May 1, 2025 • 22 mins
Government-guaranteed lending requires special expertise and back-office functionality that grows increasingly expensive for smaller banks. On the latest episode of the ABA Banking Journal Podcast — sponsored by Bix2x — Chris Hurn and Jeremy Gilpin of Community Bankshares, a bank holding company in La Grange, Georgia, discuss how they are tackling that challenge.
“To start one of these departments is very expensive for a lot of rural banks and credit unions,” says Gilpin, “It’s very prohibitive to enter the market space if you are a rural bank or even in an urban market where you do you know, maybe 5, 10, 20 of these loans a year.”
Hurn and Gilpin are part of a team that has built Community Bankshares, parent of Community Bank and Trust of West Georgia, into a network of Small Business Administration and U.S. Department of Agriculture lending subsidiaries that work on a nationwide basis. They developed a model that allows the “the holding company [to] serve as a source of strength for the bank, not just the other way around, which is typical,” says Gilpin. Gilpin and Hurn discuss the company’s role as a white label lender, referral lender, participation partner or servicer for smaller banks that want to connect their clients to guaranteed loans and the strength of the bank model for supporting these businesses and agricultural enterprises.
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Episode Transcript
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(00:01):
. Jeremy Gilpin: to start one of these departments is very, very expensive for
a lot of rural banks and credit unions.
I mean, just the SBA loan, 2million, 3 million to start one up.
You're looking at about about 2million, million and a half on
the USDA side itself as well.
So it's very prohibitive to enter themarket space if you are a rural bank
or a rural credit union or even in anurban market where you do you know,
(00:25):
maybe 5, 10, 20 of these loans a year.
So really that's, that's part of thecreation of the credit deserts is the, the
cost to initiate these types of platforms.
Evan Sparks (00:37):
From the American Bankers Association, this is the
A BA Banking Journal podcast.
Welcome back.
Today's episode is presented by Biz2X.
I'm Evan Sparks and I'm delightedto bring you a, an interesting bank
story from the great state of Georgia.
And to tell, to talk with me alittle bit more about community
Bankshares is Jeremy Gilpin.
(00:57):
Jeremy is chairman, president, and CEO of.
Community Bank and trustin La Grange, Georgia.
And also Chris Hurn.
Chris is president and CEO ofCommunity Bankshares the holding
company as well as their, thesubsidiary Phoenix Lender Services.
So Jeremy and Chris, welcome to the show.
Chris Hurn (01:16):
Thanks for having us, Evan.
Evan Sparks (01:17):
Thank you, Evan.
So I'd love it if you could beforewe get started, dig into, into your
bank story and the business model.
If you could give me a little bitof a sense of your backgrounds and
Chris, maybe I'll start with you.
How long have you been with CommunityBankshares and what led you to that point?
Chris Hurn (01:31):
I've been with Community Bankshares since January of this year.
Was doing a little consultingwork for Jeremy last year on this.
Jeremy and I have known eachother for over 15 years.
He's been very big in the USDAbusiness and industry lending program
space for, for many, many years.
I've been pretty big in the SBA lendingspace for many years and Jeremy called
(01:53):
me up about a year and a half ago andsaid, Hey, why don't we why don't we
join forces and be a part of this, thisrural community bank that I purchased
took a controlling stake in what was thatabout three years ago, Jeremy, I believe.
Jeremy Gilpin (02:07):
Yep.
Three years ago, March.
Chris Hurn (02:09):
And so I I joined up with him and you know, bought into the vision.
And now I'm the president, CEOof a holding company itself.
And we have, we have threesubsidiaries at the moment.
The largest of which well in some ways,the largest of which is Phoenix Lender
Services, which is a lender serviceprovider for both banks and credit
unions for both USDA and SBA loans.
(02:31):
And then Jeremy.
I'll let him explain.
But he's the president of oneof the subsidiaries, which is
CB&T, Community Bank and Trust.
That's the bank that powers everything.
And then we also have anothersubsidiary called Thomas Financial
Group, which is the largest USDAbusiness loan packager in the country.
And we purchased Thomas maybetwo months ago at this point,
Jeremy Gilpin (02:51):
January, January 2nd.
Evan Sparks (02:52):
All right.
So, Jeremy, tell, tell me a little bitmore about, about your background and
then, you know, how how you came incame, came how you got to the point of
purchasing this, purchasing this bank,and pivoting to this business strategy.
Jeremy Gilpin (03:04):
Yeah.
Thank you Evan.
I've been in banking for over 32 years.
Started my career in theMidwest, southeast Kansas.
And over the course of time and through,you know I'd say turbulent banking
eras, you know, early two thousands,late mid nineties, you know, during
some recessionary periods in our areas,rural markets were hit rather hard
along with farming communities as well.
(03:25):
And that's, that's mostly where Iserved my my tenure in this industry.
Picked up USDA lending probablyfrom a, one of the brightest
people I've ever, I've ever known.
He was a, a director of USDAlending in the eighties farm service
agency actually in the eighties.
And we all know what happenedin the eighties mm-hmm.
Back then with farming.
So got into USDA lending, startedfixing troubled institutions.
Utilizing USDA lending is a great way to,to create liquidity, to create fee income
(03:50):
without divestiture of shareholders orselling out community banks, which as
we all know, we're, are under fire rightnow by large nationals and regionals.
