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The last twelve months
have been an exciting transition for First
Charter Corp. (Charlotte, NC)…building a new management team and entering the
Raleigh and Atlanta markets
Financial
Regional Southeast Banks
(FCTR-NASDAQ)
First Charter Corp. (NC)
10200 David Taylor Drive
Charlotte, NC 28262-2373
Phone: 704-688-4300
Robert E. James, Jr.
President, CEO and Director
Interview conducted by:
Walter Banks, Publisher
CEOCFOinterviews.com
August 2006
BIO:
Robert E. James, Jr.
President and CEO
First Charter Corporation
Bob James has been in banking for 33 years. He became President and Chief Executive
Officer of First Charter Corporation in 2005.
Bob joined First Charter in 1999 and was responsible
for all customer contact areas, including: Community Banking, Commercial Banking, Mortgage
Services, Brokerage Services, Insurance Services and Wealth Management. The Marketing and
Training teams also reported to him.
Bob became President and CEO of First Charter Bank in
2004. In addition to the aforementioned areas, he assumed responsibility for Human
Resources, Information Technology, Bank Operations and Credit Risk Management.
Prior to joining First Charter, Bob was with Centura
Bank of Rocky Mount, North Carolina for 25 years, last serving as Executive Vice President
managing Commercial and Small Business Lending, Alternative Channels and Marketing.
Bob graduated from the University of North Carolina
at Chapel Hill in 1973 with a bachelor’s degree in business administration. He is
also a graduate of the Louisiana State University Graduate School of Banking.
Bob serves on the Advisory Boards of CharlotteSaves,
and the Charlotte Chamber of Commerce. He is Vice Chairman of the North Carolina Bankers
Association and served as Provost for the 2005 North Carolina School of Banking.
Company Profile:
First Charter Corporation is a regional financial services company with assets of $4.3
billion and is the holding company for First Charter Bank. First Charter operates 58
financial centers, four insurance offices and 139 ATMs located throughout North Carolina.
First Charter also operates loan origination offices in Asheville, North Carolina and
Reston, Virginia. First Charter provides businesses and individuals with a broad range of
financial services, including banking, financial planning, wealth management, investments,
insurance, mortgages and a broad array of employee benefit programs.
CEOCFO: Mr. James, how
long have you been with First Charter and what attracted you?
Mr. James: “I joined First Charter in January of 1999, a
little over seven years ago. I have spent most of my banking career in North Carolina. I
was with another North Carolina bank for 25 years prior to joining First Charter. The
thing that attracted me initially was that the CEO at the time who recruited me had a
great vision for the company. It was an opportunity for me to use all that I had learned
over 25 years to help a smaller company transition their growth and performance. It seemed
like a lot of fun and Charlotte, North Carolina was a great place to live, so I accepted
the opportunity.”
CEOCFO: How has that
been going, and will you tell us about your vision when you started and how it has
changed?
Mr. James: “The last six of my seven years here have
been very interesting. We completed a number of mergers, as well as suffered through some
asset quality issues. In the past eighteen months, we have had a total change in company
leadership. The CEO that was here when I joined the company has since retired, as did the
CFO. In addition to a new CEO and CFO, we also have a new Chief Information Officer. We
also engineered entries into two new markets and refined the growth strategy for our
company. We embarked upon a financial transition, as well. This company has been a good
performer over the past several years. However, our new management team wants First
Charter to be a higher performing company, so it is very much focused on performance, and
that includes the way each one of us performs our jobs day in and day out, and the way we
serve customers.”
CEOCFO: Could you
elaborate on your strategy?
