Community Banker of the Year: City Holding's Skip Hageboeck
Skip Hageboeck didn’t want to move to Chicago.
Hageboeck was a treasury manager in Indianapolis when the bank he worked for was sold in 1995 to First Chicago. Rather than relocate to the Windy City, he agreed to become the chief financial officer at Peoples Bank, a family-owned bank in Indianapolis.
For Hageboeck, it was a logical decision. He wanted to stay at a small community bank, and he jumped at a chance to try his hand at being a CFO.
“I thought this would be great experience, even if something happened to the bank,” he recalled. Peoples had “been in the family 107 years, so I figured that probably nothing was going to happen to it.”
The decision altered the trajectory of Hageboeck’s career. First Chicago became part of Bank One, which in turn was sold to JPMorgan Chase, the nation’s biggest bank and a mainstay of the New York banking scene.
Hageboeck would go on to become president and CEO of City Holding, the parent company of City National Bank of West Virginia in Charleston, in 2005.
Since joining City, he has helped oversee a turnaround and navigated the company through the financial crisis. Pursuing acquisitions in nearby markets, he has built a solid performer out of a bank based in a state that isn’t known for its growth potential, and City has more than doubled in size, to $4.4 billion in assets.
Hageboeck “is incredibly thoughtful and diligent,” said Russell Gunther, an analyst at D.A. Davidson. “He does his homework, pencils it out and, when the math works, he’s going to move — but it’s not a knee-jerk reaction. It’s something that he’s spent a considerable amount of time and energy on.”
A meticulous approach to expansion, along with an ability to consistently produce solid results, explains why Hageboeck is one of American Banker’s Community Bankers of the Year for 2018.
An academic at heart
Hageboeck grew up in a middle-class family in the heart of Indiana. When he was young, the family moved from Richmond, a town about 70 miles east of Indianapolis, to West Lafayette so his father could complete a doctorate in pharmacy at Purdue University.
The family would move again, to Indianapolis, when Hageboeck’s father joined the pharmacy faculty at Butler University.
Hageboeck didn’t always plan on becoming a banker.
After attending a summer business program in high school, and receiving inspiration from a professor, he decided to pursue a doctorate in economics. He earned an undergrad degree at Butler — in two years — then completed a Ph.D. program in economics at Indiana University in 1991.
College professors advised Hageboeck to go into teaching or to take a government post. While the idea of teaching appealed to him, Hageboeck said he couldn’t imagine lecturing on economic principles over a 40-year career.
Hageboeck also wanted a job where he could eventually build something, so he joined Indiana National Bank as an asset liability analyst.
“It was a perfect job for someone with an academic background because asset liability management is very mathematical and sort of intellectual,” Hageboeck said.
Shortly after he joined Indiana National, the bank was sold to NBD Bank. Then First Chicago was sold, and Hageboeck joined Peoples.
While at Peoples, Hageboeck met Gerald Francis, a veteran banker who would have a lasting impact on his career. Over nearly four years, Francis and Hageboeck roughly doubled Peoples’ size, to $700 million in assets.
“It went from being an average performer to being a high-performing bank,” Hageboeck said. Francis “saw the writing on the wall before he got there. He realized what would be possible.”
Peoples was sold to Fifth Third Bancorp in 1999 for a hefty premium, and Hageboeck stepped away from banking to join Roche Diagnostics, a research and medical diagnostics firm.
It didn’t take long for Francis to coax Hageboeck back to banking.
Francis had found a struggling bank in West Virginia that he was determined to turn around. Hageboeck was one of five former Peoples bankers recruited to help, though the job required him to leave Indiana.
When Hageboeck joined City in June 2001, it was operating under a regulatory order and had just fired most of its management team — including the CFO. It had less than $500 million in assets.
City “was trading for half of book value,” Hageboeck recalled. “It had a lot of serious problems. But Jerry recognized it was a great franchise that could be easily saved, so he brought us all to West Virginia.”
The Francis-led team spent the next five years downsizing the company’s national businesses in California and Dallas to focus on its core strengths, which include a valuable deposit base despite being in some slow markets, said Austin Nicholas, an analyst at Stephens.
For those efforts, Francis was named one of American Banker’s Community Banker of the Year in 2002. He stepped aside from City in 2005, when most of the heavy lifting was complete, to turn around First National Bank & Trust, an Indiana institution that was sold in 2007 to BMO Financial Group.
Hageboeck, however, didn’t want to keep chasing down troubled banks. He found Charleston to be a great place to raise a family and join the community. Hageboeck has four children; three are students at Washington and Lee University in Lexington, Va., and the fourth is a credit analyst at First Merchants Bank in Indianapolis.
And he would rather build a bank than constantly have to put out fires.
“It’s fun to run a bank day in and day out,” said Hageboeck, who became City’s CEO in 2005. “It’s been a great life for us and it’s a great company.”
West Virginia can be a challenging market for growth-minded bankers.
Though the national economy is thriving, West Virginia had the fourth-lowest per capita GDP last year. It had the nation’s second-highest unemployment rate, at 5.2% in September, while the U.S. average was 3.7%, according to the Bureau of Labor Statistics.
“Our core business is in one of the toughest economies in the country and Skip turns that into a positive,” said Dallas Kayser, City’s chairman and a director since 1995. “He is a tremendous strategic thinker and planner.”
Hageboeck held to a simple strategy at City.
