Three years ago, Joe Fazio, David Borchardt and Tom Hopp took notice of the incredible growth of Washington County and launched a plan to capitalize on it.
The trio formed Commerce State Bank, which ultimately opened its doors in West Bend Aug. 31.
"The community and the area saw a real need for us and were interested in us (starting the bank)," he said. "No new banks had been started in West Bend in about 70 years."
Washington County is one of the fastest-growing counties in southeastern Wisconsin.
New subdivisions are sprouting up in communities such as Germantown, West Bend, Jackson and Hartford. New commercial development has followed, mainly along U.S. Highways 41 and 45.
The county’s population rose more than 23 percent between 1990 and 2000, from about 95,328 to 117,493, according to the U.S. Census. That rate of population growth outpaced the population increases in Ozaukee, Waukesha, Racine and Kenosha counties during the 1990s, when Milwaukee County lost population.
Between 1990 and 1998, Washington County was the fastest-growing county in the state, according to the state Department of Commerce.
Washington County’s population increased by 4.7 percent to 122,999 in 2004, again outpacing the other counties in the metropolitan Milwaukee area.
Commerce State Bank’s primary target clients are small to medium-sized businesses. The bank is able to work with those businesses on almost any issue, but Fazio said Commerce State Bank’s best offerings to businesses are commercial loans.
The bank’s bread and butter, he said, are business loans of $200,000 to $1 million. The bank’s two other main focus areas are home mortgages and long-term, high-value deposits such as CDs and money market accounts.
Before the three bankers started Commerce State Bank, there was no locally owned bank in Washington County with a commercial focus, Fazio said, despite the county’s significant growth in recent years.
West Bend Savings Bank has been in the community for more than 70 years, but focuses more on consumer banking rather than on commercial banking.
And, although the "big guys," such as U.S. Bank, M&I Bank and other statewide and national players have locations in West Bend and other parts of Washington County, they are not locally owned, which Fazio said gives Commerce State Bank an edge.
"We got very positive feedback saying that this was a good idea and is needed (during the fund-raising period)," Fazio said.
Borchardt and Hopp previously worked at West Bend Savings Bank. Fazio had worked previously with M&I Bank and later Metavante Corp. The three were brought together by a mutual acquaintance because they were interested in starting a bank in Washington County. After some research, they decided West Bend was the best place to open their new bank.
Washington County was so attractive, Fazio said, because of its steady residential and commercial growth over the past 15 years.
"West Bend has a strong business climate with a good mix of businesses and a good growth rate," Fazio said. "It’s a good spot. There’s a lot of real estate development, both residential and commercial. All of the demographics support (opening a bank here)."
To date, West Bend has indeed been a good place for the new bank.
Commerce State Bank passed its three-month expectations in two months, nearly doubling its expected loan numbers. The bank projected it would have $9.8 million in loans after three months of operations. After just two months, the bank had $17.2 million in loans out, said Borchardt, who serves as the bank’s chief operational officer and chief financial officer.
Commerce State Bank is winning new clients and exceeding its expectations because it is able to react to loan requests quickly, Fazio said. And those quick answers are coming because the bank is locally owned and has local decision-making, he said.
"People are surprised how easy we are to work with, and they’re surprised at how fast we move," he said. "We’re able to tell a customer (over the phone) that if the conditions are as the customer tells us are true, we will get it done. We will have special loan committee (meetings). We’ll do what it takes to get it done."
The bank also is on track to exceed expectations for total assets, Borchardt said. It was expected to generate $23.6 million in assets after three months, and after just two months, it has already generated about $22.9 million.
"It’s been beyond our expectations, given the marketplace," Borchardt said. "It’s a tough market. A lot of people have locked their rates down over the long term. But we have the foundation of good people, good networks and good long-term relationships."
The bank expects to have at least $48.1 million in assets, and loans totaling about $29.6 million by Aug. 31 of next year. Those estimates are conservative, Borchardt said, and the bank will likely achieve even higher amounts.
He believes the bank will have $50 million to $60 million in total assets after one year, and between $35 million and $40 million in total loans.
By offering high deposit rates for CDs and money market accounts, the bank was able to nearly realize its three-month asset goals in less than two months.
Even during the start-up phase, the three founders saw indicators they were on the right track.
On Jan. 18, the bank made its official application to the Wisconsin Department of Financial Institutions. The application normally takes almost 12 months to complete, Fazio said, but Commerce State Bank was able to complete its process in a little more than seven months.
"I was told by several people that they didn’t know of anyone that had done it faster," he said. "I think it was because of the completeness of our application and the accuracy of it."
Borchardt, Hopp and Fazio didn’t officially start fundraising with potential investors until after they applied to the state and federal government for the bank’s charter. They originally set out to raise between $9 million and $10 million, but were able to raise $12 million after holding several meetings with potential investors.
The bank actually decided to stop raising capital after it generated $12 million, Fazio said.
"The more capital you raise, the more pressure there is to use it and the more pressure there is to loan it out," he said.
Commerce State Bank is currently located in leased space inside a small strip mall. The location is temporary, Fazio said, but the bank is committed to the West Bend area for its home.
In the next three years, Commerce State Bank will need to have its own stand-alone facility because of the expected increase of employees and customer traffic.
When the bank outgrows its current space, its directors will need to decide whether the bank should own its own building or if it should find a developer to build its building and then lease it to the bank, Fazio said.
"When you lease the building, you have more money to lend out," he said.
