Don’t Be Crowdsourced Out Of Business

This is the fifth and final piece in my series on emerging threats to banks from non-financial companies — one that shines a light on the pooling of money from many different people to make an idea happen. Click on any of these titles to read my previous posts: For Banks, the Sky IS FallingPayPal is Eating Your Bank’s LunchThe Bank of Facebook and Is WalMart the Next Big Bank.

Next week kicks off Shark Week on the Discovery channel… maybe you’ve been inspired by the endless commercials hyping this programming during Deadliest Catch?  Perhaps so inspired that you’ve come up with a brilliant new idea that just needs some money to get it off the ground!  As a creative type (you watch Shark Week after all), you can’t be bothered with your community bank’s draconian business loan process.  No, you want to start right away and are going all in with a crowdsourcing platform (there are some 700 or so) to rally the capital you need to get your project off the ground.  After all, your “financial backers” on such a platform will not profit financially — unlike those greedy banks that certainly will — while your great idea will flourish thanks to this oh-so-captivated audience that gave you their money with nothing expected in return.

Against this backdrop, banks have no chance, right?

Hyperbole aside, it may be easy to underestimate the impact of crowdfunding on financial institutions, dismissing these “purpose-driven marketplaces” as nothing more than online outposts where wacky ideas attract even wackier investors.  While banks possess inherent competitive advantages in today’s digital world (e.g. large customer bases, vast amounts of customer and transaction data along with the capabilities to enable payments, security, and financing), keep in mind a proverb that “the shark who has eaten cannot swim with the shark that is hungry.”  To this end, let me repurpose the thoughts of  LinkedIn’s co-founder Reid Hoffman, who opines:

“Crowdfunding relies on the wisdom of crowds to identify, fund and unleash entrepreneurial innovation far more efficiently than the credit rules of banks can.”

Having looked at the competitive stances taken by Wal-Mart, Facebook and PayPal in previous posts, let me shift my focus to two of the more well-known crowd funding marketplaces that are “democratizing access to capital, fueling entrepreneurship and innovation, and profoundly changing the face of philanthropy at unprecedented scale and impact.”  Rather than deep dive their business models, let me share, in their words, why people gravitate to their respective sites.

Indiegogo
Founded in 2008 and headquartered in San Francisco, this site was one of the first to offer crowd funding.

Indiegogo is no longer unique; indeed, numerous crowdfunding sites make billions of dollars of capital accessible to upstarts and entrepreneurs alike.  However, it is one of the most established in the space.  As they share “people usually contribute to campaigns for four different reasons: people, passion, participation, and perks. Often, people contribute to support other people—maybe contributing to the campaign of a friend or another inspiring individual. Others contribute because they’re passionate about a mission, such as women’s health or elementary education. Others are motivated by a desire to participate in something big, like building a new community center in their hometown. And often, people contribute to receive perks, the cool things or experiences they get in return for their contributions.”

Kickstarter
A global crowdfunding platform with a stated mission to help bring creative projects to life.

As the company explains, “Mozart, Beethoven, Whitman, Twain, and other artists funded works in similar ways — not just with help from large patrons, but by soliciting money from smaller patrons, often called subscribers. In return for their support, these subscribers might have received an early copy or special edition of the work. Kickstarter is an extension of this model, turbocharged by the web.”

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The reason I wrote today’s piece — and the previous four — is simple.  I am convinced that many community banks have real opportunities to expand what banking means to its individual and business customers by offering services that go beyond their traditional business model.  While many bankers recognize the threats presented by Bank of America to their long-term survival, I am concerned that non-bank competition poses an even greater threat.  Essentially, I think more bank CEOs and boards need to take their conversations beyond just cutting branches and full-time employees and consider how they make the bank more efficient by reinventing how they do things.

Whether you agree or disagree, I’d be interested in your thoughts. Feel free to leave a comment below by clicking on the white plus sign (within the grey circle at the bottom of this page) and I invite you to follow me on Twitter (@aldominick) where you can publicly or privately share your thoughts with me.

The Growth Conference – Thursday Recap

It is obvious that the most successful banks today have a clear understanding of, and laser-like focus on, their markets, strengths and opportunities.  One big takeaway from the first full day of Bank Director’s Growth Conference (#BDGrow14 via @bankdirector): banking is absolutely an economies of scale business.

