Sutton Bank 1878-2023
Banking has changed a lot in the last 145 years. One thing that hasn't is Sutton Bank's enduring dedication to serving its valued customers and its steadfast determination to building stronger communities.
We are proud to celebrate our 145th anniversary in 2023, and look forward to serving you for many years to come with the same level of commitment and service that has become the standard for everything we do.
A foundation built on relationships.
At its core, banking has always been a business of responsibility and earning the trust of its customers. The leaders of Sutton Bank feel a responsibility to remain independent and provide products and services that grow out of understanding our customers' needs, both individuals and businesses. Our roots are deeply tied to the people, commerce and values of north central Ohio. We know the people and the communities we serve. Our employees live and work in these communities, and participate in the decisions of local business organizations. Today, Sutton Bank operates eight full-service branch offices throughout a 4-county area.
1878 - 1978: The First 100 Years
Of Banks and Bankers
We can say The Sutton State Bank was born on July 13, 1836. That is the day Lester Sutton, the founder, was born in Steuben County, New York. In the next 42 years, before he opened his bank, he had many experiences to prepare him for a banking career.
In 1852 Lester's parents took him "West" to Ohio. After a few years in Reed Township they bought a farm and settled in Venice Township. When he was eighteen Lester graduated from the Academy at Republic. Republic at that time was the largest town in Seneca County, being located on the Kilbourne Road and also on the original route of the Mad River and Lake Erie Railroad.
The next eight years Lester spent teaching school in the area. However in 1862 he began reading law under the tutorage of General Leander Stern of Tiffin. The General became a Civil War casualty at the battle of Stone's River, a fight in which General Sheridan lost three of his brigade leaders in one day. Lester then resumed teaching but continued his study of law alone.
In 1866 Sutton was admitted to the bar and opened his first law office in Attica in the upper room of a rather primitive building where the Attica Library now stands. By this time Attica had 370 people and had had a village corporate government for about 15 years.
For the next 11 years Attorney Sutton was a busy and successful man. The growing community had an increasing need for legal services. The community also had a growing need for banking services. People of necessity banked their money with the local merchants or attorney. The merchants and attorneys were the ones who had strongboxes, safes on their premises and accounts in New York banks.
As the years went by Lester found himself doing more and more private banking. By the year 1877 he decided to formally establish a bank in Attica. He purchased a property on North Main Street from Mr. and Mrs. Crist Limbaugh. The Limbaugh homestead was razed and a new building was built to Lester Sutton's specifications. This building still survives as the southern end of the old North Central Electric Cooperative building. In the meeting room of North Central can still be seen some of the beautiful woodwork and windows that were part of the old bank.
It is known that the Bank was open for business sometime late in 1877 but tradition has always given the year as 1878. In fact, tradition has also given the precise date as February 12, 1878. This writer is willing to believe that this date, February 12, relates to the fact that all Suttons have been staunch Republicans who were always willing to celebrate Lincoln's Day.
In that long past era of banking the formalities of chartering and government control were non-existent. The depositor's primary guarantee for their funds came mostly from their faith in the owner of the business. That Lester Sutton's bank grew and prospered is testimony to the faith people had in him.
In the early years of the bank the mercantile firm of Rininger and Silcox, which had been doing some of the private banking of the area, considered opening another bank in the town. After considerable thought and investigation they abandoned the idea because Sutton's Bank was too highly regarded in the community.
Here again we find another coincidence regarding the present location of the Bank and this was also the location of the Rininger and Silcox Store. The story is told of the time a gang of bandits invaded Attica late at night choosing the Silcox store as their victim. They broke into the store and dynamited the huge safe, which incidentally stood right about on the location of the present bank vault. Other members of the gang stayed outside warning inquisitive local citizens to keep their heads indoors or have them blown off. The gang evidently knew the Silcox banking activities so this episode might be said to be Attica's first bank robbery. Coincidence again enters our story because a lone bandit held up a teller in 1975 in the present Bank building. This means that Attica's only two bank robberies occurred about a century apart at the same location but the victims were not the same institutions. The old time baddies were never found but the modern stick up artist was in the slammer within two weeks.
During many of the years the Sutton Bank was at the North Main Street location it had a unique form of robbery protection. Amos Lake, a bank employee who was an excellent shot, slept above the banking room. A hole between the upper and lower levels of the building provided opportunity for Amos to use his Winchester on any undesired visitor to the bank. Therefore, there never were any such undesired visitors.
In the summer of 1907, two men named Judd and Duke came to Attica from Cleveland and opened Attica Savings and Trust Bank in what is now the north room of the Attica Eagles, formerly Attica Hotel. The competition was short lived. Before the summer was over Duke disappeared taking the depositor's funds with him.
Alva G. Sutton, Lester's brother was the Sutton Bank's first Cashier. He served until 1903 when he accepted appointment as Postmaster of Attica and left the Bank.
On May 1, 1903 Lester, who was now in poor health, formed a partnership with his two sons, Leonard L. and Charles C., whereby each of the three became equal partners. The firm's name was changed to Lester Sutton and Sons. In 1909 death ended the career of the pioneer attorney and banker of Attica. The sons, as surviving partners, operated a successful and constantly growing bank for another six years before initiating the next change in the course of the Bank's history.
In the February of 1915 Leonard L. Sutton, Charles C. Sutton, W. L. Fritz, I. Coder and Edward Weaver filed Articles of Incorporation for The Sutton State Bank. On March 24th of that year the stockholders met and launched the corporation, electing the same five men as Directors. The Directors in turn elected Leonard Sutton President, John Schottler Vice President and Charles C. Sutton Cashier. On May 1, 1915 Lester Sutton and Sons became The Sutton State Bank, an Ohio Corporation.
