I am the Chief Executive Officer of a privately-held company that provides data analysis, research and advisory services to the C-Suite and boards of financial and healthcare companies. For years, I have delighted in bringing in business, building relationships and getting difficult things done. Today, I am a bridge between key decision makers; for instance, the C-suite at both FinTechs and Banks. I regularly present on, speak to and write about emerging issues immediately relevant to executives & boards of directors. While my professional role as CEO certainly influences my writing, the views I share on my social sites reflect my own personal opinions.
Today’s agenda covered a lot of ground; namely, how economic, technological and demographic trends are reshaping the financial community. With nearly 300 attendees with us in Chicago, I heard a lot of interesting comments and questions made throughout the day. Three that stood out to me from our “on-the-record” presentations:
The Fed’s policies are forcing banks to ask tough questions: When will rates rise? Should I make fixed rate loans in the 4% range? How will this play out? How does it affect my stock value? (Steve Hovde, the CEO of the Hovde Group)
It is not what you do for people that they remember; it is how you make them feel. (Scott Dueser, the Chairman & CEO of First Financial Bankshares)
When it comes to Dodd-Frank, I thought we’d be through it all, but its still going full force (Susan O’Donnell, a Partner at Meridian Compensation Partners)
Trending topics
Overall, the issues I took note of were, in no particular order: loan growth is now paramount to profitability; with cybersecurity risks growing, protection is becoming more and more costly (especially in terms of time & resources); standardized loan products are reducing competitive advantages of community banks (naturally impacting compensation plan participants); if compensation plans are overly complicated, step back and ask if your are trying to solve for something else; culture and performance is what it’s all about.
Admittedly, the question driving today’s title is not the easiest to answer. Without the training programs once offered, without the cache of an Apple and without the stability of a career path, you might wonder why any smart, ambitious and talented professional would take a job in banking. Surprised I’d write this from Chicago and Bank Director’s annual Bank Executive & Board Compensation conference? Read on.
A sunny day in Chicago
As I start to write today’s piece, it strikes me that without the help of LinkedIn, I don’t immediately know a single person my age (37) that works for a traditional bank — let alone operates at an executive level. This is a HUGE problem for the future when one considers the growing divide in public perceptions of banks with the actual business operations in place. Look, I’m not throwing stones. Heck, I would have loved to get into a management training program when I graduated from W&L in 1999. Its just that almost every big bank that historically trained the “next generation” of bankers had shelved their programs.
While I don’t work directly for a financial institution, I am lucky to spend days like today finding inspiration from bank executives, board members and services providers. Mostly, these are people who see the banking space as one that does need change, but does not deserve dismissal. So as the Swissotel starts to fill with “traditional bankers,” I anticipate three big themes; namely, the recruitment, development and compensation of a leadership team and the workforce of the future.
In Terms of Recruitment…
If you subscribe to the idea that “tone from the top” is key for building a culture of success, take heed of our editor’s opinion. Jack Milligan recently blogged on “The Bank Spot” that “the #1 best practice for a bank’s board of directors is to hire a high performance CEO.” In his words:
Of all the things that boards do, this might be the most obvious – and yet it’s also the most important. A good CEO works closely with the board to develop a strategy that fits the bank’s market and has the potential to create a high level of profitability. They bring in good talent and do a good job of motivating and leading them. And they have the ability to execute the strategic plan and deliver what they said they will deliver. Having a high performance CEO doesn’t guarantee success, but I think it will be very hard to be a high performing bank without one.
In Terms of Development…
In my mind, having the right leader in place dramatically improves the attractiveness of an institution to potential employees. Here, I look at what bankers like Ron Samuels and Kent Cleaver are doing in Nashville at Avenue Bank and Mike Fitzgerald at Bank of Georgetown in Washington, D.C. Creating a culture where one is pushed to contribute to the bank’s growth seems obvious. But I can tell you, putting people above products and financial profits isn’t always the easiest thing to do (right as it may be). Developing talented executives takes both patience and confidence. Indeed, one must be comfortable doing more than simply empowering others to be a team player. Here, a passage from L. David Marquet’s (a retired Captain in the U.S. Navy) “Turn the Ship Around” bears quotation. The premise: don’t empower, emancipate.
Emancipation is fundamentally different from empowerment. With emancipation, we are recognizing the inherent genius, energy and creativity in all people, and allowing those talents to emerge. We realize that we don’t have the power to give these talents to others, or ’empower’ them to use them, only the power to prevent them from coming out.
It might be easy in a highly regulated environment to see this logic and find excuses to it not applying to banking. But if a submarine captain can transform one of the worst performing boats into one of the most combat-effective submarines, perhaps these words might be re-read.
