State Bankshares in Fargo, North Dakota has evolved on a multitude of fronts over the past decade, doubling in size and becoming one of the nation’s most successful community banks.
The company, which does business as Bell Bank, is No. 1 on the 2021 list of top performing banks with assets of $2 billion to $10 billion compiled by Capital Performance Group.
The company’s now $10.1 billion assets — it was just below that threshold in 2021 and continued to grow in the first half of this year — has expanded from the Red River Valley of North Dakota around Fargo west of Minnesota several years ago. It gradually pushed into Minneapolis and built its presence in that larger market for about a decade. It also now borders the Phoenix area.
Along the way, the company has significantly diversified its revenue streams. Bell Bank is a top commercial lender, but it also runs regional wealth management and insurance units in the Midwest, and it operates a national mortgage business that originated $6 billion in loans in 2021.
The combination of interest income and fees spread across these businesses helped it drive revenue growth in 2021 of 43%, about five times that of the entire asset class, according to Capital Performance Group. .
“Our outperformance is a testament to the diversity of our business,” Bell Bank President and CEO Michael Solberg said in an interview.
Last year, the bank’s net profit grew 159%, more than triple the median rate of the top 20 banks on the $2-10 billion asset list and more than four times that of the 308 banks in the global list.
It posted loan growth in 2021 of almost 16%, compared to a median of around 1.5% for its asset class. State Bancshares did this without sacrificing credit quality. Non-performing assets as a percentage of total assets was only 0.08%. The median of all peers was 0.36%.
Admittedly, 2021 was a different era. Interest rates were historically low. Mortgage refinancing activity was robust. Economic activity was on the rise.
This year, inflation is skyrocketing and the Federal Reserve aggressively raising interest rates in response. Recession fears are rising as a result, economists say, and the mortgage market is on the front line.
“Consumer concerns about rising rates, inflation and a potential recession are manifesting in slowing demand,” said Sam Khater, chief economist at Freddie Mac.
Solberg acknowledges that headwinds are blowing. But he said, as with other lines of business, Bell Bank has grown by investing in its business when others pull back – with the aim of positioning the bank for long-term growth.
“We view this downturn in mortgage lending as a time to invest,” Solberg said. “We are actively recruiting. It’s time to take market share.
He said overall loan demand is holding steady in mid-2022 and there is no evidence signs of credit stress.
“From a demand perspective, we are cautiously optimistic,” Solberg said. “And knock on wood, we are very pleased with the credit quality.”
The big task, he said, is to find talent to help drive continued growth. “Hiring is a challenge here as it is for everyone else,” he said, referring to low unemployment and fewer skilled workers than professional job openings.
But Bell Bank has long fostered a culture that prioritizes employee professional development, compensation and job satisfaction, which helps it stand out on the recruiting front and shine in employee retention. It consistently ranks among American Banker’s The best banks to work for.
“It’s always been our secret sauce,” Solberg said. The better the company performs, the more employees earn, including bonuses. The more the company invests in its people, he said, the better its performance.
“For us, happy employees create happy customers,” Solberg said. “From there, the financial numbers take care of themselves.”