Mr. James: “We have traditionally been a Charlotte area
company. We have been in this market for about 100 years if you trace our roots back to
the first bank that was part of this organization. We have always focused on the
Charlotte, North Carolina market. It is a great market. Charlotte is the 26th
largest city in the United States, and is expected to grow about 17% over the next five
years. We made a decision to enter additional markets. In October of 2005, we entered the
Raleigh, North Carolina market with one de novo
branch. Raleigh is the 2nd largest city in North Carolina. Demographically it
is a bit stronger than Charlotte and its growth rate is as good as Charlotte. We opened
three more de novo branches on February 13th
of this year. We now have four branches in Raleigh, as well as a commercial lending team,
a construction loan team and a mortgage team. A year ago, we had nothing in Raleigh and
now we have a franchise there.”
CEOCFO: How did you
accomplish that?
Mr. James: “After studying all the markets in North and
South Carolina that have at least 75,000 people, we decided to go to Raleigh. Our decision
was based not only on Raleigh’s growth potential and strong demographics, but also on
the competitive banking analysis, including average deposits per bank branch and the rate
of deposit growth over the last five years. We started in February of 2005 with a loan
production office. Our plan was to operate that office for approximately a year, then look
for a branch site and build a branch. Something interesting happened along the way.
Wachovia acquired SouthTrust and they closed six branches in Raleigh. We were able to
acquire four of those six branches, which accelerated our de novo entry. We knew that if we didn’t
acquire these branches quickly, they were not going to be available down the road. We
moved into a Wachovia (NYSE: WB) office in October and then moved into three former
SouthTrust offices in February of this year (2006).”
CEOCFO: You all have
been very busy beavers!
Mr. James: “We have been very busy! On June 1st
of this year (2006), we announced an agreement to acquire Gwinnett Banking Company in
North Atlanta. It is a nine-year-old commercial bank with about $420 million in assets. It
is a highly profitable company, with a net interest margin of 4.75%, ROA about 1.80% and
ROE in the 21% range. It is a well-run, high performing company, and this will put us in
the north Atlanta market. In the last twelve months, we have gone from just focusing on
Charlotte to now being in Raleigh and preparing to enter Atlanta…three of the best
growth markets in the entire Southeast.”
CEOCFO: When you expand,
how do you deal with your staffing?
Mr. James: “In Raleigh, we took one of our key managers
located here in Charlotte who had been with our company for some time, who knew our
culture, and we put him in-charge of staffing in Raleigh. We used some search firms, ran
some ads in the paper, and we were very selective in our hiring. For example, we
interviewed forty branch manager candidates before opening, so we were very selective. We
took six months to find the right person to be our City Executive. The person we
ultimately hired had spent ten years in the market and we were able to hire him from
another bank. He then was able to go in and hire a number of commercial lenders that were
already in the market from various other organizations. I think that is one reason why our
loan growth in Raleigh is ahead of where we thought it would be at this point.”
CEOCFO: How will you
manage and communicate within your organization, as it gets larger?
Mr. James: “Our growth strategy is based on a
community-banking model, so we are organized like a community bank. We have decentralized
management with decisions made locally as much as possible. A City Executive leads each of
our markets and is responsible for First Charter in that market. We push as many decisions
as possible down to that City Executive, including credit decisions. We also place our
Risk Managers out in the market with the City Executives. They are in the same offices and
locked arm-in-arm, so to speak. They have the same loan growth goals and the same loan
quality goals. We find that this close working partnership allows us to grow quality loans
in all those markets. In addition, you cannot over communicate. We conduct company-wide
conference calls each month with all of our teammates in which the executive management
team and I are on the phone for about 45 minutes. We take questions from the field in
advance. We spend time talking to all of our folks about what is going on in the company,
our challenges and the places where we need to improve. Then we answer their questions.
That is the key challenge: the larger you get the harder you have to work to find new and
compelling ways to communicate and keep everyone on the same page.”
CEOCFO: What types of
customers are you looking for, and what enables you to meet the needs of your customers in
a competitive environment?
Mr. James: “We are excited about the markets we serve.