In Terms of Compensation…
Not to throw a wet blanket on the last two points, but as our team found in a recent survey, bank boards recognize the need to tie compensation to the performance of the bank in the long term, yet they continue to struggle with how to get the pieces in place to attract and reward the best leaders to meet the institution’s strategic goals. So I find it particularly interesting that less than half of the banks we surveyed tie CEO pay to the strategic plan or corporate goals, and more than one-quarter of respondents say that CEO compensation is not linked to the performance of the bank.
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I’m checking back in tomorrow from the conference. If you’re on Twitter and interested in the conversation, feel free to follow @BankDirector, @AlDominick and #BDComp14.
This Sunday, I fly to Chicago for Bank Director’s annual Bank Executive & Board Compensation Conference. As I prepare to head towards the city that splits its allegiance between the Cubs & WhiteSox, my thoughts move from baseball — congratulations to the new World Series champion San Francisco Giants — to the people, products and performances of various financial institutions. As I will be blogging and tweeting from our annual event, I thought to use today’s post to tee-up what you can expect on AboutThatRatio.com next Monday, Tuesday and Wednesday.
Since the demise of AIG, Bear Sterns and Lehman Brothers in 2008, take a minute and think about how many significant changes have occurred throughout the entire financial community. From new capital requirements to greater scrutiny on executive compensation, these “Dodd-Frank” years remind me of the aftermath of Sarbanes-Oxley’s introduction in the early 2000s in as much as board members continue to wrestle with the ‘what ifs’ and ‘how comes’ of the regulatory environment.
While much of the action taken by nearly every institutions a few years ago can best be described as reactionary and defensive, it strikes me that there are quite a few banks transforming their operating models to stay both relevant and competitive today. For this reason, I am excited for our team to host several hundred bank executives and outside directors focused on the creation of sustainable long-term value for shareholders next week. In terms of posts:
Monday’s looks at the recruitment, development and compensation of a bank’s most essential talent — both within a bank and on its board.
On Tuesday, the “main day” of our conference, I will share the trending topics from the day. Last year, I wrote how board members and executives continued to struggle with measuring executive performance and retaining key talent. At the same time, I made note that many felt the environment in which banks operate in demands productivity, proficiency with technology and the ability to sell. So I’ll juxtapose last year’s findings with this year’s themes.
Wednesday’s piece will be a bit simpler, a 90 second video I’ll have filmed from the conference.
Next Friday’s column? More of a behind-the-scenes picture recap of the conference as I recently did for Bank Director’s “anniversary.” Throughout, you can keep track of various conversations on Twitter by following @BankDirector and me, @AlDominick and/or by using #BDComp14.
As shared in Bank Director’s current issue, peer-to-peer lenders, like San Francisco-based Lending Club, are beginning to gain traction as an alternative to banks in both the commercial and consumer loan space.
In the retail sector, well-funded technology companies like Google, Amazon and a host of others are swimming around like sharks looking to tear off chunks of revenue, particularly in the $300 billion a year payments business. These disruptors, as many consultants call them, are generally more nimble and quicker to bring new products to market.
While being “attacked by aggressive competitors from outside the industry is certainly not a new phenomenon for traditional banks,” it is fair to ask what a bank can do today. For inspiration, take a look at what Richard Fairbank, the Chairman and CEO of Capital One, had to say on a recent earnings call.
Ultimately the winners in banking will have the capabilities of a world-class software company. Most of the leverage and most of our investment is in building the foundational underpinnings and talent model of a great digital company. To succeed in a digital world (you) can’t just bolt digital capabilities onto the side of an analog business.
I thought this was particularly interesting given our editor’s take in this quarter’s issue: “if you’re a traditional banker, it’s time to recognize (if you don’t already) that a growing number of consumers — many of them young, well educated and upwardly mobile—can get along just fine without you.” Clearly, it would be foolish for any bank CEO or director to operate with a false sense of security that their institution won’t need to adapt.
So is Capital One’s “approach” to business the way of the future for many big banks?
Drop me a line or send me a tweet (@aldominick) and let me know what you think. Aloha Friday!
Earlier this week, American Banker’s Robert Barba wrote that bank M&A could reach an “inflection point” (sorry, paywall). With bank valuations increasing — and asset quality improving — I’m seeing deal premiums make a comeback, along with banks able to pay them. The title of Robert’s piece caught my attention, as did his look at BB&T’s agreement in early September to buy the $2 billion-asset Bank of Kentucky Financial in Crestview Hills. While that high-stakes deal has generated headlines, let me share some observations about another transaction that “shows well.”