The officers and directorate remained the same for many years thereafter except that C. M. Link became the new Director upon the death of Edward Weaver in December of 1918.
The next outstanding item of Bank history started in August 1918 when the Bank purchased a part on inlot 16 in Attica. This was the location of what is known locally as the Silcox building and the bit of real estate to which we have referenced several times previously. Plans were made to construct the beautiful classic building of today. The type of bank architecture was a bit ahead of its time. However many buildings of this school were erected during the 1920's. Then during the 1930's practically no banks were in a position to afford new buildings. Through most of the 1940's the war and the following economic confusion prevented much construction. Thus in 1950 our building was still as modern as most and more beautiful than most.
The construction introduced another Sutton to our history. Corwin, the son of Leonard, was an engineering student. He was given the supervision of the demolition of the old Silcox building and the excavating for the new building. The new building was dedicated on August 28, 1920.
Corwin Sutton began his career as a Bank officer on September 3, 1926 as Assistant Cashier. He was elected a Director in March of 1927 after the death of Vice President and Director John Schottler.
The next Sutton to enter the Bank scene as an officer and Director was Charles Norris Sutton. His father, Charles C. Sutton, died on Christmas Day in 1930. Charles N. succeeded Charles C. as a Director and was named as Assistant Cashier on January 14, 1931. Corwin Sutton was advanced to Cashier.
The death of Lester's other son occurred in 1935. Many of us in the community remember Leonard Sutton, a meticulously dressed, imposing man, but one with a broad streak of humor, who was known to everyone as "Len." Len was never admitted to the bar but for decades he gave so much legal assistance in the form of wills, deeds, mortgages, and contracts that most people assumed that he was a full-fledged lawyer. Among many other things Len had been President of the first class to graduate from Attica High School in 1880.
The death of Leonard left the management of the Bank to the third generation of Suttons, Corwin and Charles N. in direct succession to their fathers. Corwin served as President and Charles Norris as Cashier. These were the men who guided the Bank through the trying years of the Great Depression and of World War Two.
To everyone in Attica the Sutton cousins were affectionately know as "Pop" and "Posy." Originally Corwin had been known as "Dad" instead of "Pop." The traditional explanation was that, while a small boy, Corwin was advising a gang of carpenters as to how to do their work and they responded "Yes, Dad!"
During the Bank Holiday of the depression The Sutton State Bank was examined and approved in the minimum time required. The bank was back in service in record time. In later years an official of a large corporation in Sandusky confided that his company had been about to open an account in Attica during this period because the Sutton State Bank was the nearest bank that was operating. The performance of the bank during these years of economic turmoil and war did much to increase the respect and confidence that it had always held.
In 1948 Charles N. dropped an active part in the management of the Bank to become Executive Vice President of the Richland Trust Company of Mansfield. About this time he also served as President of the Ohio Bankers Association. He continued to serve as director of the Sutton Bank.
The move by Charles Norris led to the introduction of the first member of top management who was not a Sutton. Victor Ayres was named Cashier at the end of 1948. Ayres was at the time the Attica Village Clerk and had a wide knowledge of local people and local conditions. He was to serve the Bank for 28 years and was the bridge between the third and fourth generations of Suttons.
In January 1955 Alva J. Sutton, son of Corwin, first appears in the officer list of the Bank as an Assistant Cashier. Alva had worked in the Bank during summers and other part time periods. He continued this schedule until he completed his education at Ohio State University.
At this time President Corwin Sutton had been in poor health for a few years and his death occurred in April of 1956 at the age of 56. His death was a loss to the entire community for he had served a great many more capacities other than that of banker. As Chairman of the Attica Board of Public Affairs he had been instrumental in rebuilding the village water system. As Attica Fire Chief for many years he had built an efficient volunteer organization. These were just two of the many responsibilities he had assumed.
The loss of Corwin necessitated a complete reorganization of the official family of the Bank. Hobart K. Link was named Board Chairman while Charles N. Sutton became the first President who was not an operating officer. A new title of Executive Vice President was assigned to J. Victor Ayres. Alva J. Sutton became Cashier and also a Director.
Thus it evolved that the next twenty years the management of the Bank would be in the hands of the Vic and Alva. Alva was the fourth generation of Sutton bankers.
The first great problem was the necessity to modernize the forty-year-old physical facilities of the Bank. The three old buildings to the south of the Bank were purchased and razed, as was one building to the east. A contract was let with the St. Louis Bank Building Corp. to remodel the interior of the Bank at a cost of approximately $80,000. The classic lines of the exterior remained unchanged, despite the beautiful new interior. A drive-in-window was part of the new facilities. The Bank eventually acquired all of inlots 17 and 18 south of the Bank. In recent years our new post office and a 40 car free parking lot have appeared on this area. The development of this part of the downtown area was largely the result of long term planning by the Bank.
Another change in the Bank organization occurred in 1969. The Sutton State Bank and the Richland Trust Company formed a bank holding company known as Mid-Ohio-Banc-Shares, Inc. Shortly thereafter The Farmers Bank of Loudonville joined the group. This combination of banks resulted in efficiency and savings, particularly in the use of computers. At the same time the banks retained their separate identities and management.
In 1970 Charles N. Sutton retired from banking by disposing of his investment in the Bank and the holding company. He was to spend the remainder of his life as a resident of Florida.
In accordance with bank tradition. Alva J. Sutton now became President and, for a few years, retained the title of Cashier. J. Victor Ayres was made Chairman but remained active as Chief Operating Officer. Gordon Sevold, who had been tax and accounting advisor to the Bank, replaced C. N. Sutton on the Board.