The Charlotte and Raleigh markets are both growing and the north Atlanta market is
estimated to grow 23% over the next five years. So you can see that we are in excellent
markets. The other reasons we like these markets is that they have a rich combination of
consumers and small businesses. Our company caters to small and mid-size businesses. We
target businesses with annual sales anywhere from $1 million to $50 million…companies
that borrow anywhere from $250 thousand up to 10 or $12 million. We also cater to the full
range of individual consumers; from the basic checking customer that uses our branches to
the wealthy individuals we serve through our private banking division. We cater to both
individuals and businesses by providing exceptional service and a comprehensive product
set that meets all of their financial needs. We are in the insurance business, with the
third largest insurance agency in the state of North Carolina. We can offer individuals
and businesses all of the insurance products they need to meet their needs. We also offer
full service brokerage throughout our franchise. We have a wealth management division that
manages about $460 million in assets and offers traditional trust services, as well as
asset management and private banking. Finally, we have a very robust mortgage operation
with over 30 mortgage originators throughout our franchise. By offering great service and
a comprehensive product set, and being proactive in our sales and marketing, we can
attract new customers and build market share for our company.”
CEOCFO: What is your
growth vision for the next few years?
Mr. James: “We want to be a great bank. We have
three constituencies we think we have to be great with to be a great company. The
first constituency is our teammates. Our goal is to be a preferred employer and we are
actively looking at how we can serve our teammates better. Secondly, we have to be
excellent with our customers. We have to deliver exceptional service - not just good
service, and we think we do a good job of that. Last, but not least, we have to deliver
superior returns to our shareholders. We are a public company and our shareholders expect
a good return on their investment. However, coming back to your question…our vision
is to be a regional financial services company. This is what led us to go to Raleigh and
to look at Atlanta. To be a growth company you have to be in growth markets and we think
we are in three of the best growth markets in the Southeast. Regarding our size, we have
not set a specific target for the next few years. We want to be large enough to be able to
afford the technology and the quality people we need to compete successfully, and we think
we are already there. We are much more focused on profitability than growth.”
CEOCFO: What is the
financial picture?
Mr. James: “We started a financial transition a little
over a year ago in July (2005). Our margin was slipping 3% and that was creating a low
ROA. We looked at what we could do immediately. We reduced expenses by consolidating
offices. We renegotiated contracts with our suppliers, including things as mundane as
office supplies. We found that by re-bidding those contracts we could save as much as a
half a million dollars a year. Then we did a balance sheet repositioning in the 4th
Quarter. We sold about $460 million worth of securities that were yielding about 3.50% and
used those funds to pay off debt costing us 5.28%, thereby eliminating about an $8 million
negative drag on earnings. The repositioning cost us about $20 million after tax for
prepayment penalties and unwinding some swaps. Our margin immediately improved by about 40
basis points. All of our ratios got better. Our ROA went up, ROE got better, and our
capital ratios improved because we were a smaller company, but still had good capital. We
have not completed our financial transition. We are still looking for ways to improve the
profitability of the company. For example, most recently we offered our corporate
headquarters campus for sale. First Charter bought a hundred acres of land in north
Charlotte and built a 275,000 square foot corporate center, which we moved into about five
years ago. We now feel that this is not the most effective use of our shareholders money
and we have put the building and land on the market. Hopefully, it will sell and save us a
lot of money.”
CEOCFO: In closing, tell
us why should potential investors should be interested in First Charter?
Mr. James: “I think these are exciting times. We operate
in vibrant markets and all of them are growing. In these markets, it is not just a
take-away game. That is, we do not have to steal customers from other banks to grow. We
are in markets where the pie is getting larger and if we just get our piece of the pie, we
are going to grow each year. In addition, we are proactively growing our customer base. We
open a lot of checking accounts and that allows us to cross sell other products and
services. We have a successful Community Banking model that has worked for us here in
Charlotte, which is home to Bank of America (NYSE: BAC) and Wachovia. If it can work here,
we think it can work in any growing market. Finally, we have a new management team that is
committed to improving the financial performance of this company.”
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