As Robert wrote on Tuesday, the $188 billion-asset BB&T is “often viewed as one of the bigger banks most likely to acquire. It managed to make a few deals during the downturn, including buying the operations of BankAtlantic from its holding company and picking up Colonial Bank’s assets and deposits from the Federal Deposit Insurance Corp.” While this deal alone does not represent a resurgence of big bank M&A, it might foreshadow a pick up in activity.
Of course, no two deals are alike — and as the structure of certain deals becomes more complex, bank executives and boards need to prepare for the unexpected. The sharply increased cost of regulatory compliance might lead some to seek a buyer; others will respond by trying to get bigger through acquisitions so they can spread the costs over a wider base. For this reason, I wrote a piece for BankDirector.com called “Deciding Whether to Sell or Go Public” earlier this week (no registration required). As you can read, David Brooks, the chairman and CEO at $3.7-billion asset Independent Bank Group based in McKinney, Texas, and Jim Stein, the former CEO of the Bank of Houston and now vice chairman of Independent Bank, talked with me about their experiences and decision to merge their banks.
With merger activity on the rise, more boards of directors are considering whether the time is right for their financial institution to find a strategic partner, especially if they want to maintain the strategic direction of the institution or capture additional returns on their shareholders’ investment. In the end, no one knows what will happen with bank M&A in the coming months, but looking at deals like the one Robert wrote about and the one I shared… well, one can guess.
Just as I did last year, I am taking a break from my regular Friday writing routine to highlight the last few days with our exceptional team. Admittedly, I try to keep the company stuff to a minimum on About That Ratio; however, I feel it is more-than-ok to pull the curtain back a bit and share my pride and enthusiasm for our dynamic team following our “four year” anniversary.
Yes, the Bank Director name/brand came into being in 1991; however, many of the relationships with our hugely influential audience are the result of our core leadership team’s efforts over the past four years. So as we celebrated our team’s four-year anniversary on Wednesday (I’ll explain below), I thought to share some pictures from our time together.
Atta Boy’s new friend
Scripted fun
Decorations going up
Quite amused w/ the camera
Taking pride in our koozies
Lunch gets served
Deliciousness from Puckett’s Grocery of Leiper’s Fork
Bill’s retreat in Leiper’s Fork
Al fresco dining in TN
Celebrating our largest shareholder’s b-day
Kaitlyn, the horse whisperer
Bill takes Naomi out for a paddle
Why am I not surprised?
Confirming the winning team’s work (yes, Kaitlyn, we won)
The team’s 4 year celebration? Don’t ask (Leiper’s Fork, TN)
Cornhole competition
Robert in action
Following the sale of a sister company to the NYSE in 2010, we re-designed our entire business around the information needs of a bank’s leadership team and board. From a proverbial tiger-team of ten, we now boast a talented team of nineteen men and women that I’m proud to work alongside. Of particular note, congratulations to Joan Susie, one of the co-founders of the company, who takes over the role of Chairman from our largest shareholder, Bill King. Bill also deserves more than just a tip-of-the-cap for inviting us down to his farm in Leiper’s Fork. Finally, a BIG-time thank you to everyone for helping with yesterday’s office clear-out. Demolition begins on our new office space next week!
I’m at a 1909 Neoclassical landmark in San Francisco for Bank Director’s “Valuing the Bank” program. Setting up shop in the beautiful Ritz-Carlton on Nob Hill is a real treat, as is welcoming a number of bank CEOs, chairmen, CFOs and outside directors to the Bay Area. Let me share a few of my takeaways from yesterday’s conversations and tee up what’s ahead this morning.
The Ritz-Carlton San Francisco
What Drives Value Creation
To open the day, we reviewed the operating environment in terms of “what drives value creation.” Beginning with a presentations made by the Hovde Group and Moss Adams, we touched on issues like margin compression, deposit funding, efficiency improvements and business model expansion in the context of the current environment. One interesting, M&A-specific fact from this session: the market for high-performing banks is at a 5-year high. Consider the number of deals greater than $25 million in deal value that were priced above 150% of tangible book value: in the last 4 quarters: 44… for the prior 18 quarters: 45.
Understanding Risk in the Context of Determining a Bank’s Worth
I made note that credit unions have seen loans grow 9.8% this past year; far quicker than the 4.9% growth at banks (h/t Hovde Group). So as much as I’ve recently harped on non-bank competition from players like Apple and PayPal, a stark reminder that banks also need to find a way to compete with lower rates offered by credit unions to reverse this trend of losing loans. Back to the M&A side of things, it was suggested that to maximize value, potential sellers should consider selling less profitable/smaller/rural branches.
