If Bank of Granite is really as dull as it seems, someone forgot to tell Warren Buffett.
The super-investor is an unabashed fan of the bank and its 79-year-old chief executive officer, John A. Forlines Jr.
"What John has done is extraordinary," Mr. Buffett, chairman of Berkshire Hathaway Inc., said in an interview.
Bank of Granite, with assets of $508 million, epitomizes good, go-slow banking. Mr. Forlines has assiduously avoided acquisitions and other growth crazes. Instead, he has made his mark by tending to Mr. Buffett's favorite issue-the basics-and cranking out stellar profits year after year.
The performance, Mr. Buffett said, "dispels some of the conventional wisdom about banking-that only through consolidation can you become extremely efficient and that you need to be extremely large in order to prosper in today's environment."
Curiously enough, Mr. Buffett doesn't actually own Granite stock. He said the company is too small for Berkshire Hathaway, and that he no longer makes personal investments. If he were younger, he added, he would snap up the shares.
So Mr. Buffett contents himself with talking about the bank. He started two years ago, at Berkshire Hathaway's annual meeting-and the subsequent surge in investor interest was so strong that Granite had to print up 250 extra annual reports.
Meanwhile, the bank has been spotlighted by CBS News, saluted by the U.S. Senate, and lauded by several business magazines.
What, exactly, is all the fuss about?
As Mr. Forlines tells it, all he does is keep his customers happy and his costs low.
"There's no magic bullet," he says. "Our people work very hard, a lot harder than the people in the branches of the big banks."
Mr. Forlines himself exudes energy. Undaunted by the prospect of turning 80, he tools around town in a supercharged black Buick. And he doesn't appear ready to hand off any duties to his 62-year-old president and likely successor, Charles Snipes.
"I ought to be easing off a bit, but I'm enjoying it too much," Mr. Forlines said, a bright smile cutting across his face.
Mr. Buffett brims with admiration of the man.
"He struck me as the guy I'd love to have as my partner," Mr. Buffett said.
Certainly, you have to love Mr. Forlines' numbers. Bank of Granite churned out a 2.70% return on assets in the first six months of 1997, and a return on equity of 15.57% That's par for the bank-it has posted record quarterly earnings for 14 1/2 years.
And even without acquisitions, the bank has grown handsomely during Mr. Forlines' tenure. When he took the helm in 1954, Bank of Granite had only $1.2 million of assets.
Perhaps most telling is the efficiency ratio. For the first six months of this year, the bank's noninterest expenses amounted to just 32% of total revenues-versus about 60% for similar-sized banks. Observers and bank officials attribute much of that performance to a profit-sharing plan, in place since 1955, that focuses employees' attention on cost control.
"They watch every single dime that is spent there," said Marguerite E. Sons, research analysts at Interstate/Johnson Lane in Atlanta.
For example, the bank has only 160 full-time employees, versus 195 for the average bank of similar size. Mr. Forlines said that keeping a lid on bureaucracy is a top priority.
Likewise, the bank is dead serious about serving Granite Falls, a town of about 3,500 which is nestled in the southwestern part of the state just north of the Catawba River. Locals call the bank the Rock-and it isn't resting on its laurels. Employees are continually urged "to be better bankers and to serve the community," Mr. Forlines says.
The booming economy in western North Carolina has all but guaranteed consistently strong loan demand. And the bank's business customers are willing to pay higher rates for loans from the bank because it provides a "relationship to its clients that they won't find anywhere else in the community," Ms. Sons said. "What the clients are paying for is relationships, and they get it."
The premium pricing helped Granite post a net interest margin of 5.54% for the second quarter, well above the industry norm of 4% or so. And the bank has picked its credits well; it charged off just 0.18% of its loans in the first six months, compared to an industry average of 0.50%.
For these efforts, the stock market has rewarded Granite bountifully. Since going public in June 1984, Bank of Granite's stock has risen 1,739%, compared with 574% for the Dow Jones industrial average. Last year alone, the stock rose 50%. At midday Friday, the shares were trading at $30.50.
Says Mr. Buffet: "The Bank of Granite has shown that you can have happy customers and happy shareholders at the same time."
All of which raises a question: Why not make some acquisitions and do it all on a larger scale?
"We just feel that the price that banks are selling for are ridiculously high," Mr. Forlines said. "Folks think they're worth a lot more than they are."
Bank of Granite, however, is not ignoring the modern world. The bank has opened one supermarket branch, with another in the works, and it is introducing check-imaging. In addition, the bank is hoping to buy an insurance agency and a mortgage company.
"We are fully aware of the fact that we need to diversify and be in other kinds of business," Mr. Forlines said. "Nonbanks are in all of our kinds of business, so we need to get into some of the things that they're doing."
As to whether Granite itself will be acquired, Mr. Forlines is doubtful. He says the bank's stock, trading at about three times book and 20 times earnings for several years, has probably made the bank an unlikely target.
"We don't want to sell anyway," he says. "We're having too much fun running it."