In 1972 saw another change in the ownership of the Bank when Mid-Ohio-Banc-Shares was merged into Centran Bancshares Corporation. Thus our Bank became part of a complex which included five banks, three finance companies and an international bank, but which still permitted us to retain our individual identity and management.
1974 saw Virginia L. Nutter elected as Cashier. In twenty years of service Virginia had risen from typist and teller to Assistant Cashier and now became the first woman to hold the office of Cashier.
In 1975 Eric Gillett, first appeared as Loan Officer. At the end of that year Victor Ayres retired as the active operating officer but was retained as Chairman of the Board.
The Sutton Bank started its second century of service and expansion under the supervision of three native born officers, Alva J. Sutton, Virginia L. Nutter and Eric Gillett.
1920 building which remains our headquarters today. South Main St. Attica, OH.
Founder, Lester Sutton
Original building with Leonard, Charles and Lester Sutton. North Main St., Attica, OH.
The earliest available record on the partnership of Lester Sutton & Sons is a report to the state auditor dated October 12, 1904 summarized in round numbers as follows:
|Cash & due from banks||11,000|
The cash listed in the assets consisted of $1,500 in gold coin, $2,500 of silver coin and $7,000 of paper money.
On May 1, 1915, the first day of the corporation's banking activity, the changeover was subject to examination by the state, which reported as follows:
|Banking house||9,500||Undivided Profits||1,500|
|Cash & due from banks||119,000||Deposits||328,500|
Growth of the bank was rapid and consistent as shown by the following year-end totals:
While some of the expansion of these figures is due to economic inflation, the greatest part is due to the vigor and efficiency of our community. The farmers and farm related businesses in the Seneca East area have produced and served with far above average performance. The Sutton Bank through its entire life has shown an above average willingness to finance this community's growth.
Centran Corporation, in turn, had shown its faith in the community and in the bank by arranging to provide $250,000 in new capital through purchase of new Sutton stock.
Earnings of the bank had been consistently very good throughout these hundred years even though the greater part of the gross income is being paid back to the depositors in the form of interest on their savings accounts and certificates. Our depositors received about $650,000 from the bank in 1977.
At the end of the first hundred years, 1978, our round number summary of the figures reads as follows:
|Cash & Due from Banks||501,000||Deposits||14,403,000|
|Premises & Equipment||117,000||Undivided Profits||398,000|
|All other items||199,000|
The author of the “First Hundred Years” was J. Victor Ayers. He served the community of Attica as one of its bankers and a leader of The Sutton State Bank for 28 years. He spent many hours researching Village and Bank archives to compile the unique success story of The Sutton State Bank. Although Mr. Ayres passed in November 1985 and did not get to observe the transformation of the bank, his efforts to memorialize the first century of The Sutton State Bank are acknowledged and very much appreciated. Those comments have been shared by many over the years.
1979-2022: 45 Years and Change
In order to appreciate the longevity and the success story of The Sutton State Bank, now known as Sutton Bank, one needs to also have an understanding of the economic and regulatory environments which occurred during this period.
The period following the New Deal banking reforms of the 1930’s up until the 1970’s experienced a relative degree of banking stability and economic expansion. It is a known fact that regulation has also served to make American banks far less innovative and competitive than they had previously been. The heavily regulated commercial banks had been losing an increasing market share to less-regulated and innovative opportunities. For this reason, a wave of de-regulation began to occur in the 1970’s.
The 1970’s will always be remembered as a time when the Vietnam War ended, high levels of deficit spending by our Government, the Arab Oil Embargo which created high gas prices, and economic recession with a high level of unemployment compounded with a high rate of inflation. The latter became referred to as Stagflation. Increased interest rates were the tactic utilized to combat high rates of inflation. In spite of the outside events, the bank performed well.
The inflation of the 1970s was both good and bad, depending upon your situation. If you were a depositor, the high rates of interest were manna from Heaven. The highest rate offered on a Certificate of Deposit at the Bank was 16 percent! Conversely, during this same period, the National Prime Lending Rate rose from 8 percent in the early 70’s to 15.25 percent by the end of the decade. This increased the interest expense of all borrowers taxing their abilities to repay their obligations.
Please recall, in 1972 Sutton Bank was owned by Centran Corporation, a multi-bank holding company. During the latter years of the 1970’s, the executive management of the lead bank, Central National Bank, personalized what is now considered to be one of the key risk elements of a bank, interest rate risk, also known as Sensitivity Risk. The executive team forecasted interest rates had peaked. They devised a leverage strategy to increase net interest income, or the difference between what you receive on loans and investments and what you pay for funding and deposits. The team invested heavily in long-term fixed rate bonds. These investments were funded by borrowing through short-term variable interest rate instruments in an effort to maximize income. The executive team was 180 degrees wrong in their interest rate forecast. Interest rates continued to rise thereby increasing the cost to fund the arbitrage at a time when the value of the bond investments were quickly depreciating. Interest rates increased to the point the largest bank in the holding company was losing money daily due to negative interest rate spreads without the ability to sell the investments due to what would then become massive capital losses. Capital injections became a necessity to temporarily stabilize the parent bank. Without knowing it, Central National Bank became the canary in the coal mine for the Savings and Loan crisis which would begin in the early 1980’s due to rising costs of funds and much lower yielding long-term fixed rate investments.
