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Lynn Fosse, Senior Editor

Steve Alexander, Associate Editor

Bud Wayne, Editorial Executive

Christy Rivers - Editorial Executive

Valerie Austin - Editorial Associate


CommunityBank of Texas: Business Banking \ Better Banking

Robert R. Franklin Jr

Chairman President & CEO

CBTX, Inc.



Ashley Warren


Interview conducted by:

Lynn Fosse, Senior Editor, CEOCFO Magazine
Published – December 16, 2019

CEOCFO: Mr. Franklin, every bank has their own philosophy; would you tell us a little about Community Bank of Texas

Mr. Franklin: We are the quintessential community bank. We are relationship driven and very customer centric. Everything we do is around our customers and our communities. We spend a lot of time trying to make sure that we take care of our customers, and because we are small and they have a lot of choices these days, we need to make sure that we take care of those relationships. That means not only loans but also deposits. We stay very focused on loans and deposits, that is who we are. We are a bank; we do not focus on a whole lot of other types of products. It is mainly doing your very basics of banking and trying to do that as well as we can.

CEOCFO: You mentioned customer focus and service. What are some concrete examples of where you stand out, where you are over and above what other banks might do?

Mr. Franklin: We are very much centered around a personal touch. Although we do have a call center that handles some of the basic questions for our customers, for the most part, all of lenders and customer contact people are very hands on. We try to answer as many of the questions and do as many of the tasks and things that a customer needs or wants on a very personal basis. A typical customer would have a loan, in a positive relationship they would start with their account manager or their personal assistant. They always have someone to call and know someone personally that can handle what they need with the bank.

CEOCFO: Would you tell us about the communities you serve? What is the economy like in your geography?

Mr. Franklin: The economy for us is very good. We have been very blessed to be in the state of Texas, which has been fantastic over a long number of years and specifically in Houston and Beaumont in the East Texas area. We run from East Texas, the Golden Triangle area which is Beaumont, Port Arthur and Orange. And then run all the way through Houston. In all, we have 35 branches; 19 in Houston, 15 in Beaumont and one in Dallas.

All of our economies are very healthy right now. There is a lot of activity in the petrol chemical and oil and gas business. Houston has become a lot more diversified in a lot of various businesses and we are still seeing good, strong population growth and economic growth, whether it is healthcare, oil and gas, real estate, home building. We have a lot of good strengths in the economy and it looks like it could last a little bit longer.

CEOCFO: How do you breakdown between business and personal and would you like to see the mix changing?

Mr. Franklin: When we talk about a relationship, we usually start with what we call a sponsor, which would be the person borrowing the money. Our typical customer would be an individual owned business. What we call a relationship is everything about that business and personal. We try to join the two. We are after any loans or deposits he may have as an individual, a family and also any needs he has as a business. That could be a working capital loan, a term loan for a piece of real estate. It could be equipment financing, a home mortgage, or an investment property for him individually. We really seek to have the total relationship with our bank.

CEOCFO: Do many of your customers take advantage of all you have to offer?

Mr. Franklin: Many have. We have looked at it pretty hard. About 81% of our borrowing customers have deposit relationships with us. We pretty much demand that you do your banking with us when we do a loan. We also have a lot of depositors that do not have loans at all. We know as a community bank that most of our funding is going to come from that community. If you look at our deposit mix, which is a little bit unusual in that about 44% of our deposits are demand deposits, basically checking accounts. Typically in the age of community banks, you would not see that kind of mix; those are typically seen in much more mature and older banking organizations, but a lot of that is particular to the fact that we have a lot of senior lenders around that have long term relationships with folks that go back many years, even beyond the years this bank has been in existence.

CEOCFO: How many branches do you have, and do you see the need for additional locations?

Mr. Franklin: The bank in its current configuration, is two banks that came together, Vista bank in Houston and Community Bank in Texas in Beaumont. That came together in 2013 but there were two different branching philosophies. The east Texas operation had retail branches and the Houston operation only had branches that had commercial lenders in them. There were two different philosophies around that, so what we did was merge those together.

We probably would not do any more retail branches without lenders in them but depending on if we had a good lending team that wanted to go in certain area, we would consider that. If we find two to three lenders that want to be located in a certain area and have certain influence over that community, we consider branching into those areas. For us, just to open a retail branch when you have J.P. Morgan, Wells Fargo and all these big guys on every corner, it does not do us a lot of good; we need drivers to drive business to those branches. If we had the lending teams to do them, we will open them, otherwise, we probably would not open another retail branch.

CEOCFO: What is the competition from other community banks? Are there many in your area?

Mr. Franklin: There are fewer and fewer. When I started in the business a long time ago in 1978, there were over 15,000 banks. Today there are 5,500 banks and there are going to be a lot less because you read every day in the paper about consolidation and a big one was announced in Texas yesterday which created a fifty-billion-dollar bank. There is more and more consolidation in our business.

To answer your question, we always run across community banks but there are fewer and fewer of them now every day and there is really a lot of pressure to keep consolidating banks. There is a lot less margin available for banks to be profitable. Technology has really changed the way we deliver service and a lot of that has been beneficial to community banks so we do not have to have a branch on every corner, and we can touch are customers through technology. A lot of that has been good but it has also driven a lot of competition. FinTech for example is big competition for everyone, probably the bigger banks more so than us, but across all the lines, especially the way the younger generation looks at banking relationships.

