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Cooperative Bankshares is a conservative, long-term
financial institution and largest local bank in one of the most rapidly growing markets in
Cooperative Bankshares, Inc.
201 Market Street
Wilmington, NC 28401
Frederick Willetts, III
Chairman, President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
February 24, 2005
Frederick Willetts, III has been employed by the Bank since 1972 and has served as the
Chief Executive Officer and President since June 1, 1991. He was named to the additional
position of Chairman of the Board during 1998. Mr. Willetts is past Chairman of the North
Carolina Bankers Association and served on the Board of Directors of America's Community
Bankers. He has served on the Thrift Institutions Advisory Council to the Federal Reserve
Board, as President of the Southeastern Conference of the U.S. Savings and Loan League,
the Greater Wilmington Chamber of Commerce, the Foundation of the Episcopal Diocese of
East Carolina, Vice Chairman of the Foundation of the University of North Carolina at
Wilmington and as President of Wilmington Industrial Development (Committee of 100). Mr.
Willetts was the recipient of the New Hanover Distinguished Service Award in 1987, the
"Five Outstanding Young North Carolinians" Award in 1988, the Glen Troop Award
for outstanding public service to the thrift industry in 1990 and the Wilmington Good
Citizenship Award in 1994.
Cooperative Bankshares, Inc. is a registered bank holding company incorporated in North
Carolina in 1994. The Company serves as the holding company for Cooperative Bank; a North
Carolina chartered commercial bank. The Company's primary activities consist of holding
the stock of Cooperative Bank and operating the business of the Bank. Cooperative Bank's
subsidiary, Lumina Mortgage, Inc., is a mortgage banking firm, originating and selling
residential mortgage loans through offices in Wilmington, North Carolina, North Myrtle
Beach, South Carolina, and Virginia Beach, Virginia.
Cooperative Bank was chartered in 1898. The Bank's headquarters is located in Wilmington,
North Carolina. Cooperative operates 21 offices throughout the coastal and inland
communities of eastern North Carolina. These centers extend from Corolla, located on the
Outer Banks of North Carolina, to Tabor City, located on the South Carolina border.
Through its offices, the Bank provides a wide range of banking products, including
checking accounts, certificates of deposit and individual retirement accounts. It offers
an array of loan products: overdraft protection, commercial, consumer, agricultural, real
estate, residential mortgage and home equity loans. Also offered are safe deposit boxes
and automated banking services through ATMs and Access24 Phone Banking. In addition, the
Bank also offers discount brokerage services, annuity sales and mutual funds through a
third party arrangement with UVEST Investment Services.
CEOCFOinterviews: Mr. Willetts, you have been CEO for quite
some time; what was your vision when you took over and what has transpired since you have
Mr. Willetts: "I have actually been employed here for
over 33 years and I am third generation in my family to run things; taught by my father
from an early age. In 1991, we took the company public. At that time, he moved to chairman
of the board and I became president and CEO. The vision, beginning at that point was to
become a public company and to enhance stockholder value and to convert the bank from a
traditional savings-and-loan thrift type organization, to a full-service community
are you today?
Mr. Willetts: "Using a baseball analogy, I would say we
are at the bottom of the seventh inning, so we still have some thrift assets on the books
and they are gradually paying off. The banking assets are taking more of a percentage of
the balance sheet."
CEOCFOinterviews: Who is
your target customer?
Mr. Willetts: "Our focus is on small business and
individuals in our markets."
is the economy like in the area that you serve?
Mr. Willetts: "We serve eastern North Carolina, which is
a two-tier economy. The inland areas of eastern North Carolina are suffering economically,
with tobacco becoming less of a money crop and with the textile industry moving overseas,
unemployment is high and the economy is not good. However over on the coast is where we
are more positioned at this point. It is a booming area both from a tourism perspective
and our headquarters here in Wilmington is a diverse city of approximately 100,000 here in
a metro area of 300,000. It is one of the fastest growing markets in the country."
CEOCFOinterviews: How do
you attract business?
Mr. Willetts: "We generally try to attract business by
using several methods. One is word-of-mouth, which over time has taken us a long way.
People tell their neighbors about the quality of service and the fact that even though the
big banks do not deliver that anymore, that there are still alternatives and we are one of
them. The other is the personal contacts that we make with individuals."
CEOCFOinterviews: Do you
do much advertising?
Mr. Willetts: "We do! It is hard to tell how effective
that is. I have read before that 90% of your advertising is wasted; the key would be to
know which 90% that is. I think the one-on-one approach has been more beneficial to
CEOCFOinterviews: How do
you split between commercial and consumer and do you see that changing?
Mr. Willetts: "We really emphasize more commercial. We
do make some car loans and home equity loans too, but we are geared more to the developer,
construction lending or residential properties. We have a tremendous growth rate in our
community and that has been a niche that we have been very successful in."
are your customers coming to you as opposed to your competition?
