Spence Mullis surprised, and even amused, some of his rivals when he decided to lend money to renovate the Fred Roberts Hotel in Dublin, Ga.
Once the area's premier lodging destination, the 1926 red-brick building had been vacant for decades. Georgia State Patrol officers were using it for rappelling practice.
The downtown wasn't much to speak of, with its many boarded-up storefronts and persistent crime problem.
The timing wasn't ideal either. It was 2008, and the Great Recession was underway. Five Georgia banks failed that year, along with 25 more in 2009.
Mullis, president and chief executive of Morris Bank, still made the loan. "Spence really stuck his neck out there, and I'm sure he had a lot of sleepless nights" over the project, said Louie Curry, a Dublin real estate developer.
Mullis acknowledged as much.
"Most other bankers, while probably excited that something was being done to a historic building, were also relieved that they weren't the ones loaning the money," Mullis said. "It was very lonely to be the only banker trying to make this happen."
Now he looks prescient. The Fred Roberts building, a mixed-used project with condos, shops and offices, is fully occupied. Across the well-manicured grass of Dublin's Bicentennial Plaza sits the Carnegie Library, built in the early 1900s, and the Martin Theatre, which debuted in 1934. Both predate Morris Bank, which opened in 1954, but are now actively used by the community, having been rehabbed after the Fred Roberts venture succeeded.
Mullis, 45, who can see it all from the bank's headquarters, takes some pride knowing the bank provided financing for those projects and others nearby.
As Dublin's once-neglected downtown has bounced back, Morris Bank has also thrived. Its assets have increased from $115 million in 2005 to $980 million today. The bank, a unit of Morris State Bancshares, generated a 1.7% return on assets and a 15% return on equity in the second quarter, according to call report data.
For helping spur the revival of Dublin's core commercial district, and for successfully executing a growth strategy in a primarily rural area, Mullis is being honored as American Banker's Community Banker of the Year.
Repairing a bank, then a town
After graduating from Georgia Southern University with an accounting degree in 1996, Mullis completed two compliance programs with the Federal Deposit Insurance Corp. He would go on to work as a Georgia banking examiner before moving to a Dublin accounting firm.
He joined Morris Bank in 2002 as chief financial officer and rose to president in 2005. Though the bank was struggling with problem loans at the time, Mullis' first move was to address declining morale. He created an employee rulebook, called Code Blue, which mandates a pleasant attitude and courteous behavior while on the job.
"We pay people based on Code Blue," said Mullis, who added the CEO role in 2006. Performance-based raises are tied to a formula that rewards adherence to the rules.
One such rule: "We believe that hustle and getting after it every day with a smile will lead to success."
Today, the bank encourages customers to "bank blue."
Fixing credit quality was the next task. At the worst point, in early 2009, 2.34% of the bank's loans were noncurrent. That said, Morris Bank was profitable every year during the financial crisis.
After clearing up the pile of deteriorating loans, Mullis tackled redevelopment in Dublin. It's not something that many community bankers in Georgia were doing.
"It was a leap of faith because there wasn't much going on in downtown Dublin," Curry said.
While rural Georgia is dotted with small towns that serve as county seats or regional economic hubs, those communities often suffer from high unemployment and commercial vacancy rates. The problems have been exacerbated as more young people leave for brighter prospects.
Thomaston, about 100 miles west of Dublin, is a case in point. Thomaston and Dublin are similar in size, and both are county seats. The local economies in those towns were hammered in the early 2000s when longtime textile mills closed. Many buildings on Thomaston's historic courthouse square remain vacant.
Dublin is moving in the other direction. Its downtown strip includes several popular bars, music venues and restaurants, including a pizza parlor with a wood-fired oven. Buildings are being renovated in accordance with historic-preservation standards, allowing Morris Bank and its borrowers to qualify for historic tax credits.
Condos have been built on the top floors of many of the renovated buildings. Dublin's mayor, Phil Best, said he and his wife recently moved into one. "About 10 or 12 years ago, if we had visitors come in from out of town, we would have dodged downtown," Best said, adding that three dozen families now live there.
"Mullis did some creative financing with a lot of folks who were working on downtown projects," Best said. "He took a chance to make it work."
Businesses are moving in too. The Curry Maffett Insurance Agency has settled into a restored two-floor building dating to 1898. The $2.4 million investment qualified for about $780,000 in historic tax credits.
"It takes longer to do these loans with historic tax credits, and they're more complicated, but it's great when they work out," said Mullis, who's also chairman of the Dublin Downtown Development Authority.
Morris Bank's competitors are coming back after abandoning the area for branches closer to Dublin Mall in past decades. The $220 million-asset Bank of Dudley built a branch two blocks from Morris Bank. The $214 million-asset Swainsboro Bankshares is renovating another 1898 building that originally housed the now-defunct Dublin Banking Co. Its Citizens Bank of Laurens County unit will become the building's first bank branch in decades, said Jeffery Cannon, its Dublin market president.
Mullis welcomes them all. "I wish every bank and credit union in town had a presence in downtown to help foster additional growth," he said.
Plenty of Georgia towns have the potential for a Dublin-style comeback, in Mullis' view. Morris Bank is prepared to help make one happen in Statesboro, Ga., after buying the $191 million-asset FMB Equibanc in May.
Like Dublin, Statesboro has a large supply of historic buildings that would be perfect for restaurants, shops and condos, Mullis said. "I can't tell you how many people from Statesboro have said to me, 'Why can't we have what Dublin has?' " he said.