There have been many impactful regulations issued over this period of time covering topics such as corporate governance, capital, asset quality, interest rate risk, liquidity, vendor management, information security, consumer protection, and more. The first of many impactful regulations was The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act. It is a law requiring financial institutions in the United States to assist U.S. government agencies in the detection and reporting of money laundering. This regulation essentially became the full employment act for compliance departments across the nation subsequent to the events of September 11, 2001. The banking industry, without a vote and to this day, became a watchdog with and for the United States Treasury for not just money laundering, but transaction fraud, human trafficking, elder abuse, and more.
Branching in Ohio was limited to the immediate county until the passing of Ohio Senate Bill 256. This legislation was based upon a study commissioned by Governor John Gilligan in 1971. The resulting recommendations pitted large institutions against small institutions. This issue alone was the reason why the Community Bankers Association of Ohio was created and became the political voice for community banks. After several years and much lobbying, Senate Bill 256 passed both the Ohio House and Ohio Senate in 1978. Thus began the phase-in of statewide branching, which had been accomplished up to this time by only large bank holding companies. Bank holding companies, or organizations formed to own multiple banks, had been permitted to operate statewide since 1929. In essence, a bank holding company had the ability to branch statewide as a unit bank, fully staffed with both a front and bank office. This is unlike the branches of today. This path did not create significant efficiencies; but it was a beginning. This is how Centran Corporation which purchased Mid-Ohio Bancshares in 1972, the parent company of Sutton Bank, conducted intrastate branching by purchasing banks or other holding companies in several parts of Ohio. The next obvious phase to change was interstate branching. This was authorized through Congressional action with the passing of the Riegle-Neal Interstate Banking and Branching Efficiency Act in 1994. To date, national interstate branching has been achieved by a limited number of institutions through mergers and acquisitions.
In 1980 the Depository Institutions Deregulation and Monetary Control Act was passed. This Act established the ability to create interest bearing checking accounts and began to phase-out of deposit interest rate ceilings. The purpose was to inject financial innovation into the banking industry. As a part of this process, the deposit insurance limits were increased to $100,000 from $40,000. For the community banking industry, meaningful levels of deposit insurance have been and will always be vital as it tends to level the playing field with the very large banks which are seen as too big to manage as well as to big to fail.
There is an adage, be careful what you ask as you just might receive it. That became the case with the passage of the Monetary Control Act of 1980. The Federal Reserve Board of Governors was fighting inflation by raising interest rates. The industry needed legislative change to remain competitive in the market place to fund loan and other asset growth. However, it came with a cost. The cost was margin compression. It became more costly to fund the balance sheet of a financial institution, not to mention increasing the complexity. The savings and loan crisis, which would follow, was a direct result of mismatched pricing of assets and liabilities or deposits. Just as Central National Bank had invested long in fixed rate products and funded with short-term variable rate deposits, so too did the savings and loan industry. Their mismatches were long-term fixed rate home mortgages they had booked in prior years. This crisis went so deep and forced closures of many of the savings and loans also known as thrifts. It also necessitated the merger of the Federal Savings and Loan Insurance Corporation (FLSIC) with the Federal Deposit Insurance Corporation (FDIC) as the banking industry absorbed the losses of the thrift insurance fund to insure their depositors did not lose money on their deposits.
As this was occurring there was yet another crisis impacting the community banking sector. It was the Farm Crisis of the 1980’s. As previously mentioned interest rates reached all-time highs and impacted credit quality or the ability of people to repay their debts. This devastated communities and forced the closure of numerous banks. This is where the small size of Sutton Bank, coupled with conservative underwriting and good farm management practices of our customers kept the bank in a strong position.
This brings us back to Centran Corporation and the strain on capital Central National Bank was experiencing due to their failed levered investment strategies executed during the 1970’s. Central National was losing money every day, open or closed. The ultimate solution to the Central National Bank interest rate risk problem was to merge Centran Corporation, the bank holding company which owned Central National Bank, with another healthy bank holding company. Society Corporation became that suitor. The potential impact to The Sutton State Bank and the other affiliate banks was thought to be obvious. It was believed all affiliate banks would all become a branch within the Society Bank network. How this unfolded for The Sutton State Bank is best told by Alva J. Sutton, President and CEO of the bank in a letter to the Shareholders as a part of his annual report.
The following is taken from the January 1986 annual report to Shareholders reflecting upon the events of 1985:
“The year of 1985 was a very eventful year for The Sutton State Bank and Sutton Bancshares, Inc. The year began with the knowledge that Centran Corporation and Society Corporation were engaged in a merger and that the fate of The Sutton State Bank was not known. It was assumed that we would become a branch of Society’s Northwestern Regional Bank in Fostoria. When the news came in late January that Central intended to sell the Sutton State Bank on a bid basis in order to facilitate their merger with Society by eliminating a Herfindahl-Hirshman Index situation, the people involved were not only very surprised, but very excited about the possibility of presenting a successful bid to purchase the bank on a local level. This started a chain of events that had to occur in a very short time frame, dictated by the time constraints of the Central/Society merger. Data had to be prepared so that the Bank Sale Prospectus could be published by Centran. The physical properties and equipment needed to be appraised. During this period we, who had no previous experience to draw upon, needed to formulate and execute a plan to present an acceptable bid for the purchase of the Bank. We talked with many individuals, held informative meetings with the people of the community, received tremendous support and obtained many verbal pledges for financial support, but kept running into road blocks. We met with Golembe Associates, Inc., who were handling the sale for Centran, on February 7th and learned that we were at a very big disadvantage in presenting an acceptable bid as they had very little assurance that we could comply with all their requirements. The task seemed almost insurmountable. Time was running out and the bid was due on March 1, 1985!
