Allegiance Bank Texas in Houston opened for business only a week ago and already appears to have a rivalry brewing with Sterling Bancshares Inc.
The start-up was founded by a who's who of Sterling veterans, and in just the last week roughly a dozen key Sterling bankers, including two market presidents, have defected to Allegiance, according to sources close to both companies.
Neither J. Downey Bridgwater, the chairman, president, and chief executive officer of the $4.4 billion-asset Sterling, nor Daryl Bohls, Allegiance's president, would discuss the matter, but sources said that the bulk of the bankers joined Allegiance from two Houston branches.
Industry observers said that they are not surprised by the defections, given the bankers' ties to Allegiance's founders and the fierce competition for experienced lenders in Houston and other major markets in Texas.
The bankers also may have been won over by Allegiance's plans for a decentralized business model, which might remind them of the old days at Sterling, the observers said.
Allegiance's founders include George Martinez, who co-founded Sterling in 1974 and was its chairman when he left in 2004; Steven Retzloff, a former Sterling chairman and son of another co-founder, A.F. Retzloff; and Mr. Bohls, a longtime Sterling executive who left this year to form Allegiance. Mr. Martinez is Allegiance's CEO, and Mr. Retzloff is its chairman.
Brent Christ, an analyst with Fox-Pitt Kelton Cochran Caronia Waller, said he had expected some Sterling lenders to jump ship when Allegiance opened. Though Mr. Bridgwater, who joined Sterling in 1996, worked side by side with Mr. Martinez for years, "people tended to take sides" as Mr. Bridgwater moved up the management ranks, Mr. Christ said. Mr. Bridgwater was named the president in 1998, the CEO in 2002, and the chairman after Mr. Martinez left.
"You had the George Martinez contingency and the Downey Bridgwater contingency," he said. "I don't think it is a complete surprise that the people left at Sterling would follow George."
Qualified lenders are in short supply in Texas, and banks throughout the state are paying up for their services, but one observer said Allegiance is not paying the lenders any more than they were making at Sterling.
Allegiance, however, is flush with cash. It opened its doors with $32.2 million of capital, more than $7 million above the target set by its organizers.
Sterling built its reputation catering to owner-occupied businesses, the same market Allegiance is targeting. It has one branch and one loan production office, and it is looking to add a second loan office, Mr. Bohls said in an interview last week. "We believe the owner-operated business market is the biggest thriving economy in Houston," he said. "There are a lot of $5 million deals around."
Allegiance's leaders also are planning to operate the bank much the same way they ran Sterling. Lenders who prove themselves as rainmakers will be given their own branch to run and a significant amount of autonomy, Mr. Bohls said.
Sterling's lenders had similar autonomy for almost 20 years, but about four years ago it started moving toward a business model in which credit decisions were shifted to the headquarters.
Sources said that change did not go over well with some of the old guard and likely explains why Sterling has lost a number of lenders of late — to Allegiance and other banks. In fact, Sterling ran display advertisements in the Houston Chronicle this month seeking qualified lenders.
Still, the decision to centralize appears to be paying off. Four years ago Sterling's ratio of chargeoffs to loans was above the industry average for banking companies of its size, but today it is well below the average, according to Federal Deposit Insurance Corp. data.
Loan growth, though, has slowed at Sterling of late, and Mr. Christ said he expects the recent defections to cause some, though not significant, disruption.
"From a volume perspective, it will probably be a little bit of a headwind to overcome," he said.