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A 2 Minute Recap

 

Creating Revenue Growth

At events like these, our Publisher, Kelsey Weaver, has a habit of saying “well, that’s the elephant in the room” when I least expect it.  Today, I took her quip during a session about the strategic side of growth as her nod to the significant challenges facing most financial institutions — e.g. tepid loan growth, margin compression, higher capital requirements and expense pressure & higher regulatory costs.  While she’s right, I’m feeling encouraged by anecdotes shared by growth-focused bankers considering (or implementing) strategies that create revenue growth from both net interest income and fee-based revenue business lines. Rather than lament the obstacles preventing a business from flourishing, we heard examples of how and why government-guaranteed lending, asset based lending, leasing, trust and wealth management services are contributing to brighter days.

Trending Topics
Overall, the issues I took note of were, in no particular order: bank executives and board members need to fully embrace technology; there is real concern about non-bank competition entering financial services; the board needs to review its offerings based on generational expectations and demands;  and those that fail to marry strategy with execution are doomed. Lastly, Tom Brown noted that Bank of America’s “race to mediocrity” actually makes it an attractive stock to consider.  Who knew being average can pay off?

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To comment on this piece, click on the green circle with the white plus (+) sign on the bottom right.  More tomorrow from the Ritz-Carlton New Orleans.

Let the Good Times Roll

Checking in from a rain-soaked Reagan National airport, where I think I see the plane I’ll take down to New Orleans taxiing towards its gate.  Yes, it’s “Growth Week” at Bank Director, and I’m heading to the Crescent City to host bank CEOs, Chairmen and board members keen to focus on big picture business issues surrounding growth (not necessarily associated with mergers and acquisitions) and profitability.

New Orleans

A Deep Dive

I realize the phrase “let the good times roll” is most frequently heard during Mardi Gras celebrations in New Orleans; I’m using it to tee up Bank Director’s Growth Conference that kicks off tomorrow morning at the Ritz-Carlton.  Once the lights come up, I’ll be interested to hear:

  • How growth is driving pricing;
  • Why efficiency & productivity are both key elements in positioning a bank to grow; and
  • If “overcapacity” in the US banking industry offers opportunities.

I’m particularly excited for our opening session with Thomas Brown, CEO, Second Curve Capital.  We’ve asked him to help us “set the table” for the next two days of conversations with an outlook for banks across the country by reviewing the current capital market and operating conditions, thereby providing financial context to the next two days’ presentations.  If I don’t cover his remarks in my post tomorrow, you can bet our editor, Jack Milligan, will on his must-read blog The Bank Spot.

A Look Back

Much of last year’s conversation revolved around technology and the need to adapt to a changing marketplace, as well as the importance of creating a unique niche in a competitive landscape dominated by the biggest banks.  Many of our bank speakers at the conference had a more nuanced view of technological change. Richard Hill, the chief retail banking officer for the $19-billion asset Hancock Holding Co. in Baton Rouge, Louisiana, said when he got into banking in the 1970s, the prediction was that checks would go away and branch banking would go away. That clearly didn’t happen, or at least not at the accelerated pace that many predicted. The problem for his bank and for many others is that profits are getting squeezed with low interest rates, and the bank needs to make investments that expand revenue. As he said, “a great challenge we have is figuring all this out.”

Take Our Your Crystal Balls

Let me wrap up by sharing a 2 minute video our team compiled on the “future” of banking.  We played it at our Acquire or Be Acquired conference in January and the perspectives of KPMG’s national banking leader, the CEO of Congressional Bank, etc. are worth a watch and listen.

Laissez les bons temps rouler!

FI Tip Sheet: First Quarter Favorites

As I come off of a great week in Chicago and Bank Director’s annual Chairman/CEO Peer Exchange, today’s post takes a look back at the first three months of the year.  Yes, certain discussions during this time focused on tepid loan growth, higher capital requirements and expense pressures & higher regulatory costs hitting banks today.  Nonetheless, many more conversations focused on growth, innovation and “what’s working.”  So, to wrap up this week, three points from the past ninety days that inspired me.

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Some of Banking’s Best

To kick off the year, I put together a two-part series on some of the top CEOs in our industry.  Inspired by my coach and an article entitled the “Best CEOs of 2013” that ran on Yahoo Finance, I reached out to a number of colleagues that work for professional services firms to ask their thoughts on the top CEOs at financial institutions — along with why they hold them in such regard.  Part one shared various thoughts on some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.  Part two built on that piece, highlighting three exceptional CEOs that lead publicly traded banks before shifting to the thoughts and opinions of two very talented colleagues.

