Sushil Patel, President, State Bank of Texas
Sushil Patel, president of State Bank of Texas, spoke to Invest: about running the leading community bank in the nation that specializes almost exclusively on hotel and motel loans. “We continue our mission to help hoteliers find loans. We are specialists in that field,” he said.
What have been the key highlights or milestones for the State Bank of Texas over the last year?
We are a family-owned and managed bank. The bank was founded by my father – he’s still chairman and CEO – and it is run by my brother and myself. Between the three of us, we operate and own the bank. This past year has been quite a tremendous year for our bank. We are fundamentally a hospitality bank – we are focused on the hotel and motel space – and we are a nationwide bank. This past year, we were ranked by the Mortgage Bankers Association as the most active hotel lender in the country. We did over 116 hotel closings in 2023, and we are on track this year to do a similarly high number. I think the next closest bank may be around 60 or so; there have been some non-bank funds that have done maybe 20 or 30. So that is one thing we’re proud of: our focus on the hotel space.
The second and third highlights are kind of in combination with each other: In 2023, we were ranked the No. 1 top performing bank in the entire country in terms of return on assets and equity. So, we are a high-performing bank. That ranking was done by American Banker magazine, which is a publication put out by the American Banker Association. The Independent Community Bankers of America also ranked us No. 1. In 2022, we were also ranked No. 1 by ICBA, and we consistently rank in the Top 5 or 10 in the country. We work hard at that, and we are proud of that. But this year was unique in that both publications ranked us No. 1 for either matrix.
We continue our mission to help hoteliers find loans. We are specialists in that field. The analogy I like to use is that you have doctors and you have surgeons, and surgeons are specialists on different body parts. We are finance specialists for hotels. That’s the easiest way to understand what we do.
To what do you attribute the bank’s performance?
The performance of any business generally comes down to profitability and attaining strength of capital. Those are two things that we’ve been able to do consistently. The main reason for that is because we are owner operated. Any business that is owner operated has a specific level of government controls but also levels of nimbleness that allow it to shift and make quick decisions that affect the business. That’s probably the No. 1 attribute that really helps us.
Another factor, from a macroeconomic viewpoint is that interest rates have been going up on the loan side as the Federal Reserve has continued to increase rates, although we also anticipate them coming down within the next couple of years; nonetheless, due to our bank model, we still expect to maintain this high level of performance and continue our spreads.
What differentiates State Bank of Texas from other competitors in the region?
Banking comes down to this: you have loans, and you have deposits. On the deposit side, we don’t have a bunch of branches. We have some locations in Chicago and around the Dallas-Fort Worth metroplex, mainly. But we cannot compete on convenience because we have nine branches in total. What differentiates us on the deposit side is our ability to pay higher interest rates on deposits. That’s the challenge in Dallas-Fort Worth: The banking environment is competitive with all the financial services coming into Dallas, from Southern states, for example. Everybody wants to have a presence in Dallas because of its geographic location and because it’s a major center of finance and commercial real estate. I was reading in the Wall Street Journal that they’re starting to call Dallas “Y’all Street;” it’s “Wall Street” with a little Texas twang. I thought that was really cool. They talked about all the different investment banks that are building a large presence out here. For example, our bank is headquartered in Las Colinas in Irving. Because Las Colinas was built in the late 1970s and early 1980s, in recent memory it was considered a little sleepy, while Frisco was sexy. What we’re seeing now is the rejuvenation of Las Colinas. Our bank built our headquarters out here. We just opened last October. Christus Healthcare, a large healthcare company built its headquarters here, and Wells Fargo has a project that is due to become its second largest operation in the country.
On the deposit side, therefore, it is always going to be competitive. You can compete on your number of locations, your service, your platform. For us, we compete on rate. That’s what makes us stand out.
On the loans side, frankly, we don’t have a lot of competition. Not many banks focus on the hotel space. It is such a specialized asset because once you build a hotel, it can only be used as a hotel. It’s a volatile industry that floats with occupancy rates. It’s not a stable type of lease-office or multifamily type of investment. There are different characteristics, to the point that we consider it a service business. It’s not really a real estate business. Although the building is still real estate, the actual operations themselves have a service aspect to them that is undeniable. So, it’s a specialized field, and we’re the only bank that focuses on hotel or motel loans. A lot of times, people know us as the hotel/motel loan doctors or specialists. We get cases from Dallas-Fort Worth, we get cases from all over the country, we get phone calls from other bankers wanting to hear how we feel about a specific situation. Our specialization and niche lending in that space is what makes us stand out on the loan side.
I also always like to say that all of our borrowers have my cellphone, and we operate with our cellphones. We don’t have a lot of layers of interaction or approvals. We’re able to get things done quickly, from phone calls to closing deals. I think that’s really what makes us stand out from a lot of other banks.
