Market has
outperformed the most optimistic expectations. At the end of first quarter
2002, First Market had in excess of $800 million in assets and 26 branches, 18
of which were in-store. The four year-old company is Richmond's largest local
bank, thriving on innovative cross-marketing with the supermarket and a strong
identification with a local community that has lost many of its banks to
acquisitions.
The Future and NCF
As for banking's future, Garrott believes the industry will continue to be
changed by the "next big ideas," and led by those who aren't afraid to
implement them.
"Execution is the key. And credit for execution goes to the many NCF
associates who have enthusiastically embraced our ideas and principles to
better serve the customer and community," stated Garrott. "The responsibility
for our shortcomings and mistakes fall on my shoulders as CEO through the
middle of 2000. Fortunately, my 20-year career coincided with a favorable
business climate so that we had wind at our back. The current environment is
less sanguine, but our new management team will meet the challenge."
As for himself, Garrott, though continuing on the NCF executive committee
and board, will be looking for other useful activities that are less stressful
than attempting to learn to play golf.
National Commerce Financial Corporation is a diversified financial
services company with $20 billion in assets. NCF, headquartered in Memphis,
Tennessee, with its operations headquarters in Durham, North Carolina, is a
sales and marketing organization that delivers select financial and consulting
services through a national network of banking affiliates operating in 14 of
the nation's fastest growing metropolitan areas and non-banking affiliates.
******
Chronology of Retail Banking Expansion
National Commerce Financial Corporation
1982-2002
Under Thomas M. Garrott's leadership, National Commerce Financial (NCF),
formerly National Commerce Bancorporation (NCBC), expanded its retail banking
presence via de novo entry into new markets, opening multiple in-store
branches on the same day. Over time, the company used small, in-market
acquisitions of traditional branches to achieve a low-cost, "hub-and-spoke"
delivery system to drive its superior financial performance.
November 1982 Thomas M. Garrott named president of National Bank of
Commerce and National Commerce Bancorporation
November 1982 National Bank of Commerce, NCBC's sole banking subsidiary,
operates 24 branches in Memphis, Tennessee.
December 1982 NCBC posts year-end financials of:
Total assets: $844.5 million
ROA: 0.71%
ROE: 12.18%
December 1984 NCBC loan mix is approximately 64 percent commercial, 36
percent consumer/retail.
Mid-1985 As part of its plan to aggressively augment its retail
banking presence, NCBC reaches an agreement with The
Kroger Co. to establish banking facilities in supermarkets
in Tennessee and parts of Kentucky, Missouri, Arkansas,
Mississippi and Alabama.
August 1985 NCBC opens its first in-store branch in a Kroger Co.
supermarket in Germantown, Tenn., just east of Memphis.
September 1985 De novo entry into Nashville, Tennessee.
April 1986 De novo entry into Knoxville, Tennessee.
December 1987 NCBC posts year-end financials of:
Total assets: $1.4 billion
ROA: 1.35%
ROE: 19.08%
December 1988 NCBC operates 48 branches, 33 of which are in-store
locations.
December 1992 NCBC posts year-end financials of:
Total assets: $2.3 billion
ROA: 1.59%
ROE: 18.81%
May 1993 Thomas M. Garrott named chairman of the board upon the
retirement of former Chairman Bruce E. Campbell.
July 1993 NCBC acquires a Federal Savings Bank charter through the
purchase of First Federal Savings Bank of Belzoni,
Mississippi. Using the FSB charter will enable NCBC to
cross state lines.
July 1993 De novo entry into Roanoke, Virginia.
August 1994 National Commerce Bank Services, Inc., a consulting
subsidiary, is established to sell NCBC's in-store banking
expertise to other retailers and financial institutions.
August 1994 De novo entry into Raleigh/Durham, North Carolina.
May 1995 U.S. Banker magazine ranks NCBC the top performing
financial institution of the nation's 100 biggest banks.
July 1996 De novo entry into Greensboro/Winston-Salem, North
Carolina.
November 1996 De novo entry into north Georgia.