Eat or Be Eaten

As the President of Bank Director, I’m lucky to lead one of the industry’s biggest (and dare I say best?) M&A conferences: Acquire or Be Acquired.  Let me first offer up big time props to my many talented colleagues for everything they did to make this year’s the biggest and best yet!  One of the cool new things I did at the Arizona Biltmore this year?  Film a 90 second or less video each evening that summarized the day’s salient points.  As much as I shared big takeaways in written form on this site (e.g. what if I told you that by December 31, 2018, we’d witness a 25% decline in the number of institutions between $500mm and $1Bn), I’m proud of these two videos from the desert that relayed what caught my eyes and attention on two of the three conference days.

 

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The Innovator’s Dilemma

In my role, I find myself talking with Chairmen and CEOs about their strategic plans.  This year, quite a few shared their thoughts for leveraging financial technology to strengthen and/or differentiate their bank.  In a piece I shared at the end of February, I cited Clayton Christensen’s “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.”  His book inspired that Friday’s FI Tip Sheet title – and first point.  If you’re not familiar with his work, the Harvard professor writes about two types of technologies: sustaining and disruptive. Sustaining technologies are those that improve product performance. As he sees it, these are technologies that most large companies are familiar with; technologies that involve improving a product that has an established role in the market.

Most large companies are adept at turning sustaining technology challenges into achievements.  However, large companies have problems dealing with disruptive technologies — an observation that, in my view, does not bode well for many traditionally established banks.  While risk is inherent to banks of all sizes, taking chances on emerging technologies continues to challenge many officers and directors… a theme I anticipate covering in greater detail over the next 90 days.

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Whether this is your first time or 78th time reading About That Ratio, let me say thank you for doing so.  It is a real treat to share, each Friday, three short stories about what I’m hearing, learning and talking about as I travel around the country.  Being that I meet with so many interesting people — be it a bank’s CEO,  board members or executives at professional services firms and product companies — I find it tremendously rewarding to share anecdotes and insights that might interest others.  As always, Aloha Friday!

The Elephant in the Room

In my opinion, the “elephant in the room” is the fact that 90% of institutions in the U.S. have less than $1Bn of assets… and that many advisers and pundits consider $2Bn to be the “magic number” a bank needs to be at or above in order to be considered viable and competitive.

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Against this backdrop, let me tee up today’s Bank Chairman/CEO Peer Exchange.  Only rarely do we limit the size of an “in-person” event; for this annual gathering, we find that small groups tend to optimize the interaction among the CEOs and Chairmen.  Essentially, the two positions that bear primary responsibility for delivering strong bottom line performance.

In a few hours, I will welcome 39 institutions to the Four Seasons — with 24 being publicly traded. The median asset size is $812M – with the biggest bank here checking in at $15.6Bn in size.  By design, we built this exclusive one and a half day event around a small number of presentations and peer exchange sessions where participants share their thoughts in a private, off-the-record setting.  For example:

  • Growth and profitability – how the top banks do it
  • Building a strong franchise
  • Perspectives on cyber security and digital issues
  • Managing risk to ensure growth
  • Compensation techniques to retain and attract new leaders and key staff

This format allows for in-depth discussions of critical, and sometimes sensitive, issues for just a bank’s CEO, Chairman and/or Lead Director to consider with their contemporaries. To kick things off this morning, we will take a look at various growth stories and strategies… and I’ll be sharing some key takeaways around that topic in the late afternoon/early evening. For more “timely” insight on trends or overarching topics, feel free to follow along on twitter where my username is @aldominick and the hashtag I’ll use is #chair14.

FI Tip Sheet: The Innovator’s Dilemma

Over the past few years, I have seen significant change within the banking community — much of it defensive or in response to government intervention and oversight.  According to a white paper recently published by McLagan, “a great deal has been said about the excesses and errors of the past; however (sic), the current focus for banks, in particular, must be on the need to innovate or risk becoming stagnant and losing the ability to compete for exceptional talent.”  This morning’s column focuses on the “innovator’s dilemma,” vis-a-vis three questions.

Everything is AwesomeDo We Need Sustainable or Disruptive Technology ?