During conversations with Frank Kinn, Paul Gillmor, and Dr. Cole of The Ohio State University, the name of Douglas Austin of Douglas Austin & Associates, Inc., who is also a professor of finance at the University of Toledo, kept recurring. On February 13, I contacted Dr. Austin and made an appointment to see him in his office. Frank Kinn, John Mack, and I traveled to Toledo on Friday, February 15 and laid out our whole problem before him. Dr. Austin seemed excited about the prospect of helping us out of our dilemma, and when he was convinced that we were serious and were willing to support our convictions, his whole staff gave 110% to make this happen. By the following Wednesday they had prepared cash flow charts to support the purchase showing the amount of cash required to justify a leveraged purchase. We set a goal of 15 investors with equal shares. Dr. Austin’s staff performed a thorough deposit analysis to establish and acceptable bid price.
Our work had just begun! Many, many hours of time were spent the following week meeting and talking with prospective investors and by Saturday, February 26, when Hal Nichols, Marty Werner, and Craig Mancinotti came from Toledo to go over the projections with the group we had assembled, we nearly had the required number of investors. More late hours on Saturday evening and even into Sunday were required. By Sunday afternoon, when I was to have this information in Dr. Austin’s hands, we were three investors short of meeting our goal.
I left Attica mid-afternoon and went to Toledo by way of Tiffin and Fostoria. There I obtained the final four investors, making the total 16. This provided a small cushion with which to work. I met Dr. Austin Sunday evening in his home and gave him all the information needed on each of our investors. What an emotional experience, but the work had just begun. We still needed the financing to complete our bid.
Monday morning, Hal Nichols called and asked if I could be in Toledo by 11:30. I was, and we made a hurried trip to Fort Wayne, Indiana and present our loan request to the Summit Bank. On my return, I met with and presented the same request to the Commercial National Bank of Tiffin. The following day we presented the same request to The Sylvania Bank in Sylvania. All were met with good responses, but we chose Commercial National Bank of Tiffin due to their more satisfactory terms. We obtained a commitment and with a complete package we presented our bid to Centran by the due date of March 1st. The following Monday we learned that we were not the successful bidder but were allowed to change our offer. The decision was made to make one final bid. Wednesday, March 6th, the word came that Centran had accepted our bid. Another one of those emotional experiences! Our employees were ecstatic. Banners and balloons were everywhere! Jerry Betterman, an Investment Banker from Chicago, remarked that it was like walking into the locker room of a team that had just won the Rose Bowl. But the work was not over.
A letter of Intent needed to be negotiated with Centran. This covered the time table for the final definitive agreement and stock purchase agreement between the parties involved and started the first step in the negotiations with Centran. This letter, dated March 7, 1985, was completed on March 12th setting the deadline for the final agreement as of March 28th. This date was later extended to April 1, 1985. This began the negotiations with Centran Corporation to arrive at the final Stock Purchase Agreement and Escrow Agreement. These were completed on and signed April 1, 1985 a date we set for final closing not later than 45 calendar days after approval by the Board of Governors of the Federal Reserve of the application by Sutton Bancshares, Inc. for permission to acquire control of The Sutton State Bank. During this period, Dr. Austin was completing the Draft copy of the FRY-1 Application to the Federal Reserve. The Draft copy was presented and after a number of follow-ups for additional information, the Federal Reserve acknowledged acceptance of the application on May 13, 1985. The long awaited letter came on June 6, 1985:
“Dear Mr. Sutton:
The Federal Reserve Bank of Cleveland, having considered the relevant statutory factors, approves the application of Sutton Bancshares, Inc., Attica, Ohio to acquire Sutton State Bank, Attica, Ohio, pursuant to Section 3(a)(1) of the Bank Holding Company Act.
In the consideration of the application, reliance was placed on Applicant’s representations and commitments. The acquisition many not be consummated before the 30th calendar day or after three months from the date of this letter, unless such period is extended by the Federal Reserve System, etc.”
What did this mean? It meant that we had accomplished what we had set out to do in early February and completed it in record time. The original deadline of December 31st, which was accelerated to September 1st and then to August 1st was met. We now required an extension of time on the Stock Purchase Agreement so that the final consummation of the sale could take place on July 31, 1985. On this date, we met in Cleveland, Ohio and paid to Centran Corporation the full purchase price and received in return the Stock Certificate representing 10,000 shares of the Common Stock of The Sutton State Bank, Attica, Ohio. What an experience!
This short history of the events that transpired over the last year is not your usual annual report to the stockholders but something that I felt must be put into writing to add to the history of The Sutton State Bank. We owe a debt of gratitude to a lot of dedicated people who gave unselfishly of their time and energies to make this happen and are continuing to do so. Eric Gillett, Virginia Nutter and all the employees of the Sutton Bank who have contributed so much to make this venture a success.
Thank you to all. Banking has become fun again!”
Below is a synopsis of the balance sheet of the Bank as of July 31, 1985.
|Cash & Due from Banks||749,984||Deposits||25,416,248|
|Fed Funds Sold||1,900,000||Surplus||800,000|
|Net Loans||17,472,850||Undivided Profits||1,291,155|
|All Other Items||845,592|
|Total||$ 27,707,043||Total||$ 27,707,043|
What Alva alluded to but did not clearly spell out, as his reading audience had been through the purchase process, was the fact the bank was purchased by a levered buyout. Or said another way, the bank was purchased as anyone might purchase their home, with a down payment in conjunction with debt.
