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SharePlus Federal Bank
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March 11, 2011 Issue |
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The Most Powerful Name In Corporate News and Information |
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CURRENT ISSUE | COVER ARCHIVES | INDEX | CONTACT | FINANCIALS | SERVICES | HOME PAGE |
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From a Credit Union Conversion in 2004, CEO Jeffrey L. Weaver has Guided SP Bancorp, Inc. into Becoming a Growing Publicly Traded Community Bank in the Dallas/Fort Worth Market Place |
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SP Bancorp, Inc. is the
holding company for SharePlus Federal Bank, a federally chartered savings
bank originally chartered in 1958. The Bank offers a full range of community
banking products and services out of its seven branches, four of which are
located near the Bank's headquarters in Plano, Texas; two of which are
located in Louisville, Kentucky; and one of which is located in Irvine,
California. Shares of the common stock of SP Bancorp, Inc. trade on the
Nasdaq Capital Market under the ticker symbol "SPBC." The Company maintains
a website at that includes information on the Company and the Bank,
including the Bank's products and services, branch locations and hours,
current Company financial information, and links to Company filings with the
Securities and Exchange Commission.
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CEOCFO: Mr. Weaver, what attracted you to the SharePlus Federal Bank? Mr. Weaver: There is a gentleman on the board here that I had worked with years ago at another bank in Dallas. I had previously been at a regional bank in Dallas for nine years as executive vice president of the Texas Retail Bank. It was a great opportunity for me to come to a smaller organization, build a foundation to grow something and put my mark on it. It was fortunate that I did because the bank I left did not fare so well afterwards.
CEOCFO: How has SharePlus changed under your leadership? Mr. Weaver: When I came on board in July of 2005, they had just converted from a credit union to a mutual savings bank and were not really ready to operate yet as a bank. We had issues with our core operating systems, hardware, software, etcetera, and needed an additional forty or more policies that were not in place yet. In addition, the compliance environment was not where it needed to be. We did not have capabilities on the commercial banking side of things and needed to start our own mortgage unit, so there was a lot of building that needed to be done. We put together a plan that said for the first three or more years we would be more internally focused to try to get the organization ready to be in a position to go public.
CEOCFO: Why did you chose to go public now, given the current economy? Mr. Weaver: First of all, I can’t say that it was the best time in history to go public, but there were several things that led us in that direction. One, if we were going to be able to grow as a mutual, there is no way to raise capital other than retained earnings, so we really did not have the opportunity to grow as quickly as we wanted to unless we went public. Secondly, there were lots of positive signs in the market place that things were starting to turn. In fact, banks stocks were looking a little healthier as we went in to the spring of 2010. Then the whole uncertainty around the Dodd-Frank legislation and the indications at the time that our primary, regulator the OTS was going to go away and what did that really mean for the long term. There were a lot of unanswered questions, so we just felt like it was time to move forward and be able to put ourselves in the position to have additional capital and take advantage of this great Dallas/Fort Worth market that we are in.
CEOCFO: You are in Dallas/Forth Worth, but you also have some other branches; would you tell me a little bit about the structure and how that has evolved? Mr. Weaver: The organization still has historical ties to the former sponsor companies that were in place when we were a credit union prior to the 2004 conversion. Those affiliations were with Frito Lay and PepsiCo as well as Yum! Brands. As a mutual savings bank, we continued to operate some small branches in the headquarters buildings of some of those organizations. For example, we have an office in Irvine, California in the headquarters building of Taco Bell Corporation and we have a couple offices in major facilities of Yum! Brands and KFC in Louisville, Kentucky. These are small, efficient branches with two to three employees each, somewhat limited hours, and somewhat limited services, but allows us to continue our strong relationship with those companies. We have a loyal customer base in those branches and it provides us with a very quality target base to make personal loans to.
CEOCFO: Would you tell us about the area you serve, and what is the focus of SharePlus? Mr. Weaver: SharePlus is transitioning to become a more traditional community bank with our growth focused in the Dallas/Fort Worth market place. We really have three core lines of business: mortgage lending, commercial lending and our consumer banking operation. As part of the legacy from the credit union days, we still have over 18,000 deposit accounts in the bank, which is a lot for a typical community bank our size. But again, that is a very loyal deposit base and something that we value and protect to a great degree. The Dallas/Fort Worth market place is healthy and growing. We are blessed to have been here through this economic downturn, as this area never really experienced a huge run-up in home prices the way that southern California, Nevada, Arizona, Florida and other parts of the nation did. So when the bubble burst, we were seeing 3% to 5% declines in home values compared to 20% and 30% or more declines in some of the other markets in the country. We continue to see an in-migration to the Dallas/Forth Worth area, I think in 2009 it was 140,000 new residents. The housing market and the builders here reacted very proactively and cut back their number of starts, so we had our issues, but we managed through those and didn’t get too far out of equilibrium in terms of housing starts and closings and those kinds things. We are the home to many Fortune-500 companies here, so there is a very highly educated workforce that are great candidates for loans, particularly mortgage loans. There are currently 6.5 million people in the marketplace and that is expected to continue to grow at a pretty rapid place over time. We are the fourth largest metro area in the United States, so we feel like we are fortunate to be in this market and that is really where our growth plans are focused. Although we have no immediate plans to do so, if we were to look at acquiring other branches or potentially other institutions through an FDIC sale or even an outright purchase of a healthy organization, we would focus our efforts on the north Texas market.