I have talked with a number of Chairmen and CEOs about their strategic plans that leverage financial technology to strengthen and/or differentiate their bank.  After one recent chat, I went to my bookshelf in search of Clayton Christensen’s “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.”  His book inspired today’s title — and fuels this first question.  Christensen writes about two types of technologies: sustaining and disruptive.  Sustaining technologies are those that improve product performance.  As he sees it, these are technologies that most large companies are familiar with; technologies that involve improving a product that has an established role in the market.  Most large companies are adept at turning sustaining technology challenges into achievements.  However, large companies have problems dealing with disruptive technologies — an observation that, in my view, does not bode well for many traditionally established banks.

“Discovering markets for emerging technologies inherently involves failure, and most individual decision makers find it very difficult to risk backing a project that might fail because the market is not there.”

While risk is inherent to banks of all sizes, taking chances on emerging technologies continues to challenge many officers and directors.  To this end, I thought about the themes explored in Christensen’s book after spending time in Microsoft’s New York City offices last week.  While there, I heard how big banks are generating revenues by acquiring new customers while retaining, up-selling and cross-selling to existing customers.  I left impressed by the various investments being made by the JP Morgans of the banking world, at least in terms of customer relationships and experience management along with analytics and core system modernization.  I do, however, wonder how any entrenched bank can realistically embrace something “uber-esque” (read: disruptive) that could truly transform the industry.

Do We Have the Staff We Need?

Consider the following question from the perspective of a relatively new hire: “I have a great idea for a product or service… who can I talk with?”  A few months ago, Stephen Steinour, the President & Chief Executive Officer at Huntington Bancshares, keynoted Bank Director’s annual Bank Executive & Board Compensation conference and addressed this very thing.  As he shared to an audience of his peers: “the things I assumed from my era of banking are no longer valid.”  Rather than tune out ideas from the field in favor of age and experience, he explained how his $56Bn+ institution re-focused on recruiting “the right” employees for the company they wanted (not necessarily what they had), with a particular emphasis on attracting the millennial generation into banking.  He admitted it’s a challenge heightened by public perception of the industry as one that “takes advantage of people and has benefited from government bailouts.”  Still, he made clear the team they are hiring for reflects a new cultural and staffing model designed to drive real, long-term change.  I wonder how many banks would (or could) be so bold?

Do We Have The Right Business Model?

I’ve heard it said that “forces of change” will compel banks to reinvent their business models.  Take the business model of core retail banking. According to a piece authored by McKinsey (Why U.S. Banks Need a New Business Model), over the past decade, banks continued to invest in branches as a response to free checking and to the rapid growth in consumer borrowing.  But regulations “undermining the assumptions behind free checking and a significant reduction in consumer borrowing have called into question the entire retail model.  In five years, branch banking will probably look fundamentally different as branch layouts, formats, and employee capabilities change.”  Now, I’m not sure banking’s overall business model needs a total overhaul; after all, it still comes back to relationships and reputations.  Nonetheless, many smaller banks appear ripe for a change.  And yes, the question of how they have structured their business is one some are beginning to explore.

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To comment on this piece, click on the green circle with the white plus sign on the bottom right.  Looking ahead, expect a daily post on About That Ratio next week.  I’ll be in Nashville at the Hermitage Hotel for Bank Director’s Bank Board Training Program.  Leading up to, and at, this educational event, I’ll provide an overview on the various issues being covered.  Namely, risk management and auditing issues, compensation, corporate governance, regulation and strategic planning.  Thanks for reading, and Aloha Friday!

FI Tip Sheet: Some of Banking’s Best Female CEOs

According to a recent report by Catalyst, 46.9% of the U.S. labor force is female; but only 16.9% of Fortune 500 corporate board seats are held by women and 4.6% of Fortune 500 CEOs are women. This got me thinking about the financial sector and why there are so few… along with wondering who are some of the best. Yes, the number of women serving as chief executives is spectacularly small, and the same is true in the banking industry.  Nonetheless, there are a number that standout and what follows in today’s tip sheet are some of them.