Mullis decided to splurge on marketing after the FMB purchase, to let people in Statesboro know that Morris Bank was serious about its plans there. His bank agreed to pay $1 million over five years for the sponsorship and signage rights at Georgia Southern University's football stadium.
Joe Brannen, CEO of the Georgia Bankers Association, said he thinks Morris Bank has a great chance to revive Statesboro's downtown, given Mullis' persistence. "He's an energizing person to be around," Brannen said. "He's exciting, thoughtful and strategic. You can tell he really likes being a community banker."
Hurdles remain
Mullis still faces numerous challenges, including Dublin's sporadic economic growth. In the past decade, Dublin was hit by the sudden departure of big new factories, not long after they had opened.
In 2010, the German solar-panel manufacturer Mage Solar started building a plant, financed partly by a $600,000 working-capital loan from Morris Bank. But Mage shut the plant down five years later, citing volatility in the U.S. solar market.
Traces of Mage remain throughout town, including solar-powered streetlights and a small, active solar farm on the front lawn of Dublin High School. "We built this beautiful new school, but you can't see it because of the solar panels," Mullis said, half-joking.
Valmiera Glass, a Latvian Fiberglas manufacturer, was at the center of a similar story. The company in 2014 announced plans to build a $90 million plant in Dublin and create 400 jobs. The facility opened in 2018 but shut down a year later. The company said it had significant unexpected losses during a longer-than-expected startup phase. Valmiera's U.S. subsidiary later filed for Chapter 11 bankruptcy protection.
A skeleton crew still at the Valmiera plant is slowly dismantling a multimillion-dollar glass furnace, Mullis said.
Agriculture is big in the area, but ag loans make up less than 5% of Morris Bank's $722 million portfolio. Mullis said it's difficult for the bank to compete on price with the Farm Credit System. Plus, most farms are owned by national agriculture companies that get their financing elsewhere.
Dublin's largest employer — a 340-bed Veterans Affairs hospital — is virtually recession-proof. The town also has the 160-bed Fairview Park Hospital. Health care has become the area's biggest economic engine, Best said.
Physician offices and other medical businesses are a big part of Morris Bank's largest loan category, commercial real estate. In 2015, the bank provided an $8.4 million Small Business Administration loan for the development of a skilled nursing home facility for prisoners in Milledgeville, Ga.
A prison facility is an economic development project few towns would have wanted. But Milledgeville, about 50 miles north of Dublin, has a long history as the site of state-operated prisons and mental health facilities, Mullis said. "The project not only made economic and business sense for the customer, it also helped a community that had lost so many jobs during the downturn," he said.
Morris Bank also makes a lot of loans to homebuilders. It's the lead lender on Moore Station Village, a new development planned by Curry's real estate company.
The bank doesn't have a monopoly on these loan opportunities. Dublin has nine banks in all: Wells Fargo, the $11.8 billion-asset Ameris Bancorp, the $3 billion-asset Capital City Bank Group and six other community banks. The $2.7 billion-asset Robins Financial Credit Union and the $1.4 billion-asset Georgia United Credit Union also operate there. "I compete with all of them," Mullis said.
In search of opportunity
Morris Bank needed to expand beyond Dublin to generate growth. It bought the failed Gordon Bank in Gordon, Ga., in 2010. It expanded to Gray, a growing bedroom community near Macon, in 2012 by hiring an 11-banker team from a rival. In 2015 it bought a branch in Warner Robins from CertusBank.
There should be more acquisition opportunities, said James Stevens, a lawyer at Troutman Sanders in Atlanta who has advised community banks in Georgia on M&A and regulatory issues.
"Morris Bank is significantly larger than the banks around them, and they're in a position to be a consolidator," Stevens said.
The leaders of many small banks in rural Georgia want to retire but have few in-house candidates to take over, Stevens added. "A lot of these banks have succession-planning issues."
But Mullis said the opportunities may be limited. Small banks in rural Georgia may be a source of cheap deposits, but they're in shrinking markets. And the deposits are likely to dry up.
"I take calls from all these bankers who ask me to buy them," Mullis said. "I have to tell them that they don't have anything to offer Morris Bank."
A more immediate concern is falling interest rates, which have led to net interest margin compression throughout the industry. A recent surge of early commercial loan payoffs has forced Morris Bank to search for lower-yielding credits and investment securities. The bank's profit in the first half of 2019 fell 7% from a year earlier, to $6.9 million.
Excluding FMB, total loans rose by only 4.4%, to $613 million, in that same period. The bank's net interest margin shrank by 11 basis points, to 3.60%.
"We're getting hammered by early paydowns," Mullis said. "Every bank here is getting hammered by paydowns. Margin compression is a real thing."
The margin is expected to tighten more as rates decline, but the bank's net interest income could gradually increase "with reasonable and conservative asset growth," Mullis said.
Mullis has big plans for Dublin, though. The father of two children, Beau, a college sophomore, and Nan Marie, a high school sophomore, with his wife, Brandy, he intends to do his part to ensure the town continues building on its momentum.
He wants to help Dublin develop a community walking path along the Oconee River.
The downtown strip needs a boutique hotel, Mullis said. He's got his eye on one specific parcel that would be perfect if he can talk the owner into selling.
"These projects are starting to make more business sense as we've reached critical mass," Mullis said.
Morris Bank's top officers are still years away from retiring, and Mullis is confident his team can keep adding assets through organic growth and potential acquisitions. Morris Bank expects internal growth of 5% to 7% each year, he said.
"I think we have a tremendous amount of runway potential as we have a moderately young management team," Mullis said. "My particular role will continue to evolve into a more strategic, versus tactical, one as we look for more growth opportunities."