Sixteen investors each invested $61,000 for a total equity investment of $976,000 to capitalize Sutton Bancshares, a new one bank holding company formed solely to facilitate the purchase of The Sutton State Bank. The agreed upon price paid to Centran Corporation to acquire The Sutton State Bank was $2.825 million. To fund the difference between the equity investment and the purchase price, debt was required in the amount of $1.9 million and Commercial National Bank of Tiffin, Ohio was the lender. The consulting expenses totaled $61,000. The interest rate on the debt was fixed at 12.25 percent payable quarterly for the first two years. The rate of interest would subsequently become floating at the Prime Lending Rate plus 1.50 percent. Principal payments were deferred for two years and began the third year in the amount of $25,000 increasing by a similar amount each year until the payment amount reached $200,000 annually. Interest continued to be paid quarterly. The debt to Commercial National Bank was paid in full in October 1994 through regular amortization and by Sutton Bancshares, Inc. issuing a limited amount of stock as the bank branched into new communities.
On a side note, a measuring stick of satisfactory bank performance at the time was a 1.0 percent Return on Assets. Fortunately, Sutton Bank was historically a good performing institution and you will see why it matters. At the time of acquisition total assets were $27.7 million. If a bank is performing at the 1.0 percent Return on Assets level, net income would be $277,000. Now, please consider the need to fund capital for growth, legal expenses, paying interest on the bank holding company debt, and eventually the required principal payments on the debt. Interest on the debt for the first year was $232,750, theoretically leaving $44,250 for other needs. Cash flow was tight at the holding company and no cash dividends were paid to Shareholders for a number of years.
Recognizing that growth of the balance sheet is one solution to expand net income and assist with debt repayment, the Board of Directors authorized a feasibility study in July of 1986 to determine if the City of Willard would support a branch of Sutton Bank. As Sutton Bancshares purchased the bank the previous year, a small group of people from Willard were driving to Attica for their banking needs. In spite of the probable support, the Board hesitated to branch due to the leverage position. It proved to be a wise decision.
Even without the proposed branch, the bank had been smartly growing assets during 1986 and 1987. The next year, 1988 proved to be a tumultuous year. It was a period of time where credit quality was declining due to consumer defaults. Loan losses were greater than normal and compounded with a new risk for the bank, merchant fraud. The latter was the largest single factor to negatively impact the performance of the bank that year. Loan losses and merchant fraud caused net income to plummet to $127,000, a Return on Assets of 0.35 percent, far less than what was required to service our debt. However, because the prior two years were successful, capital reserves were utilized to service debt and still maintain required capital ratios. That year also saw the departure of two of the three Officers of the Bank. Virginia Nutter resigned in the first quarter and Alva Sutton resigned at the end of the year to pursue other interests. Eric Gillett was promoted to President and Chief Executive Officer in January 1989.
The bank continued to gain market share with its’ single location returning to what can be described as improved, but average performance by 1990. Because of the improved financial performance, the Board of Directors approved its’ first branching outreach in June 1991. Regulatory approvals were received and the first branch was located in downtown Willard in the office vacated by Society Bank, which had purchased Toledo Trust, which had previously acquired The Willard United Bank in 1983, a casualty of the Ag Crisis. A drive-in location was subsequently opened located on US Route 224. Over the next number of years the bank expanded to the communities of Ashland, New London, Mansfield, and Tiffin. A new operations center was added to the Attica location in 2004 to support growth.
Two of the office expansions were especially noteworthy. First, the office in Mansfield began in 1993 as a Loan Production Office (LPO) and was eventually converted to a full-service office. This venture was an effort to find a niche which would assist in helping the bank become a strong performer, year in and year out, while providing value to customers as well. Two seasoned mortgage bankers were hired with the goal to underwrite, and originate not only local mortgage loans but mortgage loans sourced by residential mortgage brokers across northern Ohio. The mortgage Loan Production Office was in response to consumer demands requesting fixed rate loan products as opposed to a variable rate instrument. These loans were sold to investors such as Freddie Mac and Fannie Mae with the loan servicing being retained by the bank. We continued to remember the lessons taught by Centran Corp and the savings and loan industry as we passed along the interest rate risk to the investors. The non-interest income generated from the sale of loans to investors helped to diversify revenues and enhanced the performance of the bank. The strategy was successful for a period of time. This line of business was cyclical as volumes ebbed and flowed with interest rates. However, mortgage originations began to seriously wane in 2004 and 2005 with debtor’s general acceptance of the Alt-A/subprime mortgage products at a time interest rates were very consumer friendly. The adage shared by the head of this mortgage banking unit regarding the lenient underwriting at the time was “If you could fog a mirror, you could get a loan.” We quickly learned, as did the rest of the industry, the combination of low rates and loose underwriting was a recipe for disaster as it created a massive real estate speculative bubble.
The second branch opening of particular interest occurred in 1998 with the hiring of eight individuals to staff a yet to be identified or established branch in Ashland. The staff were hired in October from Signal Bank, located in Ashland. It had just two months prior announced their intent to sell to First Merit, which is now a part of Huntington Bank. The first Ashland branch of Sutton Bank was opened February 1, 1999. It was a bold move and began to immediately impact the financial performance of the Bank. Not only had the bank hired the key banking staff within the community, the Board of Directors made a strategic marketing move by making a sizable contribution to the YMCA which was a community focal point at the time. It signaled our interest was genuine and our approach was different. It too, was the right move and the right time.
Dot Com and Great Recession
From time-to-time there have occurred events which began with the best of intentions. The first of such events was the “Dot Com” which eventually became the “Dot Com Bubble”. The event was a rapid rise, and eventual fall, in the U.S. technology stock equity valuations fueled by investments in internet-based companies during the late 1990’s. Federal Reserve Chairman Alan Greenspan framed it best by calling investment hopes with the Dot Com’s as “irrational exuberance”. There was no impact felt by Sutton Bank during this downturn. The bank benefited from the Dot Com era due to new technologies created. It helped to level the technological playing field with the large banks.