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Two CEOs at “Big Brands”
Last month, I wrote how the names and logos of institutions over $50Bn — think M&T with some $83Bn in assets, PNC with $305Bn and US Bancorp with $353Bn – are familiar to most. Leading these massive organizations are some tremendously talented individuals; to today’s focus, Beth Mooney, the CEO of KeyCorp, deserves recognition. The $89 billion Cleveland-based bank operates branches in 14 states from New York to Alaska. Of note, she is the only female CEO running a financial institution included in the S&P 500. So I made immediate note of Ken Usdin’s comments about her success. Ken is the Managing Director of Equity Research for U.S. Banks at Jefferies, and notes “Beth has done a very good job streamlining the organization, improving the business model in retail banking and tightening the focus and integration of Key’s various commercial banking businesses.”

Like Beth, Barbara Yastine, the Chief Executive Officer and President of Ally Bank deserves praise for the role she’s played since assuming the post in May of 2012. Consider that Ally Bank, the direct banking subsidiary of Ally Financial Inc., announced this past year it had crossed the $40 billion threshold in deposits from retail customers.  Quite an accomplishment given its parent company, the former GMAC, was described in an American Banker piece as “a poster child of the financial crisis and could have buckled under the weight of its bad loans without a bailout.” In addition to a portfolio of straightforward products, Ally Bank has introduced popular online and mobile banking tools backed by a robust customer service platform under her care and guidance.

Four CEOs at Strong Community Banks
A dynamo in her own right, Cathy Nash, the former President and CEO at Citizens Republic Bancorp (who orchestrated a great merger deal with FirstMerit last year) pointed me towards Jean Hale of Community Trust Bancorp in Kentucky. Ms. Hale has been CEO since July of 1999 and guides the NASDAQ-listed company with total assets at $3.6 billion.

From the Commonwealth of Kentucky let me move to my first home state of Massachusetts. There, you will find Dorothy Savarese, the president and CEO of The Cape Cod Five Cents Savings Bank, leading 400 employees while presiding over an institution with $2.3Bn in assets. Serving the community since 1855, this is one of those bank logos I always get excited to see come summer vacation.

Separately, I also hear that Melanie Dressel, President and CEO, Columbia Banking System out of Tacoma, Washington, is a female CEO to watch. With the bank’s acquisition of West Coast in 2012, this is one of the largest community banks in the Pacific Northwest: 141 banking offices, including 80 branches in Washington State and 61 branches in Oregon.

Finally, Scott Winslow at RFi applauded Julie Thurlow at Reading Co-op Bank in Massachusetts as “smart, gracious and very focused on leading her team of folks to the right decisions for the bank and her community. One of the sharper CEOs I have met in the community banking world.”

Four I Want to Learn More About
As I prepared for today’s piece, I looked at various analyst reports, stories authored by our team, performance rankings and research notes. I took note of four CEOs — and their institutions — that I am curious to learn more about. For example, Sheila Mathews at Four Corners Community Bank. I also want to learn more about the work Peyton Patterson is doing up in Connecticut as Bankwell’s CEO. Finally, Bank Director’s own CEO, Joan Susie (a woman herself), told me that Diane Dewbrey at Foundation Bank in Bellevue, WA is really smart and interesting and that Laurie Stewart, president and CEO of Sound Community Bank in Seattle, is impressive.

Even with all this snow on the ground, let me close with a very warm Aloha Friday!

FI Tip Sheet: The Top Women in Banking?

Clearly, there aren’t many female CEOs of major corporations.  According to Spencer Stuart, an executive search firm, the number of women serving as the CEO of an S&P 500 company increased to 22 in 2013. Nonetheless, this represents a mere 4.5% of the companies that comprise the index.  I share this statistic as a preface to this morning’s post, one that asks for your help and feedback on “the best” female CEOs in banking today.

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Background

Last month, inspired by a piece that ran on Yahoo Finance (“the Best CEOs of 2013“), I reached out to a number of colleagues that work for professional services firms to ask their thoughts on the top CEOs at financial institutions — along with why they hold them in such regard.  I subsequently shared their thoughts (along with mine) on some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.

A request for help

While the CEOs I wrote about certainly deserved the recognition, noticeably absent on each list: women.  Yes, I realize the vast majority of CEOs in banking today are male; however, I am keen to identify those female executives at financial institutions that are truly the best in banking.  So here’s the deal.  I’d like your thoughts on the top female CEOs — regardless of their financial institution’s size — and a sentence or two that provides color and context as to why you think so. This can be shared publicly with a comment below or tweet to me at @aldominick. It can be shared directly via email adominick@bankdirector.com or with a message thru LinkedIn.

What will come of this

Next week, I’ll post a piece on the top female CEOs on this site. FWIW, I am happy to attribute comments to an individual or keep things anonymous.