Expense control has long been a priority. City’s 50.4% efficiency ratio at June 30 outperformed the 56.71% ratio at banks with $4 billion to $10 billion in assets, according to data from the Federal Deposit Insurance Corp. City lowered its ratio in the third quarter to 48.6%.
The company, which narrowly dodged disaster before Hageboeck arrived, also prides itself on its credit culture.
That approach helped City weather the financial crisis. Its only financial blemish was a $2.3 million loss in the third quarter of 2008 tied to securities losses, and it didn’t have mounds of delinquent loans to address.
City also avoided having to participate in the Troubled Asset Relief Program.
To be sure, there were moments during the crisis that scared Hageboeck, including the time a customer who distrusted the banking system withdrew $100,000 to bury it in a tin can in his backyard.
“Our credit culture was strong,” Hageboeck said. “If you were astute enough to see the strength of the franchise, you would know that we could not fail. We had too many customers and were too profitable. For our employees [the crisis] reiterated what a strong company it was.”
Emerging from the crisis in a position of relative strength allowed Hageboeck to pursue an acquisition strategy designed to let City diversify and enter faster-growing markets.
City has completed three bank acquisitions since the crisis, buying Classic Bancshares in Ashland, Ky., in 2005; Virginia Savings in Front Royal in 2012; and Community Financial in Staunton, Va., in 2013.
In July it agreed to buy two Kentucky banks: Poage Bankshares in Ashland and Farmers Deposit Bancorp in Cynthiana. The deals, which should close by the end of this year, are expected to strengthen City’s operations in Lexington, Ky., and Huntington, W.Va.
Though none have been large or transformative, they brought City into three adjacent states. Acquisitions at City aren’t about scale.
“We don’t judge our success based on how large the company is,” Hageboeck said. “We judge it on how well we perform. We have walked away from opportunities that we didn’t think would make the company stronger, just bigger. I think we’re fairly unique in that.”
City has also hired lenders in Columbus, Ohio, and Pittsburgh. It has bought branches in Kentucky and hired a former BB&T lender to open a loan production office in Charlotte, N.C.
“More and more of their franchise is no longer in slow-growth markets,” said Matthew Schultheis, an analyst at Boenning & Scattergood.
Still, Hageboeck sees opportunity in City’s home state, though it requires a different way of thinking and a realistic view of borrowers, projects and the underlying economy.
“While the markets are slow-growing it doesn’t necessarily mean you can’t grow,” he said. “In West Virginia, you know you’re in trouble if you build a huge office building — there’s no one to lease it from you.”
City also benefited when bigger banks tapped the brakes in West Virginia.
City’s deposit market share has increased to 7.6% in mid-2018 from 6.5% a decade ago. Over that time, BB&T’s share has fallen from 18% to 15.8%, while JPMorgan Chase’s has fallen to 5.6% from 6.5%.
“When they stepped back, we got hundreds or thousands of new relationships,” Hageboeck said. “Because we’re a community bank, we can take business from the big banks, and customers know we’re going to provide better service.”
Hageboeck aims to empower his employees, and he is quick to give them credit for the company’s success. Many employees have been at City since the turnaround days.
“Companies don’t succeed because of their management or any one person,” he said. “You succeed because of the team you have working for you. A CEO can cause a company to fail, but he or she cannot cause it to succeed.”
While Hageboeck sets the overall vision, he trusts each manager to run his or her department, said Craig Stilwell, City’s executive vice president of retail banking. Hageboeck also sits down with new hires to discuss City’s history and the turnaround effort.
Expect more of the same from City in coming years.
“Some of that growth will be in slow-growth markets,” Hageboeck conceded. “We’re seen as the strongest community bank in slow-growth markets.”
While it is still too early to discuss retirement, Hageboeck, 56, said he can’t imagine leaving “the best bank in the country” to go to somewhere else.
Besides, he doesn’t think retirement would suit him. Perhaps one day his second act will involve work in the nonprofit sector, or maybe he will have another chance to become a teacher.
It shouldn’t be too hard to guess the subject.
“A day may come when I’d like to go back to teach five years about the principles of economics,” he mused.
For now, Hageboeck is finding other ways to connect with younger generations.
City’s last three annual meetings have convened on college campuses: Shenandoah University in Winchester, Va., Marshall University in Huntington, and Washington and Lee.
Students and faculty are invited to attend the meetings. Hageboeck often delivers a guest lecture on corporate governance before the meeting, and he invites students to dinner afterward.
Read about the other Best in Banking honorees for 2018:
“It was a very educational experience for students, the community and shareholders,” Kayser said. “They were well received. I don’t think I’ve known of a CEO willing to open up to that venue. Skip wanted to do it, so we did it. That’s the type of forward thinking he will come up with.”
There is a self-serving purpose to the effort.
Hageboeck uses the platform to discuss career opportunities. City also offers summer internships in hopes of encouraging more college students to get involved with banking.
Hageboeck recently got in touch with the West Virginia Bankers Association to brainstorm ways to connect young people with community banks, said Sally Cline, the association’s president and CEO.
“He’s the first banker who has reached out to me to say, ‘I think we have a problem here. I’d like to get more young talent. What can we do to change the optics?’ ” she said. “He is leading the charge and wants to improve the overall banking climate. He’s sort of a visionary.”
Hageboeck wants to work with local universities and other West Virginia bankers to create programs that encourage more students to pursue banking careers. The goal is to keep City, and other community banks, around for the foreseeable future.
“As an industry, we have to look for ways to develop younger talent or there isn’t going to be talent,” Hageboeck said.