This was also the start of an extended period of low interest rates leading to a historic acceleration of home prices in the United States. Helping to fuel this growth were weakened credit standards, previously referenced as Alt-A and Subprime mortgage originations. The lax underwriting standards were the results of attempts to increase the percentage of home ownership by the two housing GSE’s or Government Service Enterprise, Fannie Mae and Freddie Mac in addition to the large national/international financial institutions. Deregulation also helped to create an environment in which the financial systems became more concentrated, and theoretically becoming too big to fail and regulate. The mortgage backed securities were the products sold to investors funding this expansion. They were not well understood. The terms of much of this paper were backed by variable rate mortgages imbedded with fraud. A preponderance of the mortgage loans originated in the subprime industry were variable rate based with a teaser rate to entice borrowers to select their paper. That was thought to be an acceptable risk given the fact their investment horizon was short as “flipping” of multiple properties was not uncommon at the time. As interest rates rose, defaults began to increase in 2005 exposing concentrations and the eventual housing collapse in 2006. As housing prices fell, the demand for new homes declined. Financial institutions across the country were burdened, not only with the liabilities of the underwriting recourse of sold loans, but on-balance sheet loans to severely stressed developers and their supporting industries, all referred to as Acquisition, Development, and Construction (ADC) lending. Another factor which contributed to and perpetuated what came to be known as the “Great Recession” was an accounting pronouncement of mark-to-market. As properties of all types were repossessed, the expected accounting expectation was to meet the requirements of General Accepted Accounting Principles, or GAAP. In short, assets must reflect current market value regardless of the cost or the amount advanced on a loan. This led to continual write downs as properties did not sell unless it was essentially at fire sale prices. The financial services industry was quickly drowning in the red ink of losses. Many institutions either merged voluntarily or some mergers were forced by Regulators to protect customers as well as the financial industry itself. There were instances where a partner bank could not be found and the FDIC paid the depositors and bank closed. Other drastic steps were taken in fall of 2008 to help the industry. The FDIC announced plans such as Temporary Asset Relief Program (TARP), Temporary Liquidity Guarantee Program (TLGP), of which a part is the Debt Guarantee Program and the Transaction Account Guarantee Program (TAGP) and temporarily increased the insurance coverage level to $250,000 (this was later made permanent). Sutton Bank did not participate in TARP. March 2009 brought relief to the bank and the entire financial sector as mark-to-market was suspended. Attitudes began to change and the economy began to improve. In spite of the efforts of Congress and Regulatory agencies, the events of the Great Recession led to the failure and closing of 489 FDIC insured banks from 2008 through 2013.
Sutton Bank was not immune to the factors noted in the prior paragraph. The bank had a small concentration of ADC lending which turned into loan losses. We had also underwritten and originated Alt-A paper selling to assorted investors. This resulted in “make-whole” recourse requests from the investors. Because of the make-whole requests, reflected as mortgage banking losses, net income was negative for 2007. In spite of losing money that year, the bank remained well capitalized. It took seven years to restore earnings, as a percent of average assets, to the level of pre-Great Recession profitability. It was an expensive and stressful lesson learned.
Change as a Constant
Embracing change has been one of the core values of the bank. One of the areas of change over the years has been the adoption of technology of the Dot Com boom. As stressful as implementation and usage might be, technology has been the great equalizer across the financial services business. A rule of thumb indicates an example of what technology can do from an FTE perspective. At the end of the first 100 years a performance metric was to have one FTE for every one million dollars of assets. At the end of 2022 that same number for Sutton Bank was nearly eleven million of assets for every employee due to the number of payment programs supported. Technology was another one of the reasons banks formed holding companies in an effort to achieve scale and efficiencies because of the high initial costs. This point was noted by Mr. Ayres regarding the formation of Mid-Ohio Bancshares, Inc. and the data center located in the lead bank. This center continued through the ownership transition of Centran Bancshares. Sutton Bank being the smallest of the affiliate banks, but more importantly, having the attitude to embrace change, was the first of the affiliates to be completely computerized. The transfer from paper to computer began as far back as 1969. Not knowing the future of that data center in conjunction with changes to occur with Centran Corporation ownership, Sutton Bank, post 1985 acquisition of the Bank, established its own data processing center in the Attica office in April 1989 as data processing had become more affordable and “user friendly”. This same software, updated and modernized regularly, is still being utilized.
Over the years, technology has been utilized to provide affordable, secure, leading, products. In 1999 Sutton Bank launched its’ first generation Internet banking product through a Fintech provider, Funds Xpress. Evolution of this product morphed to mobile banking with the release of the iphone in 2007. Today, electronic transactions account for virtually all activities.