Mr. Willetts: "We are the largest locally headquartered
bank in Wilmington. We have had two relatively new startups in the last few years that
have not penetrated the market in a significant fashion. Everybody else in this market is
out of town, out of state or out of the country banks."
CEOCFOinterviews: I am
looking at your website and it reads "modern facilities combined with old fashioned
courtesy; " what is it that makes the difference in the contact with your customers?
Mr. Willetts: "It is getting to know your customer. When
they come in, they see a familiar name and face. We don't move people around as many other
banks do so that they are used to coming in and seeing the same people.
do you look for in your people?
Mr. Willetts: "The most important is the work ethic and
people-person type. Obviously talent and drive is considered in the equation but somebody
who likes people, wants to help people and is willing to work hard to accomplish
you give us an example of what a customer might find at a Cooperative bank that they would
not find somewhere else?
Mr. Willetts: "We send mystery shoppers in to pose as
customers and we grade our people on how they greet the customer and so forth. One of the
things that they will notice is that people are called by their name if they know their
name. They will often ask how the grandchildren are or how the college education is coming
or whatever the event may be. If they have a problem, they are not shoved off somewhere,
the problem is solved right there. I leave my door open and customers can come in without
an appointment and talk to the president of the bank. You cannot do that at the big banks.
We tried to reach someone in a big bank a few months ago and we could not find anyone to
talk to about our particular problem."
CEOCFOinterviews: Do you
see new branches in the future?
Mr. Willetts: "Our strategic plan calls for us to open
new branches every nine to fifteen months; we opened four branches in 2003. We explained
to the market that we made a strategic, practical decision to do that realizing that it
would impact earnings during 2004 and it did. The market was patient with us and watched
as we continued to grow those new branches and increase profitability. Going forward, as I
say every nine to fifteen month is our plan; we can accommodate that growth without
impacting our earnings."
CEOCFOinterviews: Do you
see acquisitions in the future?
Mr. Willetts: "We look out for acquisitions, but frankly
there are not many in the markets that we are interested in today, and those that are, do
not want to sell or they are mighty fond of their franchise."
you tell us about your mortgage subsidiary?
Mr. Willetts: "We acquired a mortgage company in 2002,
which is headquartered here in Wilmington, but it has offices in Myrtle Beach, South
Carolina and Virginia Beach, Virginia. This gives the bank flexibility to move into two
other states and additionally it will allow us flexibility to offer some programs that we
do not. By affiliating with a bank, we can make their construction loans and development
loans. We feed each other back and forth."
there services that you plan to offer in the future or that you think that you may need to
Mr. Willetts: "We constantly keep an eye open for
possibilities, but we have full internet banking and bill paying capability. We have a
network of ATMs. We are moving into a new operation center this summer for better hands-on
CEOCFOinterviews: How is
Mr. Willetts: "Business is great! We are very fortunate
to be in such good markets, especially along the coast. The coastal regions of the
mid-Atlantic are booming. There are huge retirement communities. I was looking at some
demographics today, the largest influx of people into our county, came from New York
state. Many people from the northeast are finding it attractive here. There is a booming
economy expanding here. Corning Incorporated (NYSE: GLW) has expanded here, Verizon (NYSE:
VZ) has opened a new operation here, the state port is growing because they just dug the
river channel to forty-two feet, which will accommodate larger ships. We are getting new
highways constantly. The University is the fastest growing branch of the University system
in North Carolina. There is a very diverse economy here."
should potential investors be interested and what should they know that perhaps they don't
realize when they first look at the company?
Mr. Willetts: "I continually have said since 1991 that
Cooperative was a buy-and-hold stock. Because of its small-cap nature, it is thinly
traded. It is not the type of stock that you could buy ten thousand shares a day and
necessarily be able to get out next week. I do emphasize that it is a buy-and-hold stock
as long as we continue to stay the course and continue to grow our balance sheet with good
quality credits, and our portfolio of credits is excellent. We are in good markets and are
continually expanding in those markets, so it is a long-term investment."
there much float available for potential investors?
Mr. Willetts: "It trades about 2000 shares a day. There
was one day last week where it traded about 30,000 shares; this was after we announced the
three-for-two stocks split"
you tell us about the stock split?
Mr. Willetts: "We announced on January 19th, a
three-for-two stock split, which will take effect on February 24th. This has been viewed
very positively in the market. The stock is traded up close to its all-time high and the
volume has been significantly higher than it has been. One of the reasons for doing the
stock split is to put more shares into the market, which would increase the float."
reaching investors a focus for you?
Mr. Willetts: "Yes it is! I am speaking next week at an
investors conference in Chapel Hill, North Carolina. I spoke last year in Atlanta,
New York, and several other locations. I think with a small-cap stock like we are, the
market doesn't find you, you find them. Speaking with people like you today, is another
way to get that message out."
closing, what should people remember most about Cooperative Bankshares?
Mr. Willetts: "Cooperative Bankshares is a conservative,
long-term financial institution in one of the most rapidly growing markets in the country.
It is the largest local bank in that market and we will continue to grow the bank in a
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