Philadelphia Banker out to Prove Local Is Better
Epstein, Jonathan D., American Banker
Ken Tepper wants to prove Bill Gates wrong.
The 33-year-old banker is tired of hearing the Microsoft computer mogul proclaim that banks are dinosaurs that will be replaced by computer software.
"Bill Gates may know how to write software," said Mr. Tepper, but "he doesn't know how to underwrite credit, he doesn't take deposits, he doesn't make loans, and he's not insured by the Federal Deposit Insurance Corp.
"The future of banking in America is not with Bill Gates or any other fly-by-night approach to get rich quick through some computer program or on-line service."
In fact, Mr. Tepper has his own theories about the future of community banking and its use of technology - and he's eager to test them out.
With the backing of some of Philadelphia's most powerful and prominent business leaders, the former regulator and investment banker has set his sights on an established, pristine Philadelphia savings bank, from which he hopes to launch a technologically advanced, super community banking company.
Under the auspices of a new holding company, USABancShares, the tall, self-assured Mr. Tepper is actively pounding the pavement of Philadelphia, seeking investors to contribute $10 million in capital to buy People's Thrift Savings Bank.
The 108-year-old institution, based in nearby Plymouth Meeting, has been a stable and conservative figure on the Philadelphia banking scene for most of its history. But it's prevented from growing beyond its current $20 million in assets by inadequate capital.
Its loan portfolio, almost exclusively in simple home mortgages for much of its history, accounts for less than one-fourth of its total assets. And 95% of its deposits are in certificates of deposit, since it just started checking accounts this month.
But now, Mr. Tepper wants to use the offering proceeds to buy the thrift for $1.3 million, raise its legal lending limit, and expand into full consumer and commercial lending in an effort to triple its size within a year as he molds it to his liking.
"I think the concept is a good one. By having an existing franchise, he just gets up and running that much quicker," said Ben Plotkin, executive vice president of Ryan, Beck & Co., noting that consolidation has left underserved community bank niches. "It's better than any de novo you could find."
And Mr. Tepper has got some pretty unusual firepower behind him.
The company's high-profile board is led by Bruce W. Kauffman, a former justice of the state Supreme Court and now chairman of a Philadelphia law firm, Dilworth, Paxson, Kalish & Kauffman.
Also on the board are some of the city's leading figures in real estate and development, as well as the head orthopedic surgeon for the Philadelphia Eagles football and Flyers ice hockey teams.
And if that's not enough, the bank also has a three-member advisory board led by L. William Seidman, former chairman of the Federal Deposit Insurance Corp. and the Resolution Trust Corp., where Mr. Tepper worked for two years.
"We have a lot at stake," said Mr. Kauffman. "We've all worked very hard to build our reputations, and we're not going to jeopardize that for anything, even making money."
What drew them all together is a belief that Philadelphia is being slowly drained of its local banks. In the last few years, Mr. Tepper said, about 15 small banks have disappeared, either through mergers or failures.
And the only remaining large bank, CoreStates Financial Corp., is now viewed as an acquisition target of hungry superregionals.
"Where there used to be four community banks on the corner, there's now going to be one superregional," he said. …