Commerce State Bank is only planning to have one location, mainly because of its focus on small to medium-sized businesses and their lending needs, Fazio said.
"Having multiple locations is expensive," he said. "Bricks and mortar are expensive, and employees are expensive. One of our priorities is managing our expenses, and I think we can do that by having a single location. For the foreseeable future, we can operate from a single location."
The experience and contacts of the bank’s leadership have helped the bank get off to such a solid start, Fazio said.
Hopp grew up in West Bend and worked as a commercial loan officer at West Bend Savings Bank for more than 20 years. He was able to bring some of that client base with him when he helped start Commerce State Bank, Fazio said.
Borchardt worked at West Bend Savings Bank’s Random Lake office. Because he was in a different location, Borchardt drew from a different pool of clients when Commerce State Bank opened its doors.
Fazio lives in Cedarburg and has been able to leverage some clients in Ozaukee County. Fritz Ruf, chairman of Commerce State Bank’s advisory board, lives in Pewaukee and has helped connect the bank to clients in Waukesha County, Fazio said.
"Part of our plan is to go to the client," Fazio said. "That’s especially true for the small to medium businesses – that’s where a lot of banks ignore clients."
Through a courier service, the bank could even pick up deposits from some clients who are too busy to make it to the branch, Fazio said. However, for now, he’s making a lot of those pickups himself.
In the long run, Commerce State Bank will continue to focus on commercial lending and long-term deposits.
"We are not focused on consumer banking," Fazio said. "Our business model is primarily loans to commercial customers and deposits, focused on large dollars and low transactions."
Commerce State Bank
Established: Aug. 31, 2005
Address: 508 Shepherds Drive, West Bend
Employees: 8
Target clients: Small to medium-sized businesses
Total Assets: $22.9 million
Total loans: $17.2 million
Web site: www.commercestatebank.com
Key Washington County Business Developments
• SynergyHealth opened a new, $55 million, 180,000-square-foot St. Joseph’s Hospital this year at Highway 45 and Pleasant Valley Road in the Town of Polk.
• Developer Robert Lang is building a world-class golf course called Erin Hills on 560 acres near Holy Hill in the Town of Erin. The golf course will open next year. In three to seven years, he plans to build a small hotel at the course with 25 to 40 rooms.
• Sidney, Neb.-based Cabela’s Inc. will build a 165,000-square-foot outdoor gear store on a 60-acre site at U.S. Highways 41 and 45 in the Town of Richfield. The state is providing $4.35 million for road improvements and the county is providing $4.5 million for the development. The store will open next fall.
• A $90 million redevelopment of the former West Bend Co. manufacturing complex in downtown West Bend is transforming the site into a new neighborhood with condominiums and commercial space. A new YMCA opened recently in the development.
• Wal-Mart is building a 200,000-square-foot Supercenter store at the southwest corner of Appleton Ave. and Maple Road in Germantown. The store will
employ 400 to 450 employees and will replace a standard Wal-Mart store in Menomonee Falls.
• Wal-Mart is also planning to build a 180,000-square-foot Supercenter store north of Highway 60 and west of Pond Road in Hartford.
• Empyrean Holdings Inc., a Houston-based national real estate holding
company, and its business partner, the United Construction Group (UCG)
of Sacramento, Calif., are developing a $50 million mixed-use commercial real estate project in Kewaskum. The project will include mixed retail, commercial and residential development.
• Aurora Health Care plans to build an 80,000- to 100,000-square-foot ambulatory surgery clinic on 60 acres northeast of Highways 45 and 60 in Jackson. The clinic will replace Aurora’s current 6,000-square-foot clinic in Jackson.
• Aurora is also building an 88,000-square-foot clinic north of Highway 60 and east of Hilldale Drive in Hartford.
• API Software Inc., earlier this year, finished construction of a 75,000-square-foot facility in Hartford, consolidating its operations from three other buildings.
• Signicast Corp. is building a 90,000-square-foot addition to its 350,000-square-foot facility in Hartford. The project will be completed next summer.
• Quad/Graphics Inc. this year completed a 160,000-square-foot distribution center that expanded its Hartford facility to 1.5 million square feet.
• Wisconsin Pharmacal plans to move from Highway 60 and County Highway P to a new facility the company plans to build on a 45 to 50 acre property it is acquiring from the village in the Jackson Northwest Business Park. Other development is expected to occur on the property. The property acquisition by Wisconsin Pharmacal is contingent on at least $27 million of development occurring on the property by 2009, according to Del Beaver, village administrator and clerk for the Village of Jackson. After the company moves, it will free up prime real estate at the Highways 45 and 60 interchange, Beaver said. "That land is too valuable for anything but commercial," Beaver said. He expects a "higher-end shopping center" to eventually be developed there.
Growth Spurts
County 2000 population 2004 population % change
(U.S. Census) (state estimate)
Washington 117,493 122,999 4.7
Kenosha 149,577 156,082 4.35
Waukesha 360,767 373,339 3.48
Ozaukee 82,317 85,135 3.45
Racine 188,831 191,853 1.6
Milwaukee 940,164 939,358 -0.09
County 1990 population 2000 population % change
(U.S. Census) (U.S. Census)
Washington 95,328 117,493 23.3
Waukesha 304,715 360,767 18.4
Kenosha 128,181 149,577 16.7
Ozaukee 72,831 82,317 13.0
Racine 175,034 188,831 7.9
Milwaukee 959,275 940,164 -2.0
Small Business Times, December 9, 2005, Milwaukee, WI