So through that I grew through theUSDA space, traveled to the west coast,
spent 20 years out on the west coastformed a large service provider for
USDA loans, the largest in the country.
(04:13):
That's where I met the chairman and CEOof Community Bank and Trust West Georgia.
About six years ago now well, pardon me,about 10 years ago, six years ago, we
started talking 'cause this, this wasa troubled institution, quite frankly,
with $75 million in assets, 3% capitalhad been under an order since 2009.
(04:35):
I thought this is a great casestudy and a great setup for a
podcast on, on how to fix a troubledinstitution and bring it back to
prosperity for, for everyone, right?
Mm-hmm.
Community but also havea national footprint.
So we formed a group just preCovid filed the application.
It took us two years in order to completethat, mostly due to the pandemic.
(04:58):
Came in three years ago.
Started setting up shop, doing some USDAlending, revamping, reorganizing both the
holding company and the bank itself sothat the holding company can serve as a
source of strength for the bank, not justthe other way around, which is typical.
Spoke to Chris who've, I'm whomI've known for a long time, I think.
Yeah, 15 years and said, man,wouldn't it be great if two worlds
(05:20):
collided and we could offer financing?
For everyone in need, not just ruralcommunities and just underserved, right?
There's, there's, there'scredit deserts all over the
country, not just rural markets.
And we thought that was a greatidea and, and, you know, we're
blessed enough that Chris said yes.
(05:41):
And Chris came on boardand we, we fired up.
SBA division which led to us startingup a servicing company as well,
a services company I should say.
'cause it does just more than servicing.
And then also we had the opportunity topick up Thomas Financial, acquire it.
Mike Thomas, who's been in thebusiness for over 40 years.
Prior to having Thomas USAF workedunder the Carter administration
(06:04):
for SBA he was wanting to retirewith real no real succession plan.
And I'd known Mike.
Probably 20 years myself.
And so we were able to bringall of the greats together.
And that's what we reallydid, is just we found the best
of the best in the industry.
We all came together so that we can, Imean, I, I know this sounds cliche, but
(06:24):
make, make the country a better place.
Mm-hmm.
And it's, it's worked out wonderfully, so.
Evan Sparks (06:32):
You talked about 75 million in assets a number of years ago.
Where are you at in terms of the bankand then what's the scale, what's your
SBA scale and your USDA lending scaleacross these various enterprises?
Jeremy Gilpin (06:42):
I can, I can answer for the bank and then Chris, you could
go with the USDA and SBA portfolios.
Sure, sure.
Chris Hurn (06:49):
Yeah.
I've got some data here.
Since Jeremy and his team tookover the bank, which the bank dates
back, believe it or not, to 1900.
It was it was the only bank in TroopCounty, Georgia to survive the Great
Depression, for instance, whichis kind of an interesting factoid.
But since he took over, so it's beenjust at three years, at the end of
March they've grown the assets 142%.
(07:13):
So it's about 216 million at the moment.
But.
I put an asterisk to that, Evan, becausealmost all of that is the UNGUARANTEED
portion of USDA loans or SBA loans.
So typically it's a 20 or25% UNGUARANTEED portion.
So it's almost as if they'vegrown from that 75 million to
about 800 million in asset size.
In three years, the loangrowth has grown, 527%.
(07:37):
Deposit growth has grown 143% andcapital has, has grown 348% all within
three years, which is, which I thinkis is pretty, pretty darn impressive.
So in terms of where we're at onthe SBA side of things, I. CB&T
is Phoenix's first lender, serviceprovider, client SBA approved.
(07:58):
And so what we do is we originate,underwrite, close service help of
secondary market sales all on behalfof CB&T, as part of as being their LSP.
So we worked very closely withthem and obviously with SBA to
deliver these services, but wewere the we were the 34th ranked.
(08:18):
Most active SBA lender, seven a lender.
So far this fiscal year thatjust came out a couple weeks ago,
we're actually the largest SBAlender in the state of Georgia.
You know, we've, we have nationwidePLP, that's preferred lender partner
status, so we have designatedunderwriting for our SBA loans.
So that will probably my, my best guessis we'll probably end this calendar year
(08:39):
at somewhere around 200 to 250 millionin fundings for SBA on the USDA side.
We'll probably end up beinga part of, I don't know, 300
to 400 million in projects.
Not all of which we originate for CB&T.
We have some other partner banks thatwe also originate for, but again, we
do a lot of those similar functionsbehind the scenes in terms of being
(09:02):
a lender services provider for them.
But Jeremy, please, and
Jeremy Gilpin (09:06):
that's on, that's on Phoenix's side, on Thomas financial side
they'll also package and walk throughthe entire press process for several
financial institutions across the country.
Approximately $400 millionin USDA lending as well.
So all combined, you know, anywherebetween seven to 800 million in
USDA originations for the year.
And that's mostly rural development.
(09:29):
That would be business and industrycommunity facilities, which is
your nonprofit healthcare emergencyservices type of projects and reap
renewable energy for America programs.
Evan Sparks (09:41):
Clearly y'all do these kind of white label business.
Do you do both kind of referrals fromfrom banks that need, that need your
backend, and also do, do you alsoreceive applications directly for,
directly from consumers and then marketthose out to participating banks?
Chris Hurn (09:57):
Yes, we, we we, we do that, we provide that origination services at
the moment for, for CB&T Phoenix does.
But we also work with someother banks on the USDA side.