April 1997 NCBC and Ukrop's Super Markets, Inc. announce plans to
charter a federal savings bank together, a first-of-its-
kind venture for in-store banking. NCBC and Ukrop's will
jointly own the new bank which will operate in Ukrop's
locations.
November 1997 De novo entry into Richmond, Virginia, with the opening of
First Market Bank, a joint effort with Ukrop's Super
Markets Inc.
December 1997 NCBC posts year-end financials of:
Total assets: $4.7 billion
ROA: 1.58%
ROE: 20.92%
December 1997 NCBC operates 128 branches, 109 of which are in-store
locations.
February 1998 Acquisition of First Citizens Bancshares Company, Marion,
Arkansas
(Memphis metropolitan statistical area in-market
acquisition.)
March 1998 Acquisition of Bancshares of West Memphis, West Memphis,
Arkansas. (Memphis MSA in-market acquisition.)
August 1998 Acquisition of CBC Bancshares, Collierville, Tennessee.
(Memphis MSA in-market acquisition.)
November 1998 Acquisition of First Community Bancorp., Inc.,
Cartersville, Georgia. (North Georgia in-market
acquisition.)
December 1998 NCBC loan mix is approximately 26 percent commercial, 74
percent consumer/retail.
May 1999 U.S. Banker magazine ranks NCBC the top performing
financial institution of the nation's 100 biggest banks.
May 1999 BankINVESTOR magazine ranks NCBC the top nation's top
performing financial institution for five-year
performance.
August 1999 Acquisition of First Financial Corporation, Mt. Juliet,
Tennessee. (Nashville, Tennessee, MSA in-market
acquisition.)
September 1999 NCBC named to Standard & Poor's MidCap 400 Bank index.
September 1999 De novo entry into Charleston, West Virginia.
December 1999 NCBC operates 162 branches, 116 of which are in-store
locations.
April 2000 Acquisition of Piedmont Bancorp., Hillsboro, North
Carolina. (Raleigh-Durham MSA fill-in acquisition.)
July 2000 Merger of equals with CCB Financial Corporation of Durham,
North Carolina. Ernest C. Roessler named NCBC president
and CEO, Thomas M. Garrott re-elected chairman of the
board and named chairman of the executive committee.
April 2001 NCBC changes its name to National Commerce Financial
Corporation.
July 2001 NCF and Bi-Lo, a major grocery store chain headquartered
in Mauldin, South Carolina, announce an agreement to offer
financial services in the upstate region of South
Carolina. Approximately 10 in-store locations are
expected to be complete by the end of 2002.
August 2001 Acquisition of First Vantage Bank - Tennessee, Knoxville,
Tennessee. (Knoxville, Tennessee, MSA in-market
acquisition.)
November 2001 Acquisition of Southbanc Shares, Anderson, South Carolina.
(Greenville-Spartanburg MSA in-market acquisition.)
December 2001 NCF announces de novo expansion into Atlanta via 30
branches to be located in Kroger stores. All 30 branches
expected to be open by the end of 2003. Kroger and NCF
also announce that NCF will open four in-store locations
in Savannah in early 2002.
December 2001 NCF posts year-end financials of:
Total assets: $19.3 billion
ROA: 1.85%
ROE: 25.31%
February 2002 Acquisition of 37 divested First Union/Wachovia branches
and corresponding ATMs in North and South Carolina,
Georgia and Virginia.
March 2002 NCF posts first quarter financials of:
Total assets: $20.1 billion
ROA: 1.97%
ROE: 29.83%
April 2002 NCF operates 447 branches, 156 of which are in-store
locations, in nine southeastern states.
SOURCE National Commerce Financial Corporation
 back to top
Related links:
http://www.ncfcorp.com
Photo Notes:
NewsCom:
http://www.newscom.com/cgi-bin/prnh/20010510/NCBCLOGO
http://www.newscom.com/cgi-bin/prnh/20020424/CHW002
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 212-782-2840
CONTACT:
Eileen Sarro, +1-919-683-7642, or M.J.A.
"Jekka" Pinckney, +1-901-523-3525, both of National Commerce
Financial Corporation
|
