ABA Banking Journal - June 2008 - (Page 36)
TOPCOMMUNITYBANKS Charter Bank S-corp bank over $100 million Five-timer credits success to the basics Y ou can’t leave a voicemail for Sid Ridlehuber, president and CEO of Charter Bank. But any member of the staff who picks up will be happy to take a message, and he’ll return it promptly. When you ask the veteran Texas banker if the refusal to adopt voicemail has anything to do with the bank’s performance—it has placed in the top ten of its category in our rankings for five years in a row—he affirms it. Indeed, Ridlehuber believes that sticking to much of what he considers classic community banking—where bankers bank, directors direct, and technology doesn’t replace human ability— continues to be the key ingredient in his bank’s success. He still maintains an open door to customers, right on the banking floor of headquarters, in a time when many bank presidents are disappearing upstairs. “We run our bank like a business,” says Ridlehuber. A key element in the bank’s success, he says, is not keeping folks waiting. “We’re flexible and responsive, with a decisionmaking process that moves quickly,” he says. When Ridlehuber moved to Charter, in the Gulf Coast city of Corpus Christi, in 1994, the bank was only $30 million in assets. At the end of the 2007 ranking period, the bank had hit $155.4 million, in a competitive market where growth-minded banks must steal market share from each other. Today Ridlehuber faces not only three local community banks, but also several aggressive credit unions, plus branches of more than a dozen out-of-town banks. it. His consumer bankers have more than a decade’s experience working with personal lending, “and they can help customers put together a deal.” Most of the bank’s consumer lending is secured. Subprime lending, however, has had no appeal for Charter Bank. Each lending officer holds authority based on their level of experience and bank rank, and where that is insufficient, they can join with Ridlehuber’s own authority, up to the bank’s legal lending limit. While the board reviews lending in aggregate, it doesn’t review specific loan decisions. Lending with the human touch Corpus Christi, says Ridlehuber, is a subset of the Texas economy in general. It hasn’t seen the booms of the recent past, and isn’t suffering the flops of the present. Medical facilities and the oil refinery business dominate the city’s economy. The bank maintains a relatively low loan-to-deposit ratio, at 61.29%. Of its loans, 50% are in real estate, mostly a diversified mix of commercial real estate, and very little mortgage lending; 35% are in C&I loans; and 15% are in a smattering of consumer credit types. “Overall, we believe that sound underwriting is the key to profitability, although we aren’t averse to taking a banker’s risk,” says Ridlehuber. Human judgment plays the key role in all of the bank’s lending, even in consumer credit. “We don’t credit score,” says Ridlehuber. The CEO feels that scoring sends a message that it’s all by the numbers, take it or leave Pricing for profits Charter Bank has been a Subchapter S bank since 1998, and that makes the connection between everyday banking and ownership benefits quite clear. Take loan pricing. “We don’t believe in giving money away,” says Ridlehuber. “We are not ashamed to get a fair return for our shareholders in the process of serving customers.” He believes what his bank provides in the way of tailored lending and personal services warrants a premium. “We try to focus on business relationships,” he explains. “We’re not a commodity broker.” Maximizing return for Sub S shareholders, who are taxed directly, remains on Ridlehuber’s radar in all aspects of management. Take the investment portfolio, of extra importance given the bank’s relatively low loan-to-deposit ratio. A big chunk of this is devoted to municipal bonds, according to Ridlehuber. This helps the bank’s shareholders keep their taxes down; especially important as most are in high tax brackets. Ridlehuber notes that the return on the munis would push the bank’s ROAE to 51% on a tax-equivalent basis. Outlook for 2008 While things look tough for banks in many other parts of the country, Charter Bank’s management continues to bank on its classic practices and belief that the Texas and Corpus Christi economies will continue to enjoy some insulation from national trends. “We don’t think Texas will be unaffected, but perhaps less so,” says Ridlehuber. He says he does expect to see some falloff in the economic picture in 2008 and 2009. Thus far in 2008, however, Charter Bank has been having a case of déjà vu. In mid-May, Ridlehuber said performance was on par with the same point in 2007. So, perhaps with that momentum, we’ll see Charter at number one. —Steve Cocheo, executive editor 36 JUNE 2008/ABA BANKING JOURNAL www.ababj.com/subscribe.html
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