When the doors of Crews & Associates Inc. first opened in 1979, seven founding partners sat in a small office in Little Rock, Ark., discussing how they could drum up municipal bond business and make a name for the company locally.
Recalling the birth of the firm, Jim Jones, president and chief compliance officer, noted that its original “trading desk” consisted of a single table with one phone line and a coffee maker.
The partners convened there to divide up the major responsibilities of institutional sales, general market underwriting, and back-office duties. Besides each wearing several hats, the partners also shared the responsibilities for municipal sales.
“We understood all sides of the business and we really got our hands dirty,” Jones explained. “We learned the business from the inside out.”
“When we started, it was one of the worst times to start a fixed-income firm,” he explained. “Now we have the experience to weather any storms.”Over the next 30 years, the firm transitioned from a fledgling municipal bond shop with just eight employees to a full-service investment banking firm that last year had a trading volume exceeding $22 billion and now has 206 employees. They include about 155 registered representatives, 34 of whom have been with the company for more than 20 years.
Crews & Associates opened its first public finance office in Charleston, W. Va. in 1994. It currently handles competitive and negotiated underwriting as a senior and co-manager from its 12 public finance offices in nine states: Alabama, Arkansas, Lousiana, Maryland, Missouri, Mississippi, Tennessee, Texas, and West Virginia.
While a lot has changed since the firm’s inception, a lot has also stayed the same, said Jones, one of the seven who helped launch Crews.
Three of its original founders — Adron Crews, Rick Chitwood, and Jim Lake — passed away between 1996 and 2007. There are four remaining: Jones, chief executive officer Rush Harding, first vice president and equity supervisor John Bailey, and first vice president of corporate trading Rob Owens.
Together they are working to “continue their legacy” as they lead the company into its 31st year in the industry, while also adding some new products and initiatives along the way, according to Jones.
He said the founders are upholding the core business philosophies that the firm was built on, including conservative management, catering to the needs of its issuer clients as well as its institutional and retail investors, and instituting simple “back to the basics” business techniques. These include a diligent work ethic, maintaining face-to-face interaction, relationships with issuers and investors, hiring and training local college graduates, and encouraging staff to be generalists in all aspects of the business, such as sales and trading, and evolving into operations, compliance, and public finance.
To keep up with the ever-changing market, Jones said the firm is also adding new products and initiatives, such as satisfying investors’ search for more yield by incorporating taxable Build America Bonds into its repertoire of fixed-income offerings.
Bonds currently represent 95% of the firm’s fixed-income business, with “well over” 50% coming in the form of tax-exempt securities, Jones pointed out.
“There is such a demand for fixed-income products right now, with spreads so low on corporate bonds and people looking for more yield,” he said. “We have an equity side, but our bread and butter is bonds.”
Crews’ capital markets group has increased the firm’s presence in municipal underwriting, trading and sales, both regionally and nationally. Its municipal inventories typically range anywhere from $15 million to $40 million, according to its website, crewsfs.com.
Over the past 10 years, the firm has improved its national senior-managed underwriting rankings and volume, most recently climbing to 36th so far in 2010, with 98 issues totaling $754.7 million, as of Oct. 13, out of the more than 10,000 issues totaling $311 billion sold in the market this year, according to data provided by Thomson Reuters.
That shows almost tenfold growth from 2000 when it ranked 97th, senior managing 14 issues totaling $78.4 million out of a total of 10,591 issues industry-wide worth $194.13 billion.
Crews this year is on track to beat its prior best senior manager performance. Last year it senior-managed 104 issues with a total par amount of $775.2 million in a year when the industry saw 11,411 issues totaling $406.81 billion, according to Thomson data. Jones said the firm has come a long way since completing its first municipal bond transaction — a $2.3 million sales and use tax revenue offering from Monroe County, Ark., in August 1986 to finance jail construction.
Meanwhile, he said its single largest deal to date as sole senior manager was a $109.3 million financing from the Arkansas Development Finance Authority on behalf of the Washington Regional Medical Center/Northwest Arkansas Hospital in August 2005. Two years later, Crews completed its largest underwriting commitment when it served as a co-manager on a $911 million tobacco bond issue sold by West Virginia.
MARKET CHALLENGES, CHANGES
Besides growing its municipal operations, the firm also actively trades U..S. government and agency paper, mortgage-backed securities, money market funds, mutual funds, taxable municipals, corporate bonds, unit investment trusts, and equities.
Managing unforeseen volatility in all those markets can be challenging, according to Jones, but he said that after 30 years he believes the firm is flexible enough and willing to incorporate necessary changes into its existing business models.
One of the biggest hurdles has been keeping up with increasing regulatory mandates, especially those that have surfaced since 2008, Jones noted. “We are small enough that it’s very easy to see what we do in terms of transparency, but we are big enough that we are subject to all the new rules and regulatory changes,” he said.
Crews is active in trade organizations as a means of staying informed about new regulatory initiatives.
Besides the Financial Industry Regulatory Authority, the firm is active in the Bond Dealers of America, formerly known as the Regional Bond Dealers Association, which it joined as a founding member in 2008.
Staying abreast of governmental and regulatory mandates, as well as streamlining its business and building long-term public finance relationships with its issuer clients, has contributed to Crews’ lengthy run, according to Jones.
“In the last 30 years, over 50 firms have opened or closed locally,” he said. More recently, “since 2008, you had a lot of issuers with liquidity problems, and layoffs. We were not highly leveraged at all, so we managed to avoid these quantitative quagmires. We have been a firm with little turnover and have been nimble without layers of bureaucracy.”
Technological advancements in recent years have altered the way the firm conducts business on a daily basis, such as streamlining and computerizing its trading-desk operations, and has helped it keep up with the speed at which markets move today.
“There wasn’t nearly the volume or the speed of trades there is today,” Jones said. “Now we are totally electronic and trades occur at lightening speed.”
That’s far cry from having to look up bonds in what was known as the “Blue List of Current Municipal Offerings,” a daily digest of offerings, commentary, and statistics about muni and corporate bonds in the secondary that was published on blue paper by a unit of Standard & Poor’s since 1935; it’s now offered online by subscription. Jones noted that automation is necessary to meet compliance and disclosure mandates, such as reporting trades to the Municipal Securities Rulemaking Board.
LOOKING AHEAD
While Crews & Associates is still growing, Jones said it is not racing toward a specific benchmark in terms of bond volume or staffing levels, but rather is increasing its sales force and broadening its new and existing municipal operations.
“We are proud of where our footprint is,” he said.
The firm continues to seek out both small financings for local municipalities as well as those on behalf of larger, more nationally known credits, Jones said, because it believes that that balance is what has produced repeat business and helped it thrive. One of its oldest clients is the Bentonville, Ark. School District, which worked with the firm’s financial advisory arm, First Security Beardsley Finance, on muni for more than 25 years.
Crews recently completed a $131.5 million school bond transaction — one of the largest-ever single bond issues by an Arkansas school district and a stark comparison to its first, a $4.9 million sale sold by the district, handled by Beardsley and underwritten by Crews in 1986.
