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Business Observer Wednesday, Sep. 17, 2003 15 years ago

2nd Runner-Up: Charlie Brown III

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President and CEO Charlotte State Bank, Port CharlotteCharlie Brown did not intend to become a banker. He wanted to become a financial analyst at a big firm.
by: Article Author Staff Writer

2nd Runner-Up: Charlie Brown III

President and CEO Charlotte State Bank, Port Charlotte

Charlie Brown did not intend to become a banker. He wanted to become a financial analyst at a big firm. But when he was in high school in Ohio, Brown's father, also a banker, urged Brown to get a job at a bank, while his friends were bagging groceries. He became a teller at age 16; the rest is history.

When he applied for a job at BankOne's on-campus location at Ohio State, where he attended college, his teller experience got him hired. His experience earned him a promotion to consumer lender. When it came time for management training, Brown was already a BankOne guy. He had deep roots with BankOne when he graduated in 1987 with a B.S. in business administration and a major in finance, and went to work for the bank full time.

"That just goes to show that decisions you make when you are 16 can have an impact," says Brown, now 37.

Still, Brown wondered about the world of securities. To satisfy his curiosity, he worked in the securities markets for a short while in the late 1980s. It made him miss banking.

"I feel comfortable with the people in banking, and I needed to get back to those people," says Brown. "They are generally conservative, family-oriented people. I truly enjoy being around other bankers."

In 1990, when Brown's father asked him to move to Florida and help start a small-business lending program for Charlotte State Bank, Brown accepted.

Brown's father, Charlie Brown Jr., had moved to Florida from Ohio in 1984 to get Murdock Savings Bank chartered and under way. Murdock was later sold to American Bank, now Gold Bank.

In 1987, Bill Crews, chairman of Crews Banking Corp., a holding company that also owns Wauchula State Bank and First State Bank of Arcadia, wanted to charter a new bank in Charlotte County. The elder Brown offered to help Crews and Charlotte State Bank was born.

The early Charlotte State Bank was a boutique bank, with loan production offices in key cities across Florida - Sarasota, Tampa, St. Petersburg, and Orlando. The Browns' growth of the bank's small-business loan program in the early 1990s made Charlotte State Bank 12th in the country for small business loan production according to the Small Business Administration.

"From 1990 to 1993, our claim to fame really was SBA loans," says Brown. "The start-up of that program was very entrepreneurial."

Still, the joining of two "Charlie Browns" created confusion. "It was Charlie Jr. for a while, then Little Charlie and Big Charlie," says Brown.

In 1994, Charlotte State Bank changed direction. The elder Brown became ill and was no longer able to run the bank. Crews asked the younger Brown to take over, with the understanding that the bank would change direction. Rather than remain a boutique bank, Crews wanted Charlotte State Bank to become a more traditional community, hometown bank. Brown was 29 years old, the youngest bank president in the state at that time.

"From 1987 to 1994, the bank has amassed only $20 million in assets," says Brown. "That was a small bank, and we completely changed strategy. We literally turned the ship. That meant getting involved in the community, changing the management team. I started with a nucleus of five people, which has now grown to 12. The first year of the new strategy we grew from $20 million to $30 million, which was a big jump. Our average growth rate over the last five years has been over 20%. Our average increase in profitability over the last five years has been over 120%."

Charlotte State Bank has opened two branches in the last eight months, a big venture for a community bank and one that typically puts pressure on the bottom line. Brown says opening a community bank branch usually costs $250,000 to $300,000 per new branch per year, with no profitability for two-and-a-half to three years. Nevertheless, Charlotte State Bank's profits and numbers have continued to trend upward.

Asked what decisions were critical to the successful change in bank strategy in 1994, Brown unequivocally points to two - becoming active in the local chamber of commerce and hiring the right people.

"I got very involved with the chamber, taking on as much as I could handle," says Brown. "From a marketing standpoint, the exposure through that chamber involvement became the nucleus of our marketing."