CEOCFO: Do your customers appreciate the value of a community bank, yours, or as people are using more and more technology, do you see a point where they really will not care? How do you buck the trend for technology to be more important than the relationship?

Mr. Franklin: That is a very good question. You probably do not know anyone who does not own a cell phone today. That has become the bank of especially a lot of the younger generation. It is not only their bank but almost everything they want, or need can come through that phone. In general, about 80% of the resources, the deposits are held by four or five of the largest banks in the country. About 80% of the small business lending is done by community banks. That tells you that the folks who need to tell their story and need someone to listen to their story and try to make a decision around whether that small business gets its capital that it needs, it needs someone there to listen and that is where the community banks come in. Community banks in this world are all fighting to keep our space and we also think it is important to the economy because that is where most of the capital for these small business folks come from. That is who is making the loan.

CEOCFO: How is business at CBTX these days?

Mr. Franklin: Our business has been good for several years, economy has been good, loan quality is good, and we like to see rates stabilized as they move up and down, it is not something we like a whole lot. I think most businesspeople would like to see rates stabilized. Maybe we have. They are stabilizing at a pretty low place, but it also makes it easy for people to do business. If you are borrowing money today at these kinds of rates, you should be able to make some money on the other side and hopefully the small business guys are benefiting from all of this. I think they are to some extent. We feel pretty good about the next year or two. You never can look out very far. Coming into an election year, who knows how that is going to change everyone’s outlook.

CEOCFO: Would you tell us about your involvement with community? How do you decide where to focus your efforts?

Mr. Franklin: We do it in a couple of ways. At CommunityBank, we require every employee to do community service. I say require but everyone does that very happily. Each banker has what we feel is an obligation to help the community and the reason we say it is required is it is something that we can keep track of. It helps us understand and be able to give information to our regulators and the people who look after us. We are involved in the community and thousands of hours are spent each year in trying to be community involved.

We are also the small business lender. We are the guy out there trying to help the small businesses and individuals whether that is buying a piece of real estate or building and selling whatever widget that they might be producing. It is a big part of the economy that sometimes I think people overlook because there is so much large business out there. Most of the people in the country are really employed by small businesses. There are a lot of them out there and they are all typically starved for capital, so they need good, strong community banks to be around.

CEOCFO: What has changed and improved as the bank has grown and evolved to where you are today?

Mr. Franklin: In some ways, we could be accused of being very old school. We have always been very disciplined around our relationship approach in that we put the customer at the center, we try to develop our products around their needs, and we want all of their banking. We are not breaking off pieces and trying to figure out this piece or that piece or trying to be part of the relationship; we want to be all of the relationship. This has been done in banking for years and years and we have seen people divert away from this over time.

From our standpoint, what makes us successful is that we do stay disciplined in the relationship approach because as a bank, it helps us in our funding, it keeps us very close to our customers and we know our customers just like the economy are going to go through ups and downs. The closer we can be to that customer, the better we can help them through those ups and downs and understand what their needs are. You really have to understand a customer and how they handle these ups and downs to really be able to be there for them when times are not nearly as good as they would like them to be and enjoy the good times also. It is sort of an old school approach and I think some of those fundamentals just do not change. The generations behind me may think differently, but that is the way we approach it.

CEOCFO: Does the investment community recognize the value of CBTX?

Mr. Franklin: I think they have. It appears to me that the investment community that feels most comfortable in your approach are the ones that find you. I think the investment community that is supporting us today are people that have a longer term approach and value our deposit franchise and are not looking for a bank that is going to grow 20% a year at a very rapid fashion. People that like to so 5-8% growth rates, good strong credit quality and a very disciplined approach to the way we go about things, I think those are the people that are invested in us today. We may have started out with one group and filtered into another, but it seems like today we have investors that appear to be very patient capital and are looking for a safe haven or something more predictable, because we are pretty predictable.

CEOCFO: Why choose CBTX, from a customer perspective and an investor perspective?

Mr. Franklin: From an investment perspective, we are a very disciplined bank. We concentrate on credit quality. Our risk profile is going to be very narrow. I think you can feel good about an investment in our bank and understand that we focus on continuing to grow the bank year over year, but we are going to take a very disciplined relationship, focused approach.

From a customer standpoint, if you want a bank that will dig in, understand your story and help you grow your business, we are the bank for you. There are a lot of guys out there that try to do this but people that have not been through a down time are the ones that do not really understand relationships well. It is when things do not go right in your business and you do not know who to call, that is when you realize you do not have a relationship with a bank and it is pretty unsteady when that happens. When you are familiar with your banker, you know how he is going to react and say how you can deal with the issue, and you start to work on the problem at hand.

People need a relationship with their bank and sometimes people do not understand that and sometimes they do. Some of this has not been generationally passed down but over time as you see people in business and the ups and downs of the economy, people start to understand that a relationship with your banker is pretty important and when times are not as good as you would like, you like to know who to call and who is going to answer.

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“We are the quintessential community bank. We are relationship driven and very customer centric. Everything we do is around our customers and our communities.”

- Robert R. Franklin Jr