We all, so we get, we getloan applications directly.
But then yes it's, we're, we'rea business bank fundamentally.
So that's, that's what our focus is.
(10:18):
We do work with referral sources.
Of course, we do work with otherbanks who, for whatever reason,
they're not able to do a transaction.
Maybe it's a turndown for them.
Maybe they don't havethe expertise that we do.
Oftentimes we try to turn that intoeither a participation arrangement or
certainly a servicing arrangement so wecan help them out and bring, bring some
of our specialized knowledge to know.
Jeremy Gilpin (10:37):
You have to remember Evan, to start one of these departments
is very, very expensive for a lotof rural banks and credit unions.
I mean, just the SBA loan, Chris, 2million, 3 million to start one up.
Yeah, about, yeah, you're looking atabout about 2 million, million and a
half on the USDA side itself as well.
So it's very prohibitive to enter themarket space if you, if you are a, a, a
(11:00):
rural bank or a rural credit union or evenin an urban market where you do you know,
maybe 5, 10, 20 of these loans a year.
So really that's, that's part of thecreation of the credit deserts is the, the
cost to initiate these types of platforms.
We've created a back office to allowcommunity banks and credit unions the
(11:22):
opportunity to offer these productsto their customers and their members.
Evan Sparks (11:26):
What's the size of that back office and how have
you built that team to do that?
Chris Hurn (11:31):
Well, it seems to be growing daily, Evan, we, we've got
about last count as of last week, Ithink we had about 121 people already.
Okay.
You know, we just, by the way, wejust, we didn't say this, but we
just stood up Phoenix late January.
Or excuse me, late December of last year.
So this is the first quarterof operations for Phoenix.
(11:51):
As you said, we just purchased ThomasFinancial Group also in the first quarter.
So it's been a, it's been a busy, it'sbeen a busy few months for us, for sure.
Yeah.
Jeremy Gilpin (12:00):
We, we started when we took, we did a change
of control three years ago.
We had 23 employees onstaff, so now we're 120.
Our assets under management at Phoenixand Chris is very I'm humble about
this, but it's, it's close to $800million in assets under management.
So he's done a great job of, ofbringing the who's who in that
industry together into Phoenix.
So
Chris Hurn (12:21):
the servicing portfolio is what Jeremy's talking about, Adam?
Yeah.
Correct, correct.
Jeremy Gilpin (12:24):
Correct.
Evan Sparks (12:27):
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And now back to the conversationwith Chris and Jeremy.
Across the holding company,what is your balance of interest
income to non-interest income?
(13:08):
How does that drive, drivethe success of the strategy?
Jeremy Gilpin (13:11):
Our net interest margin, Evan, is excluding our servicing,
which we pay our subsidiaries.
It's still around 5.7%.
So we, we have a verystrong net interest margin.
But I, I think our, our fee to ourinterest income to non-interest income.
Chris, I hate to speculate, butit's probably 60 40 non-interest
income to interest income.
(13:32):
Yeah.
Chris Hurn (13:33):
At least.
Yeah, I was gonna say seven 30.
Yeah.
Jeremy Gilpin (13:35):
Yeah.
Yeah.
It's getting there.
It, it's getting there.
Which, which I, I might remind whichis why Chris said to date, because I
don't think we're quite done yet insetting up risks for other institutions
because when you have that strong of aninterest, net interest margin with the.
Type of lending that we do and the depositgrowth that we have, that we have had
(13:56):
you have to have a very strong treasurymanagement in order to make that happen.
Yeah.
And so that's something on thebank side that we watch daily.
Chris Hurn (14:09):
Yeah.
And, and just for comparativepurposes, Evan, so you know,
again, for CB&T, that's the bank.
For our year end you know Jeremy's right,our interest margin's about 5, 6, 5 7.
Our, our peer group's about three seven.
Our return on, on averageequity was almost 14%.
Our peer groups a little under 10%.
Our annual asset growth was 59%.
(14:31):
Our peer groups 3.1%.
So we've been, we've beenmoving rather rapidly.
But again, as Jeremy hinted that, I mean,we've, we feel like we've put together a
bit of a who's who in terms of, in our,in our specific industries, which is of
course, government guaranteed lending,USDA and SBA, I mean, we've, we've got
some of the, the most well-known folks.
In both industries who are part of ourteam, who we've been fortunate enough
(14:53):
to, to bring over and, and they'rejust beginning with us, frankly.
So I, I really feel like the,our best days are ahead of us.
It's been pretty exciting.
It's we're not your typicalrural community bank.
We don't want to be, we're using thebank as a funding conduit to, to do
our government guaranteed lending,which is what we're so well known as.
(15:13):
And at the same time.
You know, growing the assets ofthe bank, the balance sheet of the
bank safely, successfully, and andreally utilizing those deposits.
To fund our loans as opposed to in, inmy past, I've been a non-bank lender.
I had A-S-B-L-C, for instance, with SBAin the past, and I, I funded everything
through, through capital Preferred Equityand large warehouse lines of credit.
(15:35):
It's a, it's a bit of arelief for me personally to,
to not have to be personallyguaranteeing all that, all that.
Jeremy Gilpin (15:43):
Well, and to do this, you also have to have a pretty
decent organizational structure,obviously is right, because
there are so many moving parts.
And that's another thing thatsets us aside, is our structure.
So typically in community banking,the holding company doesn't really
have employees, it's just theholding company for the institution.