Thanks, and Aloha Friday!

Acquire or Be Acquired – Sunday Recap

The most successful banks have a clear understanding and focus of their market, strengths and opportunities.  One big takeaway from the first full day of Bank Director’s Acquire or Be Acquired Conference (#AOBA14 via @bankdirector): it is time for a bank’s CEO and board to reassess their strategic opportunities.

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thanks to Keith Alstrin of Alstrin Photography

90 Second video recap

Looking for profitability cures

From the strategies and mechanics behind transactions to the many lingering questions regarding industry consolidation, economies of scale, regulatory burdens and how to build long-term value, today featured some pretty fascinating presentations.  One of the common themes from the afternoon sessions: most bankers are looking to cure profitability challenges through some kind of M&A activity.

How much are you worth
Whether buying, selling or simply growing organically until it’s time for a transaction, a bank’s leadership team needs metrics in place to know and grow its valuation.  As we heard today, valuation is a controversial and complex subject.  To wit: it requires an in-depth understanding of a company, its market and competitors, financial and non-financial information.  In addition, factors such as the legal and regulatory environment proves quite a challenge.

Trending topics
Overall, the issues I took note of where, in no particular order: margin compression, deposit funding, efficiency improvements and business model expansion in the context of the current environment. Also, keep an eye on the the Northeast and greater Atlanta area this year for increased merger and acquisition activity.

More to come from the Arizona Biltmore tomorrow…

FI Tip Sheet: Great Bank CEOs (part 2)

“You know who’s good” might be one of my favorite conversation starters… be it talking football or baseball, banking or business, it always interests me to hear who others consider leaders in a particular field or discipline.  As the country’s economic recession gives way to recovery and many more banks return to profitability, quite a few executives have success stories to share.  This week’s tip sheet builds on last week’s post by highlighting three exceptional CEOs that lead publicly traded banks before shifting to the thoughts and opinions of two very talented colleagues.

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(1) In case you missed it, last week’s tip sheet looked at some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.  After I posted the piece, I thought about a number of bankers that could have been included in the $5 to $50Bn summary.  For example, Joe DePaolo, the president & CEO of Manhattan-based Signature Bank, a $19.7-billion asset, NASDAQ-listed financial institution.  He’s led the bank’s growth, from a mere $50 million in assets at its founding in 2001 to close to $20 billion today.

Likewise, Jim Herbert’s work to build First Republic Bank (the bank he founded in 1985 and is listed on the NYSE) deserves praise and recognition.  I shared my thoughts on Jim’s bank after meeting him last year.  For those in the know, First Republic is one of this country’s great banks. Not only is it solely focused on organic growth, it’s also focused solely on private banking. While my conversation with Jim was off-the-record, I left his office convinced its the smarts within, not the size of, a bank that will separate the have’s from the have-nots in the years ahead. Clearly, as new regulations and slim profit margins challenge the banking industry, the skills and backgrounds of the employees who work in banking must change too.

Finally, the co-head of Sandler O’Neill’s Investment Banking group, Bill Hickey, praised Vince Delie – the President & Chief Executive Officer of the 11.7Bn, NYSE-listed FNB Corproration.  According to Bill, Vince “has led FNB through four acquisitions in the last three years and three capital raise transactions… FNB continues to deliver above market returns and has been rewarded with a currency that trades at 245% of Tangible Book Value.”

(2) Before joining out team a few years ago, Bank Director Magazine’s Managing Editor, Naomi Snyder, spent 13 years as a business reporter for newspapers in South Carolina, Texas and Tennessee.  Based on this background, and her current responsibilities, I asked for her thoughts on the qualities and characteristics of a successful bank CEO.  In her words, “some of the CEOs of great banks seem to have leadership qualities without being bullies. I don’t think they hire a bunch of “yes” people who will agree with them as the ship is sinking. They don’t have charismatic personalities at the expense of honesty and ethics.”  She noted that in multiple performance rankings in Bank Director magazine, these banks show some consistent themes. “Great banks differentiate themselves from the competition. They often don’t compete on price but on quality of service, and there is no way to do that without hiring a superior staff and motivating employees to do their best.”