A Niche Found
The value and convenience of Internet Banking quickly became evident through the national marketing program of Wingspanbank.com which was launched in June 1999 as a wholly owned internet only bank subsidiary of Bank One, now JP Morgan Chase. The Wingspan product was eventually discontinued in 2001 as it unsuccessfully competed with the retail offices of its parent. It was ahead of its’ time. But what it did was to plant a seed for those not in the banking business. Was this a means by which you could enhance and extend relationships with a group of people with an affinity for a particular institution, but not necessarily a bank and benefit financially? Today, this is commonly referred to as Banking as a Service (BAAS). Then it was called affinity banking. DePaul University thought it was a great way to broaden the relationships with their students, alumni, and friends. DePaul discussed with Crowe, a large financial institution accounting and consulting firm, the possibility of starting their own bank to broaden relationships. After understanding the regulatory burdens associated with banking, it was apparent a partnership to access the banking channel was a better approach. Crowe, one of the bank’s long-time audit vendors, recognized the propensity for innovation on the part of the management team of the Bank and referred DePaul to Sutton Bank to discuss the willingness of the bank to provide a gateway for financial services for the DePaul affinity group. This discussion eventually lead to the development of three individual and distinct collegiate affinity banking sites. The first was DePaulBank.com for DePaul University. It was released late in 2000. This was soon followed by SNCBank.com for Saint Norbert College and AUEagleBank.com for Ashland University the following year. As in the case of Wingspanbank, the affinity banking sites did not gather the traction anticipated and were wound down. There were other inquiries and discussions regarding reaching out to “ready-made” communities. One such inquiry in 2001was the Amway Corporation and their desire to better support their independent business owners or “IBO’s”. Although no affinity bank was launched, it did lead to a much deeper focus on the payments industry by Sutton Bank, with the Amway Corporation. It eventually became Sutton Bank’s entry into the world of Payments. It changed the path of Sutton Bank.
Because the culture of the bank was to embrace technology and be creative the tag line of “old fashioned innovation” attitude was adopted in 2004. Another example of embracing change, in addition to what has been shared, can be found in 2005 when Congress expanded the number of Shareholders allowed within a Sub-Chapter S Corporation. The management team quickly saw this as a way to enhance Shareholder value through the elimination of dual taxation. When explained, Shareholders also saw the benefit and approved the governance change for taxation purposes to a Sub-Chapter S status. Sutton Bancshares remains a Sub Chapter S Corporation yet today. The employees greatly benefit as an Employee Stock Ownership Plan (ESOP) is a part of the benefit package. This provides not only capital for growth to the holding company but liquidity for Shareholders. The ESOP is the largest single shareholder within Sutton Bancshares.
The diversity of revenue associated with the payments strategic focus has helped to create many new positions within the bank. Some of those positions are local while others work remotely or in other offices, a gift of technology. From a business perspective, the focus on payments began in 2003. Products supported were general purpose reloadable, business-to-business, payroll cards, and business-to-consumer. Absent from the product quiver was the ability to issue meaningful gift card programs because Ohio Laws made an Ohio Bank Charter uncompetitive. The management team sought a solution to the competitiveness gap of the Ohio Revised Code in 2017 relating specifically to the issuance of gift card programs. It would become a way, not just for Sutton Bank, but all Ohio chartered financial institutions to potentially become issuers of large gift card programs. Large national gift programs were historically issued where the State laws were more favorable to financial services industry, thus creating jobs in those states. Our local State Representative Bill Reineke was approached regarding sponsoring legislation to make Ohio competitive, with the goal of creating jobs locally. Representative Reineke sponsored the necessary legislation. The legislation ultimately passed the State House and Senate under the banner of House Bill 353. It was signed into law by Governor John Kasich October 23, 2018. Sutton Bank signed a contract for its first national gift card program in the fall of 2019. It was quite an accomplishment for the banking industry, and a feather in the cap for Sutton Bank.
After leading the Bank for 30 years, Eric Gillett announced to the Board of Directors his intent to retire at the end of 2019. James A. Gorrell, who joined the bank in 1992 as Chief Financial Officer, was promoted to Chief Executive Officer.
The Covid-19 Years
On March 11, 2020, a worldwide pandemic was declared by the World Health Organization. The deadly pandemic disrupted lives and economies world-wide. Sutton Bank was not immune and successfully managed through it day by day, as did families and businesses. Some Sutton employees were allowed to work from home as the occasion and circumstances necessitated. While this was a juggling act from a staffing perspective, and conducting business, it was a financial positive due to the stimulus activities of the Federal Government. There were three separate personal “pandemic payments” to eligible people, Payment Protection Program for businesses, and many stimulus payments to government entities, health care providers, schools, and more. In addition to our larger retail footprint and the national presence of the payments side of the business, significant dollars were deposited in the bank. The deposits and assets of the bank exploded from $600 million in 2019 to over $1.7 Billion at the end of 2022. Much of this stimulus money was spent using prepaid and debit cards via on-line purchases driving up interchange revenues which were contractually shared with our partners. The strategic plan, enacted years before to grow the retail footprint of the bank as well as the payments line of business, placed the bank in the right place at the right time.
At the close of 2022, the payments business has outgrown what has been the bread and butter of community banking, commercial and agricultural lending. Sutton Bank has become one of the top community banks in the United States in the issuance of prepaid cards and associated products. Without the attitude of embracing change and technology this could not have occurred.
One cannot help to believe our founder, Lester Sutton, would be proud of what he began and how it has necessarily and successfully morphed. It has not always been easy. However, there have been constants in this evolution. First there has been, by pure coincidence, a relative of the Sutton, Coder, and Fritz family, at some time or another, always serving as one of the members of the Board of Directors. Second, and most important, Sutton Bank has been blessed with many talented, caring, and compassionate individuals who have and continue to embrace the Mission, Vision, and Values, instilled and refined overtime. In spite of the many technological changes within Sutton Bank, the Board and Staff continue to understand the importance of relationships and the need to provide value to each relationship just as Lester Sutton did 145 years ago.
As of 12/31/22 our size and reach is much different than at any time in our history:
Cash & Due from Banks
Premises & Equipment
All Other Items
Total Shareholder Equity
The author of the “1979-2022: 45 Years and Change” was Eric A. Gillett. He served the community of Attica as one of its bankers and a leader of Sutton Bank for 44 years, serving as CEO for 30 of those years. It was under Mr. Gillett’s leadership that the Bank experienced dramatic progressions and growth; a major contributor to the continuing story and legacy of Sutton Bank.
The Story Continues……..