Today’s Agenda
This morning, we will look at corporate governance and talent-specific opportunities to strengthen one’s institution. After a series of peer exchanges, I am excited to tackle the idea that banks are sold more than they are bought. Indeed, our final session of this program pairs David Brooks, the Chairman & CEO of the NASDAQ-listed Independent Bank Group and Jim Stein, Vice Chairman & Houston Region CEO, Independent Bank. Jim was the CEO at Bank of Houston and sold that bank to David’s, and together, will talk with me about how that deal was struck.
Good morning from the campus of the 9th oldest university in the United States: Washington & Lee. Yes, I am back in Lexington, VA to speak at my alma mater’s 3rd annual Entrepreneurship Summit. So in lieu of my traditional Friday post on banking, today’s column highlights three points (specific to social media) that I will expand upon in a few hours.
I am fortunate to share today’s stage with a number of successful fellow Generals. I love this school, and thought to share the presentation I put together for this two-day event (see: W&L 2014 Presentation). As you will see — and maybe hear — I’ve broken it into three parts that all relate to leveraging social media in a small, growing and profitable business:
You can’t manage what you can’t measure — with a look at “the stats” we use at Bank Director to gauge progress and success;
A juxtaposition of JPMorgan Chase’s #AskJPM fail with TD Bank’s wildly popular Automated Thank You Machine; and
If you are a student at W&L, I hope you will pay close attention to the final slide in this shared presentation. It speaks to the internship opportunities we have for interested and qualified applicants looking for a paid position in Nashville next summer.
Regardless of one’s market, a bank’s leadership team needs to know AND focus on growing its institution’s value.
With many public companies feeling undervalued — and private ones unsure of their true worth, Bank Director welcomes bank CEOs, chairmen, presidents, CFOs and members of the board to the Ritz-Carlton in San Francisco next Thursday and Friday for “Valuing the Bank,” a peer exchange offered exclusively to officers and directors of financial institutions. In simple terms, this program focuses on:
Raising capital, exploring a merger or sale + going public;
Attracting, compensating and retaining pivotal talent;
How strong corporate governance protects a bank’s value; and
Understanding risk in the context of determining a bank’s worth.
If you are in the Bay Area next Thursday and Friday — and serve as a bank director or are on a bank’s executive team — we have space for three (3) more participants. If you’re interested to learn more, let me know via email (adominick at bankdirector dot com) or get in touch with our event’s team (877) 397-7595.
As our editor, Jack Milligan, writes in How One Large Bank Fosters Innovation, “conventional wisdom holds that banks are not very good at innovation — and large banks, with their entrenched bureaucracies and clumsy legacy systems, are probably worst of all. It might then come as a surprise that Bank of New York Mellon Corp. has run a highly successful innovation program that has made a meaningful contribution to the bank’s profitability, and also manages to get most of the company’s 10,000 employees involved in the process.”
Earlier this week, I shared how Declan Denehan, BNY Mellon’s managing director for strategy and innovation, provided his thoughts on staying relevant while engaging with the “startup ecosystem” during Monday’s FinTech Day. Jack’s article offers a great summation of Declan’s perspectives — and for today’s post, I simply wanted to recap the event as a whole. The fun for our team started well before the doors opened at 9:00; however, FinTech day kicked off with:
A number of video shoots in the NASDAQ studio that we will post to BankDirector.com;
Continued with a live-streamed discussion focused on innovation with Declan and me; and
Wrapped up with a closing bell ceremony and a lot of great company logos rotating on the exchange’s video board in Times Square.
Before wishing everyone an Aloha Friday, let me thank the entire Bank Director team — and in particular, Kelsey Weaver, Laura Schield, Michelle King, Mika Moser, Jack Milligan and Joan Susie — for your efforts to make the day a success. Each of you contributed something special and for that, I am very appreciative and already getting excited for next year (dare we call it FinTech 2.0)!
I just received a few pictures from yesterday’s closing bell ceremony at NASDAQ. With me is our Publisher, Kelsey Weaver, and executives from various technology companies — both established and just starting up. Thanks to the entire team at Bank Director; specifically, Mika Moser, Laura Schield, Jack Milligan and Michelle King, for making this year’s FinTech Day a wonderful success!
I’ll have more on FinTech Day — a collaboration between the exchange and Bank Director that celebrates the contributions of financial technology companies to banks in the U.S. — later today along with additional pictures and perhaps a video or two.
As shared in 
About That Ratio 