(3) To put some color and context to Naomi’s thoughts, I asked Jack Milligan, the Editor of Bank Director magazine, to share his thoughts on three community bank CEOs that are doing some impressive things.  The qualifier?  Keep ’em “local” — he is in Charlottesville, I’m in D.C. — and close to $1Bn size.  Fortunately for me, Jack accepted my challenge and suggested I take a look at Fairfax, VA-based First Virginia Community Bank (FVC).  Led by Chairman & CEO David Pijor, FVC was “a November 2007 de novo that has grown to $422 million in assets as of December 2013.  Pijor, a veteran of the NOVA banking market, raised $23 million in a little over eight weeks and had the bank up and running in just 11 months.  Granted, this was prior to the subprime mortgage crisis and “Great Depression,” and Pijor has had the advantage of being in one of the strongest banking markets in the country, but the bank’s loans, deposits and capital over the past 7+ years have been impressive all the same. Pijor also did a small acquisition in late 2012 that enabled FVC to expand into neighboring Arlington County. I would expect to see big things out of this little bank.”

Next, he pointed me towards Citizens & Northern Corp., a financial institution based in Wellsboro, PA and led by their Chairman & CEO, Chuck Updegraff.  As Jack shared, “C&N is situated in North Central Pennsylvania, not exactly a banking growth market although the local economy has received a bit of a lift from natural gas exploration in the Marcellus Shale Region. This is just a very well-run bank that makes the most of what its market has to offer, and Updegraff deserves credit for running a very tight ship.  C&N has a little over $1.3 billion in assets and was the top ranked $1-$5 billion bank on Bank Director’s 2012 Bank Performance Scorecard and the 2nd ranked bank in 2013.”

Finally, Jack lauded National Bankshares Inc., an organization that counts James Rakes as its Chairman & CEO.  Per Jack: “if you’ve ever been to Blacksburg, VA – the home of Virginia Tech University and a neighbor of nearby Radford University in Christiansburg – you know that it’s a beehive of activity nestled in the mountains and forests of Southwestern Virginia. At just slightly over $1 billion in assets,National Bankshares is another well-managed bank that takes full advantage of everything its market has to offer – in its case a relatively strong local economy that benefits from having two vibrant universities. Virginia Tech is the 2nd largest public college in the state and is a major research institution. National was the 3rd ranked bank in the $1-$5 billion category in the 2012 Bank Performance Scorecard, and placed 6th in 2013.”

Now, I will tease Jack that he could have talked about a number of fine community banks in the Washington, D.C. area (for example, the Bank of Georgetown, which has grown considerably under the leadership of Mike Fitzgerald, their Chairman, President & CEO).  Nonetheless, his is a good look at those institutions that may not have national brand recognition, but are strong and stable pieces of their local communities.

Aloha Friday!

FI Tip Sheet: Some of Banking’s Best CEOs

Last month on Yahoo Finance, Sydney Finkelstein, professor of management and an associate dean at Dartmouth’s Tuck School of Business, produced a list of the Best CEOs of 2013, one that includes Jeff Bezos of Amazon, Pony Ma of Tencent,  John Idol of Michael Kors, Reed Hastings of Netflix and Akio Toyoda of Toyota.  Inspired by his picks, I reached out to a number of colleagues that work for professional services firms to ask their thoughts on the top CEOs at financial institutions — along with why they hold them in such regard.  What follows in this morning’s tip sheet are myriad thoughts on some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.

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(1) Top CEOs at financial institutions over $50Bn

The names and logos of institutions over $50Bn — think M&T with some $83Bn in assets, KeyCorps with $90Bn, PNC with $305Bn and US Bancorp with $353Bn — are familiar to most.  Leading these massive organizations are some tremendously talented individuals; for example, John Stumpf, the CEO at Wells Fargo.  Multiple people shared their respect for his leadership of the fourth largest bank in the U.S. (by assets) and the largest bank by market capitalization.  According to Fred Cannon, the Director of Research at Keefe, Bruyette & Woods, John “has created and maintains a unified culture around one brand, (one) that demonstrates strength and stability.  Wells is exhibit #1 in the case for large banks not being bad.”

Similarly, U.S. Bancorp’s Richard Davis garnered near universal respect, with PwC’s Josh Carter remarking “Richard has continued to steer US bank through stormy seas, continuing to stay the course running into the downturn, taking advantage of their position of relative strength, weathering the National Foreclosure issues and managing to avoid being considered part of ‘Wall Street’ even though US Bank is one of the 6 largest banks in the U.S.”

