By Vanessa Mambrino, Senior Consultant, Capital Performance Group LLC, Washington, DC, a firm providing advisory, planning, analytic, and project management support to the financial services industry. www.capitalperform.com
Goodfield State Bank of Goodfield, Ill., this year's top performing subchapter-S-corporation with total assets of less than $100 million, was chartered in 1920 and has watched what was originally a small rural community grow up around its branches. Goodfield is located between Peoria, where Caterpillar, Inc., is headquartered, and Bloomington, home to State Farm Insurance. Both companies have fared well and, as a result, the town has become a bedroom community for the two cities with strong residential growth and a robust local economy.
Earnings in 2012 were driven by a combination of the residential mortgage refinancing boom and Goodfield State Bank's investment services division. "We were in a good position to take advantage of the refinancing wave," says CEO Chad Martin. "We have customers who have refinanced three or four times." Servicing fees and gains on the sale of residential mortgages to the secondary market accounted for approximately 38% of total revenues last year. Meanwhile, the investment services division has managed to successfully capture the 401(k) business of several of the bank's commercial clients. The contribution of this line of business to earnings in 2012 was small relative to mortgage banking, but has been increasing over time and Martin expects that it will to continue to grow in 2013. Noninterest income represented 46% of total revenue at Goodfield State Bank in 2012, roughly three times the averages of 15% among all top performing small S-corps and 13% among all small S-corps.
Looking ahead, Martin expects that mortgage volumes will slow down-after all, "people can only refinance so many times." The bank is focused on growing its commercial and agricultural lending portfolios to help offset this trend. Goodfield State Bank targets the OORE (owner-occupied real estate) and equipment-lending needs of machinery manufacturing businesses (which support Caterpillar) and businesses within the wider spectrum of the agribusiness sector (those who provide implements, equipment, and chemicals to farmers). The bank aims to bundle those loans with a package of deposit and cash management products as part of an overall focus on relationship building and cost-of-funds management.
In a few months, Goodfield State Bank will be opening a new branch, bringing its total network up to 3 locations. "This branch will be in a similar community and we should be able to mirror our current strategy in its market," says Martin. With all of this planned expansion, does he believe that the bank will be back among our top performers next year? "I do. Yes, I do. I think our margin will be compressed, but still strong, and I expect that earnings will not be too far off from 2012 levels."