Well, in our instance, the holdingcompany is the operational arm
of all of our subsidiaries, okay?
(16:04):
Where you're gonna find the CFO, you'regonna find the treasury management,
you're gonna find it, hr, right?
It actually has employees.
It provides service and support to all ofthe subsidiaries, so that way as it moves
up to the top echelon in the top layer,we can adjust resources as necessary.
So it keeps all of our subsidiaries quickand nimble without creating the battleship
(16:27):
atmosphere that takes so long to turn.
So as an opportunity arise or anew government program arises, we
can pick which entity best fitsthe model, provide the resources
from the holding company down.
To fulfill that and move withoutdisruption from the other subsidiaries.
Yeah.
Evan Sparks (16:45):
What are, what are, what are some of the challenge do, do you
see for, do you, do you foresee any,any challenges or things that you're
planning around, you know, strategicchallenges to the government- guaranteed
funding, business financing, financingsector over the, over the coming years.
Chris Hurn (16:59):
Not so much.
I mean, the, the nice thingabout both programs is they're,
they're bipartisan supported.
You know, I don't think there's too manyfolks in Congress that wanna be against
small business or, or rural businesses.
So that does help.
You know, the bigger issue is making surethat the congressional delegations are.
Educated about the programs and theeconomic impact that they make because
(17:20):
both of these large lending programs, youknow, clearly punch above their weight
in terms of economic development impact.
You know, we're, I, I don't thinkJeremy and I are too worried about
Doge coming in and, and saying,these aren't, these aren't necessary.
I think like every government program,sure, there's probably some dead wood that
they, that doge and others will probablybe able to, to clean up a little bit.
But at the, at the end of the day.
(17:41):
These are these are either historicallyzero subsidy or even a slight
subsidy or even negative subsidyprograms, which means, as I always
like to say, the more independentyou can be as a federal program in
Washington, the better off you are.
Because if you're dependent, thenyou're subject to the, you know,
the whims and the whims of, of dc.
But both of these programs has,have historically operated at those
(18:05):
subsidy levels, and it's, it's veryhelpful to, for the sustainability
of the programs going forward.
Evan Sparks (18:11):
Any other interesting stories or things that you, you'd like to
share with the banking industry audiencethat, from your experiences in building
up businesses in this specialization?
Jeremy Gilpin (18:21):
Going back to the economy and, and what's going on with, with
some, some of the political client,you know, also our experiences, the
fact that when, when things startto slow down, credit boxes at large
nationals and regional banks tend totighten, which lends itself more to
government guarantee type of lending.
So businesses that would normally notthink of government guaranteed lending in
the past, but is their only option now.
(18:45):
And so these programs tend to increasein the demand by the customer base
tends to increase during these times.
So if you're a financial institution andyou're getting pressure from regulators
to tighten conventional type lending,because obviously a conventional
loan will always lose more justbased upon the guaranteed percentage.
Right.
And, and float your balance sheet.
(19:06):
Right.
Much larger, especially when you'relooking at liquidity items, cost of funds,
items, you know, balance sheet management.
So I would, I would implore allcommunity banks if you're not.
Looking into these programs toreach out to Chris and, and the
Phoenix team at least for, atleast for an overview, right?
Because it, it does help andit does impact communities.
(19:28):
USDA, for example, is approximatelyone out of every $50 that go
into a loan is government.
So $49 is private institutions.
Chris Hurn (19:41):
I, I would say along the same lines, I mean, the, the reason
why we did this is we believe that our.
Our model will actually increasecapital access out there in, in
our, in our respective you know,sectors because it's not easy.
You don't just roll out of bed asa banker and decide you wanna do
a USDA land loan or an SBA loan.
(20:01):
That doesn't happen.
Out of all the institutions that canmake SBA loans, for instance, only about
1300 have actually made an SBA loan inthe last, in the last calendar year.
So, you know, and, and of course it'sthe 80 20 rule, the Pareto's principle
about, you know, the 20% are making80% of all the volume every year.
So, you know, it is tough if you're, ifyou're not making, I would argue one or
(20:23):
two SBA loans a month, you should probablyutilize the services of a lender service
provider such as Phoenix or others.
Just because you will never beable to get that level of expertise
that you need to protect yourinstitution as you go forward.
And the same thing it relates to USDA.
There's only about 130 lendersthat were involved last year in the
USDA program, so you can imagine.
(20:45):
The specialty again, 80 20 that exists in,in, you know, in that top 20% providing
80% of all the funding's out there.
And it's, it's pretty remarkable.
And, and you know, I think somepeople don't participate in these
programs because they did rollout of bed once Evan years ago,
and they said, let's go do this.
They didn't know what theydidn't know, and they got in
trouble with the regulators.
(21:06):
And you know, that's, that'snot a comfortable place to
be in as a regulated entity.
So I think oftentimes workingwith a lender service provider
is a, is a much better method.
And, you know, it may even be aninterim step, you know, once, once
you're doing more than a couple SBAloans a month probably does make
sense for you to contemplate you know,bringing a back office back in house
and, and growing your, your department.
(21:27):
But as a way to get started,to Jeremy's point, if we're.
Heading towards slower economicperiods, you are gonna see a pullback
from traditional conventional lending.
And oftentimes Jeremy and I have beenthrough these cycles many times in
our 20, 30 years in this industry.
