CHARLOTTE, N. C. -- Worth Williamson spent most of the 1980s believing that his rapidly growing community bank could do no wrong.

"When all you have to do is open the door in the morning and business comes floating in, pretty soon you think it's because you're prettier than everybody else," says Mr. Williamson, president and chief executive of the $148.4 million asset First Charlotte Financial Corp. and its bank, First Charlotte Bank and Trust Co.

A Humbling Experience

But on May 15, 1990, Mr. Williamson, received the first of his many lesson in humility. On that fateful day, one of First Charlotte's biggest borrowers filed for bankruptcy, producing an instant $600,000 chargeoff. Soon after, several other key credits went sour.

It was the kind of crisis that has crippled many a community bank in recent years. But First Charlotte, which opened its doors in November 1983, managed to survive, making the chastened Mr. Williamson an authority on how to respond when a financial institution runs into serious trouble.

His advice? Acknowledge the magnitude of problems, and take immediate and aggressive steps to correct them.

"This organization is totally upside down compared to what it was the first five years," says the 51-year-old executive. "We are much more interested in doing things in a uniform and standardized way."

Like so many other new banks formed during the mid-1980s, First Charlotte was determined to set the world on fire.

Although it was up against some of the country's premier financial institutions - NCNB Corp. (now NationsBnak), First Union Corp., and Wachovia Corp. - it believed it could wrestle market share by offering superior customer service to small-business owners.

In that spirit, the bank's five branches were designed to emphasize personal service and provide an ambience of exclusivity.

A receptionist greets all customers, and the teller windows are located discreetly off to the side. Visitors can serve themselves coffee while relaxing under barrel-vaulted ceilings.

The bank's formula seemed to work spendidly for the first five years.

From its opening to the end of 1989, First Charlotte grew rapidly, reaching $169 million in assets. Return on average assets peaked that year at 0.95%; return on equity at 14.39%.

But then the bubble burst. One of the company's biggest borrowers, a real estate developer, filed for bankruptcy. The failure caught Mr. Williamson and his management team by surprise.

"Our lending force was so young, they didn't keep in close touch with their borrowers," Mr. Williamson acknowledges. "They really didn't know what the hell was going on, in a lot of cases."

Mr. Williamson says the bank soon realized that more trouble was on the way.

"We were scared to death," Mr. Williamson says. "We really didn't know how deept the hole was. And it turned out we were right. It was just the beginning."

But Mr. Williamson wasted no time taking corrective action. Within 48 hours of the developer's filing, he formed a special team to monitor problem assets, reduced interest rates on the bank's CDs, and virtually froze all new lending activity.

As problem loans surfaced, they were promptly written off.

The chargeoffs put a huge dent in First Charlotte's performance: The company in 1990 reported a $391,000 loss, after charging off a total of $2.1 million, or 1.8% of its loans.

About 35% of the chargeoffs involved real estate; the others were commercial and industrial loans to overleveraged borrowers who "got caught up in the growth of the 1980s." Mr. Williamson says.

Throughout the crists, Mr. Williamson kept the bank's reserves at about 2% of total loans, a relatively high ratio for a bank its size.

"The regulators became more sympathetic and gave us the benefit of the doubt when they saw the steps we were taking," he says.

Although First Charlotte was forced to take another $1 million in charfgeoffs last year, it still managed to eke out a modest $688,000 profit.

The company earned $250,000 in the first quarter of this year. But its nonperforming assets rose 21% to $4.6 million, and now represent 3.1% of total assets.

Mr. Williamson, who has not been paid a bonus since 1989, expects to recover $3.1 million of the sour loans.

Since the 1990 crisis, First Charlotte has diversified both its loans and deposits, trying to avoid relying on a few big customers. it introduced three new commercial cash-management products to attract deposits from smaller companies.

The bank's officers also receive better training and work within much stricter credit standards.

A native of Salisbury, N.C., where his father was a druggist, Mt. Williamson attended Davidson College outside Charlotte as a pre-med student but decided he was "absolutely unsuited" for medicine.

Following graduation, he joined the Navy and served on an aircraft carrier for three and a half year, leaving as a lieutenant in 1966.

He stayed in the Naval Reserves for 20 more years and retired as a commander.

A genial man with a self-deprecating sense of humor, Mr. Williamson believes his military experience helped him maintain morale at First Charlotte during the bad years "because appearances are everything; you can't let the group down."

Mr. Williamson began his banking career at NCNB, serving variously in the trust department, marketing, credit control, branch administration, and the company's loan workout group. He left in November 1982 to help organize First Charlotte.

"As great as NCNB people were, I knew I was never going to be able to run that bank, and I preferred to be totally responsible for something. At that time, I was 42, so instead of running around on my wife, I quuit my job," he says with a laugh.

As Mr. Williamson discovered, running your own show can be scary at times. But he wouldn't have it any other way.

"Most guys who start new banks do so because they're basically malcontents, he says.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.