Brown acknowledges that every banker attributes success to the lenders and managers that work at the bank. "The real key is to have strategically-minded, focused leaders at your bank," says Brown. "We have monthly strategic initiative meetings. When a lending officer has a long-term strategic goal to investigate and implement, he doesn't think of it as some thing he has to do on top of the six loans he has to close today. He knows it may be the most important part of his job, because it will help determine where we will be five years from now. You have to have people who don't just want to know what the requirements of the job are and what the bonus structure is. You want to hire people who ask a lot of questions in their interview about strategy, the goals for the bank."

Brown says the circumstances of Charlotte State Bank require long-term strategic thinking. The bank is held by the Crews family, so the goals are different. Brown does not want branches across Florida. He does not want to set the bank up to sell in a few years.

"We are now in the third generation of Crews owning these banks," says Brown. "We have to think about existing shareholders and the future generations of the family. We are not running the banks to sell them, but to build them up for the next generation. Everything we do is toward that goal, so we make decisions or projections in five- and 10-year increments."

The holding company's recent announcement that it plans to purchase Englewood Bank exemplifies long-range planning. "I do strategic planning for the holding company," says Brown. "We needed to leverage our capital, through growing and/or through acquisitions. Englewood Bank is a good fit for us. Their byline is 'Your Hometown Bank,' which, coincidentally, is ours also. The Englewood Bank purchase is not going to score in the next one or two years; it is a five- to 10-year investment. "

Brown will retain his role at Charlotte State Bank, and become CEO of Englewood Bank, helping design and direct strategic initiatives there for growth, a role Brown relishes.

There will be no consolidation of any of the Crews' banks. "We have done that analysis, and I can guarantee that we will not consolidate," says Brown. "We would not get substantial savings from consolidation, and we might lose some autonomy. We would have the same number of people needed for operations, just under one roof. Plus, every bank does things a little different."

Brown says the Englewood Bank purchase is unusual because it is a private community bank buying another private community bank. Moreover, the holding company is making the purchase using capital it accumulated through earnings; it will not raise any outside equity.

"Are we looking for more acquisitions? You betcha," says Brown. If future acquisitions require the company to get outside financing, Brown says they would do it in a way that would not affect the voting shares.

As far as Brown's interest in the company, he only says: "They take very good care of me, contractually."

Brown has also helped grow the bank by bringing in brokerage and trust functions. Originating from his interest in securities markets, Brown started a brokerage subsidiary for Charlotte State Bank about five years ago, and it was profitable from the first year.

He started the bank's trust and financial planning services in response to an increasing void in the area. "This is the oldest or second oldest county in the country," Brown says. "It seems like the place for financial planning and trust services. But the wire houses and the regular banks were pulling staff and operations out of here and going to Lee and Sarasota counties to go after the million-dollar clients. We are growing by faster percentages here, but in smaller dollars. The question was whether we could be profitable with clients between $300,000 and $1 million, and the answer was yes."

Charlotte State Bank now offers essentially all traditional banking services. "We want Charlotte State Bank to be the financial resource for small business owners and consumers in Charlotte County. The same for Englewood Bank in Englewood."

Brown says his biggest challenge right now is implementing the growth initiative at both the Englewood and Charlotte County banks.

"We don't want to grow and have people say: 'Oh well, they're big now. It won't be the same.' We want to buck that trend and become even more hometown-oriented."

- Kendall Jones

CHARLOTTE STATE BANK ($ = Thousands)

FY 2000FY 2001FY 200201/03-06/03

Total Assets$86,675$110,233$119,333$132,963

Total deposits$75,503$95,002$103,032$116,180

Noncurrent loans and leases06787940

Net income$7361,2901,959$1,071

Return on assets0.92%1.31%1.73%1.66%

Return on equity14.57%15.16%19.07%18.90%

Efficiency ratio75.85%68.94%66.09%70.96%

Assets per employee (millions)1.772.001.811.73

Noncurrent loans to loans00.97%0.09%0.04%

Total risk-based capital ratio10.90%13.13%12.80%11.22%

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