CEOCFO: People became very concerned during the recent banking crisis and economic downturn; how did you reassure your customers? Mr. Weaver: We did a couple of things just through our marketing initiatives. We put one program in place when the failing banks really started to garner a lot of headlines and the tagline in our ads was ‘keep it safe, keep it here’. We were trying to encourage our depositors to understand that this was a safe place to keep their money and that it made sense for them as they became more conservative, spent less, saved more and that this is the best place to do that. That was very successful in retaining deposits in 2008-2009 timeframe. We also have another tagline in our ads - ‘life happens, we can help’. We tried to position ourselves as an organization that could help people when they were having problems, help them through the rough times during lay-offs etcetera, and help them emerge on the other side in a successful manner. We did a lot of work with customers who were between jobs and were struggling to make payments. We have several programs that we put in place to help borrowers to work through those issues. Then just a lot of communication with customers was very important about what was going on in the bank and reassuring them that we were here for the long-haul, we were a healthy institution and a safe place to keep their money.
CEOCFO: What sets SharePlus apart from the other community banks? Mr. Weaver: If you ask a hundred community bankers what makes them different, ninety nine of them are going to say “our service”. We think that is true for us as well, but the difference is at SharePlus we deliver on that. We have a great relationship with our customer base and we measure our service levels every quarter with our mystery shopping surveys that we do for our call center and branch locations. We have multiple programs in place throughout the organization to ensure that we are consistently delivering on those service promises. Secondly, we are trying to build the organization based on relationships, and we know we can’t out-technology or out-spend the Wells Fargos and other big banks, so we are trying to do that with relationships and getting quality referrals from our existing customers. From there we think our service allows us to establish that loyal customer base that will pay dividends to us for a long time. As we develop our commercial banking base, which right now is still about 10% to 15% of our total assets but growing, we are doing that based on referrals and expanding relationships with existing customers and that is really what the foundation of the bank is all about. We have a couple of sayings that we try to instill in our staff and one is, “we want to out-national the locals and out-local the nationals, and that everything we do is built on relationships and doing the right thing for customers”. The interesting thing is although Dallas has remained healthy there are a lot of banks here that through the downturn were not necessarily in trouble, and they did not necessarily stop lending. However, the availability of credit was greatly decreased and we were always out there looking for quality relationships with potential borrowers and never were out of the market the way some of the community banks were.
CEOCFO: Have you become stricter with your credit standards and stricter with your mortgage standards? Mr. Weaver: On the commercial lending side of things, we were a start-up in 2007, so just about the time we got started with commercial lending activities, the market really tightened up and we definitely became more conservative from the point where we initiated the department. On the mortgage side of things, we have also become a little bit more conservative. Some of that is based on the economy, some is based on pure regulatory changes, not only Dodd-Frank, but the Safe Act, new appraisal standards, and similar other pieces of legislation that have come along. They have somewhat forced us to be more conservative, although we really haven’t had significant issues in our mortgage portfolio. The change in the regulations has almost forced that and for the most part it has not necessarily helped the consumer. It has increased their costs and potentially slowed down their ability to get a loan closed. However, we have invested in some new technology and frankly some new staff to make sure that we can meet all the regulatory requirements, but without sacrificing service to our customers. The regulatory changes on the mortgage side have forced everybody to be more conservative and there are fewer programs out there available from investors. As with most originators, we sell the vast majority of our fixed-rate loans into the secondary market. There are just not risky lending programs available anymore, so the structure of the market and the new regulatory changes have just forced everybody to be more conservative.
CEOCFO: SharePlus recently announce strong results; how do you continue on that path? Mr. Weaver: We certainly had a strong second half of 2010. Part of that was fueled by an increase in our mortgage originations. Rates were low, and people were finally starting to feel a little bit more confident about the economy, so we saw both refinances and home sales activity increase during the second half of the year. We also had some embedded gains in our investment portfolio that we decided to take due to the low rate environment. Fee income from the sale of mortgage loans was the primary driver. We are starting to see a little bit of a slowdown in the refinances as rates are starting to come back up, at the same time we are seeing increased volumes from home sales. Our commercial group is expanding, and we expect those balances to continue to grow as well. Those are our two growth engines on the lending side of things we see lots of positive signs there.
CEOCFO: What about community involvement for the bank? Mr. Weaver: We are very active in the community. Particularly in the Dallas marketplace, we are active in several organizations around our Oak Lawn office, which is just north of downtown. We are both partnering on the advisory board of a elementary school that is down the street as well as some first-time homebuyer organizations. It is a similar organization to Habitat For Humanity, which we have provided assistance and education for. In the Plano marketplace, we are very plugged in with education initiatives as well with a high school that is down the street and some other schools in this marketplace. We are active in many community and civic groups where our employees have an opportunity to give back. As a small institution, sometimes it is very easy to get lost in the shuffle and if one of the big banks is a major sponsor of an organization or event, it makes it difficult for us to have as much impact. Therefore, what we try to do is find smaller local organizations and local causes that we can get involved with and actually have an impact and get a little bigger bang for our buck as we participate.
CEOCFO: In closing, why should the investment community look at SP Bancorp today?
Mr. Weaver:
First of all, we have a very experienced management team and a very savvy
board of directors compared to most institutions our size. We are in a great
marketplace that has upside both on the commercial banking and mortgage
banking businesses. It is growing and it never experienced the severe
downturns that we saw in a lot of markets around the country. We just think
that the potential of this institution is fantastic and we would encourage
investors to read our earnings release and look for our 10-k that is going
to be out in coming weeks.
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We tried to position ourselves as an organization that could help people when they were having problems, help them through the rough times during lay-offs etcetera, and help them emerge on the other side in a successful manner. We did a lot of work with customers who were between jobs and were struggling to make payments. We have several programs that we put in place to help borrowers to work through those issues. Then just a lot of communication with customers was very important about what was going on in the bank and reassuring them that we were here for the long-haul, we were a healthy institution and a safe place to keep their money. - Jeffrey L. Weaver |
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