15 Minutes with Bell Chairman Richard Solberg
As Bell State Bank & Trust celebrates its 50th anniversary, we sat down for a question-and-answer session with Richard Solberg, longtime chairman of Bell’s board of directors and a major shareholder in the company.
“First of all, I’d like to take this opportunity to say thank you to our correspondent banking partners for doing business with us!” Solberg said. “We never take that for granted. We do get asked a lot of questions about correspondent banking and our bank’s growth, and I want to take this opportunity to answer some of them.”
Q. How large is Bell’s correspondent banking area?
It’s a growing part of our company. We started back in the ’90s by helping a few smaller North Dakota banks with participation loans. These were banks without large lending limits, and their customers’ borrowing needs were becoming greater. Today, we have bankers actively connecting for correspondent opportunities in 14 states (North and South Dakota, Minnesota, Wisconsin, Illinois, Iowa, Nebraska, Kansas, Missouri, Idaho, Montana, Wyoming, Colorado and Arizona). Occasionally, deals come up in other parts of the country. We’ve recently done some loans in Nevada and Washington state. We are working directly with more than 200 banks, and our correspondent lending portfolio exceeds $450 million.
Q. Why do banks choose to do correspondent business with Bell?
The banks we are working with want a correspondent bank that doesn’t directly compete with them, so they can keep the customer relationship.
They’re also looking for quick loan decisions when needed. (Which is not a problem for us, because we don’t have to call San Francisco for a decision.)
They want to work with a bank that has a large lending limit, so if it’s a large participation, they don’t have to go to several banks. (We make correspondent loans up to $10 million, so we can accommodate most requests.) And, they want to work with a bank that does not re-participate the credit.
On larger loans, they value our perspective on risk, structure and other factors.
And finally, they like doing business with a bank that combines lending capacity with community bank values.
Q. You mean there’s a $4 billion bank that’s headquartered in Fargo, North Dakota? How does that happen, and how does a privately held bank maintain the required capital ratios?
Bell’s growth has occurred primarily organically, rather than through acquisitions. We’re now one of the largest independently owned banks in the country and the largest in our region. We’ve done this by operating the way community banks, as a rule, operate – around the philosophy that people matter. Like so many of our correspondent banking partners, we’ve always believed in knowing our customers well and doing right by them.
Yes, we have been obsessed by growth – and I would say we’ve focused on growth over profits. I don’t think you can have continued, significant growth and
off-the-charts profits every year. At times, we’ve priced loans lower and deposits higher in order to grow. Sometimes you might have to fight with the “bean counters” to do it – but if you don’t do it, your growth is not sustainable. This strategy might not help us make the “high performing banks” list for earnings, but we don’t have the pressure of next quarter’s earnings that publicly held companies do.
Over the years, our stockholders have been willing to sacrifice dividends, putting our profits back into the company in order to support growth.
Q. Are there other strategies that have helped the bank grow?
We have bought a few smaller banks over the years, but acquisitions are not our typical strategy. We do what Alex Sheshunoff years ago called “buying the horses instead of the barn.” We’ve added a lot of great people who embrace our simple “bottom line” mission: “Happy Employees! Happy Customers!” If you hire good people who enjoy what they do, are proud of where they work and are rewarded when the company is successful, they’ll treat your customers well, and both employees and customers will bring significant business to the company.
Q. Many banks got out of correspondent banking during the financial crisis of ’07 and ’08. Bell didn’t. Why not?
Our loan losses during that period weren’t something we blamed on bad correspondent loans or bad underwriting. These were good people, good companies, with loans that were underwritten well – but those were tough times.
Because so many banks got out of correspondent in those years, it actually was a good time for us to expand. We now have correspondent bankers in multiple “hub” cities, and the territory extends way out for our correspondent “road warriors.” Our footprint and commitment to correspondent banking keeps growing.
Q. Are you doing more of any specific types of loans?
We do an unusual volume of bank stock loans to bank ownership groups and holding companies, enabling them to purchase banks, buy out shareholders or inject capital needed for growth.
Lots of correspondent banks don’t do loans to this group – but because we’ve been on the other side of the ledger, it’s an area we understand. Growing banks and bank holding companies often need long-term financing, and we’re willing to be flexible in how we structure their loans.
Q. Do you see Bell going public at some point, due to its size?
No, because we think we have a big advantage being privately owned. I believe when you go public, there’s a change in the culture of your company. We don’t want our focus to be on managing for short-term earnings, rather than a long-term investment – including the greatest investment, our people.
New Correspondent Banking Officers Helping Community Banks