You'll see that the government guaranteedlending sector will flourish and you know,
some of these folks are gonna wanna diptheir toes in and, and get involved, and
(21:50):
we'd certainly welcome working with 'em.
Evan Sparks (21:52):
Great.
Well, thank you both for taking time totalk to me and to our listeners about what
y'all are doing at community Bankshares.
So.
Really appreciate it.
Thank you, Evan.
Appreciate it.
For our listeners, you can findthis in previous episodes at
aba.com/banking journal podcast.
Thanks to Biz2X forsponsoring this episode.
Thanks so much for listening, andwe'll be back with you again very soon.
. Jeremy Gilpin: to start one of these departments is very, very expensive for
a lot of rural banks and credit unions.
I mean, just the SBA loan, 2million, 3 million to start one up.
You're looking at about about 2million, million and a half on
the USDA side itself as well.
So it's very prohibitive to enter themarket space if you are a rural bank
or a rural credit union or even in anurban market where you do you know,
(00:25):
maybe 5, 10, 20 of these loans a year.
So really that's, that's part of thecreation of the credit deserts is the, the
cost to initiate these types of platforms.
Evan Sparks (00:37):
From the American Bankers Association, this is the
A BA Banking Journal podcast.
Welcome back.
Today's episode is presented by Biz2X.
I'm Evan Sparks and I'm delightedto bring you a, an interesting bank
story from the great state of Georgia.
And to tell, to talk with me alittle bit more about community
Bankshares is Jeremy Gilpin.
(00:57):
Jeremy is chairman, president, and CEO of.
Community Bank and trustin La Grange, Georgia.
And also Chris Hurn.
Chris is president and CEO ofCommunity Bankshares the holding
company as well as their, thesubsidiary Phoenix Lender Services.
So Jeremy and Chris, welcome to the show.
Chris Hurn (01:16):
Thanks for having us, Evan.
Evan Sparks (01:17):
Thank you, Evan.
So I'd love it if you could beforewe get started, dig into, into your
bank story and the business model.
If you could give me a little bitof a sense of your backgrounds and
Chris, maybe I'll start with you.
How long have you been with CommunityBankshares and what led you to that point?
Chris Hurn (01:31):
I've been with Community Bankshares since January of this year.
Was doing a little consultingwork for Jeremy last year on this.
Jeremy and I have known eachother for over 15 years.
He's been very big in the USDAbusiness and industry lending program
space for, for many, many years.
I've been pretty big in the SBA lendingspace for many years and Jeremy called
(01:53):
me up about a year and a half ago andsaid, Hey, why don't we why don't we
join forces and be a part of this, thisrural community bank that I purchased
took a controlling stake in what was thatabout three years ago, Jeremy, I believe.
Jeremy Gilpin (02:07):
Yep.
Three years ago, March.
Chris Hurn (02:09):
And so I I joined up with him and you know, bought into the vision.
And now I'm the president, CEOof a holding company itself.
And we have, we have threesubsidiaries at the moment.
The largest of which well in some ways,the largest of which is Phoenix Lender
Services, which is a lender serviceprovider for both banks and credit
unions for both USDA and SBA loans.
(02:31):
And then Jeremy.
I'll let him explain.
But he's the president of oneof the subsidiaries, which is
CB&T, Community Bank and Trust.
That's the bank that powers everything.
And then we also have anothersubsidiary called Thomas Financial
Group, which is the largest USDAbusiness loan packager in the country.
And we purchased Thomas maybetwo months ago at this point,
Jeremy Gilpin (02:51):
January, January 2nd.
Evan Sparks (02:52):
All right.
So, Jeremy, tell, tell me a little bitmore about, about your background and
then, you know, how how you came incame, came how you got to the point of
purchasing this, purchasing this bank,and pivoting to this business strategy.
Jeremy Gilpin (03:04):
Yeah.
Thank you Evan.
I've been in banking for over 32 years.
Started my career in theMidwest, southeast Kansas.
And over the course of time and through,you know I'd say turbulent banking
eras, you know, early two thousands,late mid nineties, you know, during
some recessionary periods in our areas,rural markets were hit rather hard
along with farming communities as well.
(03:25):
And that's, that's mostly where Iserved my my tenure in this industry.
Picked up USDA lending probablyfrom a, one of the brightest
people I've ever, I've ever known.
He was a, a director of USDAlending in the eighties farm service
agency actually in the eighties.
And we all know what happenedin the eighties mm-hmm.
Back then with farming.
So got into USDA lending, startedfixing troubled institutions.
Utilizing USDA lending is a great way to,to create liquidity, to create fee income
(03:50):
without divestiture of shareholders orselling out community banks, which as
we all know, we're, are under fire rightnow by large nationals and regionals.
So through that I grew through theUSDA space, traveled to the west coast,
spent 20 years out on the west coastformed a large service provider for
USDA loans, the largest in the country.
(04:13):
That's where I met the chairman and CEOof Community Bank and Trust West Georgia.
About six years ago now well, pardon me,about 10 years ago, six years ago, we
started talking 'cause this, this wasa troubled institution, quite frankly,
with $75 million in assets, 3% capitalhad been under an order since 2009.
(04:35):
I thought this is a great casestudy and a great setup for a
podcast on, on how to fix a troubledinstitution and bring it back to
prosperity for, for everyone, right?
Mm-hmm.
Community but also havea national footprint.
So we formed a group just preCovid filed the application.
