ABA Banking Journal - June 2009 - (Page 26)
TOPCOMMUNITYBANKS Security First National Bank Non S-Corp bank between $100 million and $3 billion A world apart, in more ways than one Mike Brewer, president S ecurity First is one of those banks that does well in a very modest economy. And it does well consistently. The threecounty area of southeastern Oklahoma near the Texas and Arkansas borders is the poorest area of the state. Yet things are not as bad there now as in some other parts of the country. Unemployment, at about 6%, is well below the national average. “We’re down here by ourselves and don’t feel the big spikes of other parts of the country,” says Mike Brewer, president of Security First, the only “standalone bank,” as he puts it, in the town of Hugo, Okla., pop. 5,500. Brewer says the area is fairly diversified economically, with some broiler (chicken) and cattle farms, as well as an International Paper plant and the headquarters of the Choctaw Nation nearby. The bank ranked number one this year in non-Subchapter S banks over $100 million in assets with a yearend 2008 return on average equity of 29.89%. The year before, the bank was number three even though its ROAE was 32.95%. It was number two in 2006, at 33.29%. was), of course, but Security First has managed to grow both sides of its balance sheet for many years without being squeezed on either side. It grew from $55 million in assets in 1995 to $105 million today. Funding to a large degree comes from municipal deposits— mainly DDAs—allowing the bank to enjoy a generous net interest margin (6.22% at yearend). Brewer says that “our spread is shrinking like everybody’s,” as adjustables reset lower. Brewer also points out that the bank doesn’t have any loan losses at present. It has nonperformers, and has had a few foreclosures, but it doesn’t suffer any loss on these because, he says, “we’re collateral lenders.” And, as noted earlier, the bank’s market has been less affected by the national turndown. Fit ’em and hold ’em The bulk of the bank’s $68 billion in loans are 1-4 family residential mortgages (some of them classified as ag loans in call report data). They have some ag production loans to chicken and cattle producers, but few commercial loans, and few auto loans. The mortgage portfolio has been growing steadily for the last 25 years, says Brewer who has been with the bank for 36 years. A few years ago, many of the top performers were banks that specialized in real estate lending. Often these banks were highvolume specialists. Security First is not of that ilk. It custom fits its mortgages to customers, carefully weighs the risk, makes sure it is compensated for it, gives great service, and holds the loans. The bank never made subprime loans, says Brewer. It does grade potential borrowers into A, B, C, D categories, and particularly likes “a good B- or C+ risk,” according to Brewer. That’s because the As usually are rate shoppers, whereas the Bs and Cs pay a little more. The majority of the bank’s mortgage loans are 15-20 year adjustables that adjust every three years. None are sold . That flies in the face of what most people in the business say about mortgage lending—that it’s a high-volume, commodity business requiring an active secondary market. Much of it is (or Buy their lunch vs. eat their lunch All the above is more the technical side of the story, which is important, but misses the bank’s basic approach to business. Simply put, the bank and all its 35 employees care about the customers. Many businesses say that, of course, but Security First backs it up. It has a 15 minute rule, for example. An employee must return a customer’s phone message within 15 minutes. As a result, says Brewer, when customers are weighing options (there are branches of two larger banks in town), they’ll say, “I know I’ll get a call back from Security.” Here’s another example: When Brewer spots a customer in a local coffee shop, he will sometimes tell the waitress, “I’ll pick up that tab.” “Customers really appreciate things like that,” he says. Security First’s service charges are a little higher, though competitive. “But,” says Brewer, “we provide the service.” This applies very much to the bank’s mortgage lending. Its loan officers make loans that fit the person’s budget. As a result it doesn’t have set rates. The lenders put their heads together, assess the risk, and offer a rate that is fair, but also fairly compensates the bank. Brewer says the approach is similar to retailers who make suits to order. Hugo, Okla., may be off the beaten path, but these days no place is out of touch with competitive offerings. Security First’s good-service, custom-tailored approach clearly works. Says Brewer, “Customers tell us, ‘You’re a little high, but I trust you’.” — Bill Streeter, editor-in-chief 26 JUNE 2009/ABA BANKING JOURNAL www.ababj.com/subscribe.html
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