Best Laid Plans

When Sean Kouplen realized his dream and, with the help of a group of investors, bought his own bank a year ago, little did he realize how his expectations for the bank were about to change.
Toss in a dramatic downturn in the national economy that has left a trail of failed financial institutions elsewhere in the nation, and his plans for growing Nowata-based Regent Bank took some unexpected turns.
“My entire banking career has been in pretty good times, so I was accustomed to being able to grow financial institutions pretty rapidly, and my track record was such,” said Kouplen, CEO of Regent Bank, which expanded into the Tulsa market Aug. 1, 2008. “And so, of course, I expected that same thing to happen at Regent. It has happened, but in a different away than I would have expected.”
Kouplen, with partner and Regent Bank Chairman Dow Hughes, organized a group of 70 investors as Regent Capital Corp., which was approved to purchase the bank April 1 a year ago. Kouplen has served in executive positions with Tulsa area financial institutions Grand Bank and Citizens Security Bank while Hughes previously served as executive vice president of MidFirst Bank.
“My plan was clearly to bring in the best investors I could find, which we did; raise more capital than anybody had raised, which we did; go out and hire an all-star team of bankers, which we did; and mesh those with an already very good group of employees that we were inheriting when we bought the bank,” he said. “Put those together, market heavily and grow like crazy.”
“Let’s fast forward a year. We have grown like crazy. The bank has exactly doubled from the time we signed the contract to buy it. It was $72 million (in assets) at that time – it is about $140 million today,” Kouplen said, seated in a conference room of the branch on the ground floor of Executive Center I at 71st Street and Yale Avenue. “So we have seen very good growth, but it has been significantly more challenging than we expected.”
He credits much of the bank’s success to high liquidity during a time of unforeseen opportunity and a solid team of veteran bankers and board members.
Loans have grown from $45 million to $100 million and deposits have increased from $55 million to $108 million in the past year.
“Although the last year has been challenging, I wouldn’t change a thing,” Kouplen said. “I am optimistic about the future of Oklahoma’s economy and the future of Regent Bank, and our long-term goals when we purchased the bank have not changed a bit.”
Kouplen said the slowing economy has actually presented a mixed bag of positives and negatives for the bank.
“It isn’t all the gloom and doom that you see on TV and read in the national press,” he said.
The Positives
A Time of Opportunity

Credit tightening in the marketing creates significant opportunities for attracting quality employees as well as quality clients, Kouplen said.
For employees, “perhaps the bank they were with before cut back on making loans, and that was hurting their relationships with clients, so they came with us,” he said.
And for clients, the lender relationship has opened doors, he said.
“The truth is, there are clients that I have been calling on for 10 years that have always had a satisfactory relationship with their lender, and we had a good relationship but they never had a reason to move,” he said. “This lender that was always with them in the good times maybe hasn’t been with them lately, when things got a little rocky. So all of a sudden, I got the opening that I have been looking for for 10 years.”
“In our industry in particular, these times create great opportunity,” Kouplen said. “I can name 50 clients that I wouldn’t have gotten had it not been for a slower economic time. And that’s a huge positive.”
He said that the client-lender relationship in this slow economy is more important now than he has seen in his career.
“In the past, what you would find is that with a quality client you were bidding on their business against multiple other providers,” he said. “In this environment, people will pay a little higher interest rate or put a little bit more money down, because they value the relationship, they value having somebody that will fight for them and who cares for them, that they know and trust. That whole dynamic is huge. It has totally changed the value proposition for a community bank.”
Liquidity Within the Market
Kouplen said there is a winner and a loser in every circumstance, and with the stock market downturn, many people are putting their money back in the bank.
“Many people have taken a flight back to safety, if you will, with their money,” he said. “Where as 2-, 3-, or 4-percent returns used to be laughable by people, all of a sudden over the past few months, that has looked pretty attractive. We have had significant deposit growth because of that.”
Where liquidity might have been a challenge for a community bank, it’s really not now, he said.
“We are very liquid; we have paid off all our borrowings and have a lot of money coming in, and that’s a positive,” he said. “I think you would find this with banks across the metro area – a lot of improved liquidity.”
The Lending Advantage
Although homes sales have slowed, the new first-time home buyer tax credit and historically low interest rates have kept the mortgage business very brisk, Kouplen said.
And in commercial financing, changes in the terms for SBA loans has opened many opportunities, he said.
The economic environment has also impacted the loan mix for the bank.
“If you looked at our bank, or most banks, a year ago, you were probably looking at a 60/40 real estate versus non-real estate mix,” Kouplen said. “That is probably closer to 20/80 right now.”
Residential real estate, particularly new construction, has slowed significantly and the loan volume through those types of loans has declined substantially, Kouplen said.
“The flip side of this is small business guaranteed loans used to not be that popular. People did not want to pay the fees, and the 80 percent guarantee was nice, but many times it wasn’t enough to mitigate the risk. Now with 90 percent and no fees, I mean, people love them and we do, too.”
The Negatives
Challenging Time for Clients