It took us two years in order to completethat, mostly due to the pandemic.
(04:58):
Came in three years ago.
Started setting up shop, doing some USDAlending, revamping, reorganizing both the
holding company and the bank itself sothat the holding company can serve as a
source of strength for the bank, not justthe other way around, which is typical.
Spoke to Chris who've, I'm whomI've known for a long time, I think.
Yeah, 15 years and said, man,wouldn't it be great if two worlds
(05:20):
collided and we could offer financing?
For everyone in need, not just ruralcommunities and just underserved, right?
There's, there's, there'scredit deserts all over the
country, not just rural markets.
And we thought that was a greatidea and, and, you know, we're
blessed enough that Chris said yes.
(05:41):
And Chris came on boardand we, we fired up.
SBA division which led to us startingup a servicing company as well,
a services company I should say.
'cause it does just more than servicing.
And then also we had the opportunity topick up Thomas Financial, acquire it.
Mike Thomas, who's been in thebusiness for over 40 years.
Prior to having Thomas USAF workedunder the Carter administration
(06:04):
for SBA he was wanting to retirewith real no real succession plan.
And I'd known Mike.
Probably 20 years myself.
And so we were able to bringall of the greats together.
And that's what we reallydid, is just we found the best
of the best in the industry.
We all came together so that we can, Imean, I, I know this sounds cliche, but
(06:24):
make, make the country a better place.
Mm-hmm.
And it's, it's worked out wonderfully, so.
Evan Sparks (06:32):
You talked about 75 million in assets a number of years ago.
Where are you at in terms of the bankand then what's the scale, what's your
SBA scale and your USDA lending scaleacross these various enterprises?
Jeremy Gilpin (06:42):
I can, I can answer for the bank and then Chris, you could
go with the USDA and SBA portfolios.
Sure, sure.
Chris Hurn (06:49):
Yeah.
I've got some data here.
Since Jeremy and his team tookover the bank, which the bank dates
back, believe it or not, to 1900.
It was it was the only bank in TroopCounty, Georgia to survive the Great
Depression, for instance, whichis kind of an interesting factoid.
But since he took over, so it's beenjust at three years, at the end of
March they've grown the assets 142%.
(07:13):
So it's about 216 million at the moment.
But.
I put an asterisk to that, Evan, becausealmost all of that is the UNGUARANTEED
portion of USDA loans or SBA loans.
So typically it's a 20 or25% UNGUARANTEED portion.
So it's almost as if they'vegrown from that 75 million to
about 800 million in asset size.
In three years, the loangrowth has grown, 527%.
(07:37):
Deposit growth has grown 143% andcapital has, has grown 348% all within
three years, which is, which I thinkis is pretty, pretty darn impressive.
So in terms of where we're at onthe SBA side of things, I. CB&T
is Phoenix's first lender, serviceprovider, client SBA approved.
(07:58):
And so what we do is we originate,underwrite, close service help of
secondary market sales all on behalfof CB&T, as part of as being their LSP.
So we worked very closely withthem and obviously with SBA to
deliver these services, but wewere the we were the 34th ranked.
(08:18):
Most active SBA lender, seven a lender.
So far this fiscal year thatjust came out a couple weeks ago,
we're actually the largest SBAlender in the state of Georgia.
You know, we've, we have nationwidePLP, that's preferred lender partner
status, so we have designatedunderwriting for our SBA loans.
So that will probably my, my best guessis we'll probably end this calendar year
(08:39):
at somewhere around 200 to 250 millionin fundings for SBA on the USDA side.
We'll probably end up beinga part of, I don't know, 300
to 400 million in projects.
Not all of which we originate for CB&T.
We have some other partner banks thatwe also originate for, but again, we
do a lot of those similar functionsbehind the scenes in terms of being
(09:02):
a lender services provider for them.
But Jeremy, please, and
Jeremy Gilpin (09:06):
that's on, that's on Phoenix's side, on Thomas financial side
they'll also package and walk throughthe entire press process for several
financial institutions across the country.
Approximately $400 millionin USDA lending as well.
So all combined, you know, anywherebetween seven to 800 million in
USDA originations for the year.
And that's mostly rural development.
(09:29):
That would be business and industrycommunity facilities, which is
your nonprofit healthcare emergencyservices type of projects and reap
renewable energy for America programs.
Evan Sparks (09:41):
Clearly y'all do these kind of white label business.
Do you do both kind of referrals fromfrom banks that need, that need your
backend, and also do, do you alsoreceive applications directly for,
directly from consumers and then marketthose out to participating banks?
Chris Hurn (09:57):
Yes, we, we we, we do that, we provide that origination services at
the moment for, for CB&T Phoenix does.
But we also work with someother banks on the USDA side.
We all, so we get, we getloan applications directly.
But then yes it's, we're, we'rea business bank fundamentally.
So that's, that's what our focus is.
(10:18):
We do work with referral sources.
Of course, we do work with otherbanks who, for whatever reason,
they're not able to do a transaction.
Maybe it's a turndown for them.
Maybe they don't havethe expertise that we do.
Oftentimes we try to turn that intoeither a participation arrangement or
certainly a servicing arrangement so wecan help them out and bring, bring some
of our specialized knowledge to know.
Jeremy Gilpin (10:37):
You have to remember Evan, to start one of these departments
is very, very expensive for a lotof rural banks and credit unions.
