Conservative balance sheet, loyalty sees bank to centennial celebration

First State Bank of Eastpoint, Mich., was faced with some tough decisions in 2007, but the bank’s conservative balance sheet and customer loyalty helped the bank make it to 100 years.

First State Bank, Eastpoint, Mich.

In 2007, First State Bank of Eastpointe, Mich., was faced with some tough decisions. Loans and mortgages were deteriorating, a sign that southeast Michigan was already feeling the impact of the coming financial downturn. As the bank worked to clean up troubled loans and sell off two pools of mortgages at a loss, it went from an income of $1.6 million in 2006 to a loss of $8.7 million in 2007.

However, identifying those issues early “forced us to make the structural changes within the bank that helped see us through what turned out to be a rather prolonged economic downturn,” said Gene Lovell, president of the now $664 million bank.

The next two years, not surprisingly, also held operating losses for First State Bank. However, in “three years, we were back to profitability. In four years, we were able to provide our shareholders with a dividend. We did that without ever requiring, requesting, or receiving one penny from the federal government, and we’re quite proud of that,” Lovell said. “I think it speaks well to the bank because we have always maintained a conservative balance sheet and, as painful as the losses were, we were never at a point where I felt we were at risk as a continuing concern. We were never under any type of consent agreement with the regulators although clearly they were keeping an eye on all financial institutions at the time.”

That conservatism has helped First State Bank reach its centennial this month.

The bank opened its doors in October 1917 as Halfway State Bank, a nod to the fact its village was the halfway point on the stage coach line between downtown Detroit and the county seat of Macomb. In 1935, the bank was recapitalized with funds from butcher and town mayor Christian Nill. To this day, his descendants own controlling shares in the bank and are represented by four directors on the board.

“They are a wonderful family,” Lovell said about the Nills. “They have grown up with the bank being part of their lives. If I used the financial crisis as an example, the benefit here was immeasurable.…They were willing to look at a difficult situation with the cold eyes that that situation needed and look at it objectively, look at the bank’s long-term best interest.”

The bank’s focus on relationships has been rewarded with incredible loyalty from customers. “We’ve got a few customers who have been with us at least 80 years,” Lovell said. “I’ve talked with a couple of them, and they will tell me how their parents opened an account for them the year they were born.” He also said nearly 500 customers have been with the bank for at least 50 years. “During good times and bad times, they’ve stayed with us.”

After the recession, Lovell said it became clear to the bank that “if we were going to thrive as a community bank, we needed to help ensure our community thrived. Focus our efforts on giving back to the communities we serve in.” This year, the bank has donated $5000 each month to a non-profit nominated by an employee or customer.

As the bank looks to the future, Lovell said, “We’re still a very solid, financially sound community bank” that is continuing to grow. First State recently expanded its market to neighboring Oakland County and is looking to open its twelfth branch in 2018. And the decreasing cost of technology opens up a lot of opportunity. “We can really offer, in many ways, the same quality of services as a large national bank, but we still have that hometown community of a community bank, and I really think there’s a lot of value there.”