While the challenges for businesses in Oklahoma and Tulsa, in particular, are fairly minimal compared with the rest of the country, Kouplen said Regent Bank is seeing a greater number of businesses that are experiencing slowing.
“That’s difficult on two fronts,” he said. “Frankly, it’s emotionally difficult because these people become very dear friends. They are not just clients, they are people that you care very deeply about. Even though we may be in a very good position collateral wise, and we think we are going to be OK on the credit, it is still painful to watch somebody go through a tough time.”
The second reason it is bad news is because it leads to more loan challenges for a bank, he said.
“I think, across the board, we are seeing a lot of slower pay, we are probably seeing more non-current assets, loans that are falling further behind, than we did before and so more of our time has to be focused on portfolio management,” he said.
Kouplen said 30 day plus past dues were at 2.93 percent at the end of March.
“This number is actually down from the month before, but it’s still higher than we would like. Our goal is to be under 1 percent,” he said.
The Regulatory Environment
The entire financial industry is facing the challenge of increased regulatory involvement, Kouplen said.
“They are clearly looking at credits harder than they have in the past. They are very interested in trends. They are obviously more skeptical of real estate values than they have been,” he said. “Consequently what a year, two years, three years ago might have been a perfectly satisfactory credit, might be subject to debate.”
He said Regent Bank has $1.2 million in its allowance for loan loss and is adding $50,000 a month to prepare for potential loan issues associated with the slowing economy.
A second regulatory burden facing all banks due to the large number of bank failures (none in Oklahoma) is a planned one-time assessment by the FDIC, Kouplen said.
That assessment is expected to be 10 basis points on deposits, which would be a little more $100,000 for Regent Bank.
“Well, $100,000 is difficult to make up,” he said. “We are looking at a variety of cost saving measurers, which could include people. When more than 50 percent of your budget is in salary expense, there are not a whole lot of other places you can go. That is clearly a challenge that I was not expecting.”
Booking the Loan
“The final challenge that we deal with, is that new business in this environment is more difficult to book,” Kouplen said. “It is very much a two-edged sword. On one hand, you have the opportunity of other providers tightening credit and so there are more people out there looking for banks. That gives us a greater opportunity. The flip side of that is many times it is harder to bank people today because perhaps their financial trends haven’t been good, their industry may be struggling or the regulatory oversight has increased, so you have to look at each credit more thoroughly than probably ever before.”
He said that while the bank is booking many new loans each week and month, the lenders are having to work harder to make that happen. In some cases they are unable to make the loans.
“A business may have a good track record, but the recent, last six months performance has not been good. It is difficult to know whether that is a short- or a long-term situation,” he said. “In our business, which is so highly leveraged and so highly regulated, you many times cannot take that chance.”

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