I mean, just the SBA loan, Chris, 2million, 3 million to start one up.
Yeah, about, yeah, you're looking atabout about 2 million, million and a
half on the USDA side itself as well.
So it's very prohibitive to enter themarket space if you, if you are a, a, a
(11:00):
rural bank or a rural credit union or evenin an urban market where you do you know,
maybe 5, 10, 20 of these loans a year.
So really that's, that's part of thecreation of the credit deserts is the, the
cost to initiate these types of platforms.
We've created a back office to allowcommunity banks and credit unions the
(11:22):
opportunity to offer these productsto their customers and their members.
Evan Sparks (11:26):
What's the size of that back office and how have
you built that team to do that?
Chris Hurn (11:31):
Well, it seems to be growing daily, Evan, we, we've got
about last count as of last week, Ithink we had about 121 people already.
Okay.
You know, we just, by the way, wejust, we didn't say this, but we
just stood up Phoenix late January.
Or excuse me, late December of last year.
So this is the first quarterof operations for Phoenix.
(11:51):
As you said, we just purchased ThomasFinancial Group also in the first quarter.
So it's been a, it's been a busy, it'sbeen a busy few months for us, for sure.
Yeah.
Jeremy Gilpin (12:00):
We, we started when we took, we did a change
of control three years ago.
We had 23 employees onstaff, so now we're 120.
Our assets under management at Phoenixand Chris is very I'm humble about
this, but it's, it's close to $800million in assets under management.
So he's done a great job of, ofbringing the who's who in that
industry together into Phoenix.
So
Chris Hurn (12:21):
the servicing portfolio is what Jeremy's talking about, Adam?
Yeah.
Correct, correct.
Jeremy Gilpin (12:24):
Correct.
Evan Sparks (12:27):
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(12:48):
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And thanks again for to Biz2Xfor sponsoring this episode.
And now back to the conversationwith Chris and Jeremy.
Across the holding company,what is your balance of interest
income to non-interest income?
(13:08):
How does that drive, drivethe success of the strategy?
Jeremy Gilpin (13:11):
Our net interest margin, Evan, is excluding our servicing,
which we pay our subsidiaries.
It's still around 5.7%.
So we, we have a verystrong net interest margin.
But I, I think our, our fee to ourinterest income to non-interest income.
Chris, I hate to speculate, butit's probably 60 40 non-interest
income to interest income.
(13:32):
Yeah.
Chris Hurn (13:33):
At least.
Yeah, I was gonna say seven 30.
Yeah.
Jeremy Gilpin (13:35):
Yeah.
Yeah.
It's getting there.
It, it's getting there.
Which, which I, I might remind whichis why Chris said to date, because I
don't think we're quite done yet insetting up risks for other institutions
because when you have that strong of aninterest, net interest margin with the.
Type of lending that we do and the depositgrowth that we have, that we have had
(13:56):
you have to have a very strong treasurymanagement in order to make that happen.
Yeah.
And so that's something on thebank side that we watch daily.
Chris Hurn (14:09):
Yeah.
And, and just for comparativepurposes, Evan, so you know,
again, for CB&T, that's the bank.
For our year end you know Jeremy's right,our interest margin's about 5, 6, 5 7.
Our, our peer group's about three seven.
Our return on, on averageequity was almost 14%.
Our peer groups a little under 10%.
Our annual asset growth was 59%.
(14:31):
Our peer groups 3.1%.
So we've been, we've beenmoving rather rapidly.
But again, as Jeremy hinted that, I mean,we've, we feel like we've put together a
bit of a who's who in terms of, in our,in our specific industries, which is of
course, government guaranteed lending,USDA and SBA, I mean, we've, we've got
some of the, the most well-known folks.
In both industries who are part of ourteam, who we've been fortunate enough
(14:53):
to, to bring over and, and they'rejust beginning with us, frankly.
So I, I really feel like the,our best days are ahead of us.
It's been pretty exciting.
It's we're not your typicalrural community bank.
We don't want to be, we're using thebank as a funding conduit to, to do
our government guaranteed lending,which is what we're so well known as.
(15:13):
And at the same time.
You know, growing the assets ofthe bank, the balance sheet of the
bank safely, successfully, and andreally utilizing those deposits.
To fund our loans as opposed to in, inmy past, I've been a non-bank lender.
I had A-S-B-L-C, for instance, with SBAin the past, and I, I funded everything
through, through capital Preferred Equityand large warehouse lines of credit.
(15:35):
It's a, it's a bit of arelief for me personally to,
to not have to be personallyguaranteeing all that, all that.
Jeremy Gilpin (15:43):
Well, and to do this, you also have to have a pretty
decent organizational structure,obviously is right, because
there are so many moving parts.
And that's another thing thatsets us aside, is our structure.
So typically in community banking,the holding company doesn't really
have employees, it's just theholding company for the institution.
Well, in our instance, the holdingcompany is the operational arm
of all of our subsidiaries, okay?
(16:04):
Where you're gonna find the CFO, you'regonna find the treasury management,
you're gonna find it, hr, right?
It actually has employees.
It provides service and support to all ofthe subsidiaries, so that way as it moves
up to the top echelon in the top layer,we can adjust resources as necessary.
So it keeps all of our subsidiaries quickand nimble without creating the battleship
(16:27):
atmosphere that takes so long to turn.
So as an opportunity arise or anew government program arises, we
can pick which entity best fitsthe model, provide the resources
from the holding company down.
To fulfill that and move withoutdisruption from the other subsidiaries.
Yeah.
Evan Sparks (16:45):
What are, what are, what are some of the challenge do, do you
see for, do you, do you foresee any,any challenges or things that you're
planning around, you know, strategicchallenges to the government- guaranteed
funding, business financing, financingsector over the, over the coming years.
Chris Hurn (16:59):
Not so much.
I mean, the, the nice thingabout both programs is they're,
they're bipartisan supported.
You know, I don't think there's too manyfolks in Congress that wanna be against
small business or, or rural businesses.
So that does help.
You know, the bigger issue is making surethat the congressional delegations are.
Educated about the programs and theeconomic impact that they make because
(17:20):
both of these large lending programs, youknow, clearly punch above their weight
in terms of economic development impact.
You know, we're, I, I don't thinkJeremy and I are too worried about
Doge coming in and, and saying,these aren't, these aren't necessary.
I think like every government program,sure, there's probably some dead wood that
they, that doge and others will probablybe able to, to clean up a little bit.
But at the, at the end of the day.
(17:41):
These are these are either historicallyzero subsidy or even a slight
subsidy or even negative subsidyprograms, which means, as I always
like to say, the more independentyou can be as a federal program in
Washington, the better off you are.
Because if you're dependent, thenyou're subject to the, you know,
the whims and the whims of, of dc.
But both of these programs has,have historically operated at those
(18:05):
subsidy levels, and it's, it's veryhelpful to, for the sustainability
of the programs going forward.
Evan Sparks (18:11):
Any other interesting stories or things that you, you'd like to
share with the banking industry audiencethat, from your experiences in building
up businesses in this specialization?
Jeremy Gilpin (18:21):
Going back to the economy and, and what's going on with, with
some, some of the political client,you know, also our experiences, the
fact that when, when things startto slow down, credit boxes at large
nationals and regional banks tend totighten, which lends itself more to
government guarantee type of lending.
So businesses that would normally notthink of government guaranteed lending in
the past, but is their only option now.
(18:45):
And so these programs tend to increasein the demand by the customer base
tends to increase during these times.
So if you're a financial institution andyou're getting pressure from regulators
to tighten conventional type lending,because obviously a conventional
loan will always lose more justbased upon the guaranteed percentage.
Right.
And, and float your balance sheet.
(19:06):
Right.
Much larger, especially when you'relooking at liquidity items, cost of funds,
items, you know, balance sheet management.
So I would, I would implore allcommunity banks if you're not.
Looking into these programs toreach out to Chris and, and the
Phoenix team at least for, atleast for an overview, right?
Because it, it does help andit does impact communities.
(19:28):
USDA, for example, is approximatelyone out of every $50 that go
into a loan is government.
So $49 is private institutions.
Chris Hurn (19:41):
I, I would say along the same lines, I mean, the, the reason
why we did this is we believe that our.
Our model will actually increasecapital access out there in, in
our, in our respective you know,sectors because it's not easy.
You don't just roll out of bed asa banker and decide you wanna do
a USDA land loan or an SBA loan.
(20:01):
That doesn't happen.
Out of all the institutions that canmake SBA loans, for instance, only about
1300 have actually made an SBA loan inthe last, in the last calendar year.
So, you know, and, and of course it'sthe 80 20 rule, the Pareto's principle
about, you know, the 20% are making80% of all the volume every year.
So, you know, it is tough if you're, ifyou're not making, I would argue one or
(20:23):
two SBA loans a month, you should probablyutilize the services of a lender service
provider such as Phoenix or others.
Just because you will never beable to get that level of expertise
that you need to protect yourinstitution as you go forward.
And the same thing it relates to USDA.
There's only about 130 lendersthat were involved last year in the
USDA program, so you can imagine.
(20:45):
The specialty again, 80 20 that exists in,in, you know, in that top 20% providing
80% of all the funding's out there.
And it's, it's pretty remarkable.
And, and you know, I think somepeople don't participate in these
programs because they did rollout of bed once Evan years ago,
and they said, let's go do this.
They didn't know what theydidn't know, and they got in
trouble with the regulators.
(21:06):
And you know, that's, that'snot a comfortable place to
be in as a regulated entity.
So I think oftentimes workingwith a lender service provider
is a, is a much better method.
And, you know, it may even be aninterim step, you know, once, once
you're doing more than a couple SBAloans a month probably does make
sense for you to contemplate you know,bringing a back office back in house
and, and growing your, your department.
(21:27):
But as a way to get started,to Jeremy's point, if we're.
Heading towards slower economicperiods, you are gonna see a pullback
from traditional conventional lending.
And oftentimes Jeremy and I have beenthrough these cycles many times in
our 20, 30 years in this industry.
You'll see that the government guaranteedlending sector will flourish and you know,
some of these folks are gonna wanna diptheir toes in and, and get involved, and
(21:50):
we'd certainly welcome working with 'em.
Evan Sparks (21:52):
Great.
Well, thank you both for taking time totalk to me and to our listeners about what
y'all are doing at community Bankshares.
So.
Really appreciate it.
Thank you, Evan.
Appreciate it.
For our listeners, you can findthis in previous episodes at
aba.com/banking journal podcast.
Thanks to Biz2X forsponsoring this episode.
Thanks so much for listening, andwe'll be back with you again very soon.
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