Finally, Steve Steinour, the CEO at Huntington Bancshares, inspired several people to comment on his work at the $56Bn institution.  Case-in-point, Bill Hickey, the co-Head of the Investment Banking Group at Sandler O’Neill, pointed out that since taking the helm in 2009, Steve has led a “remarkable turnaround… Huntington is now a top performer and is positioned to be the dominant regional bank in the Midwest.”

(2) Top CEOs at financial institutions between $5Bn and $50Bn

For banks between $5Bn and $50Bn, Greg Becker at Silicon Valley Bank garnered quite a few votes.  Headquartered in Santa Clara, California, I think they are one of the most innovative banks out there — and several people marveled that it has only grown and diversified under Greg’s leadership.  According to Josh Carter, “what they’re doing is a good example of how a bank can diversify their lending approach while maintaining a prudent credit culture.”  This echoes what Fred Cannon shared with me; specifically, that the $23Bn NASDAQ-listed institution is “the premier growth bank with a differentiated product.”  

Fred also cited the leadership of David Zalman, the Chairman & Chief Executive Officer at Prosperity Bancshares Inc., a $16 billion Houston, Texas-based regional financial holding company listed on the NYSE.  According to Fred, David demonstrates how to grow and integrate through acquisitions that is a model for other bank acquirors.  C.K. Lee, Managing Director for Investment Banking at Commerce Street Capital, elaborated on David’s successes, noting their development “from a small bank outside Houston to one of the most disciplined and practiced acquirers in the country and more than $20 billion in assets. The stock has performed consistently well for investors and the acquired bank shareholders – and now they are looking for additional growth outside Texas.”

Keeping things in the Lone Star state, C.K. also mentioned Dick Evans at Frost Bank.  In C.K.’s words, “this is a bank that stayed true to its Texas roots, maintained a conservative lending philosophy, executed well on targeted acquisitions and a created distinctive brand and culture. As Texas grew into an economic powerhouse, Frost grew with it and Mr. Evans was integral to that success.”

Finally, Nashville’s Terry Turner, the CEO of Pinnacle Financial Partners, drew Bill Hickey’s praise, as he “continues to successfully take market share from the larger regional competitors in Nashville and Knoxville primarily as the result of attracting and retaining high quality bankers. Financial performance has been impressive and as a result, continues to trade at 18x forward earnings and 2.4x tangible book value.”

(3) Top CEOs at financial institutions from $1Bn to $5Bn

For CEOs at banks from $1Bn to $5Bn, men like Rusty Cloutier of MidSouth Bank (“a banker’s banker”), David Brooks of Independent Bank Group (“had a breakout year in 2013”) and Leon Holschbach from Midland States Bancorp (“they’ve not only grown the bank but added significant presence in fee-income businesses like trust/wealth management and merchant processing”) drew praise.  So too did Jorge Gonzalez at City National Bank of Florida.  According to PwC’s Josh Carter, Jorge took over a smaller bank in 2007 “with significant deposit concentrations, large exposures to South Florida Real Estate, weathered a pretty nasty turn in the economy and portfolio value and emerged with a much stronger bank, diversified loan portfolio and retained key relationships.  Jorge has also managed to maintained an exceptional service culture, with a significant efficiency level and has combined relationship driven sales to grow the bank.  Jorge has also diversified the product mix and is one of the few smaller banks that can really deliver on the small bank feel with big bank capabilities.”

In addition, Banner Bank’s CEO, Mark Grescovich, won points for his work at the commercial bank headquartered in Walla Walla, Washington.  Mark became CEO in August 2010 (prior to joining the bank, Mark was the EVP and Chief Corporate Banking Officer for the $24Bn, Ohio-based standout FirstMerit). In Fred Cannon’s words, the transformation “is truly exceptional and Mark accomplished this by encouraging and utilizing a talented team of bankers from legacy Banner.”

Finally, Ashton Ryan at First NBC in New Orleans is one I’ve been told to watch.  Indeed, C.K. Lee shared how “Ryan capitalized on the turmoil in New Orleans banking to turn in strong organic growth, with targeted acquisitions along the way. The bank is recently public and has been rewarded by the market with a strong currency to go with its strong balance sheet and earnings.”

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In addition to the list above, I have been very impressed by Peter Benoist at Enterprise Bank in St. Louis, look up to Michael Shepherd, the Chairman and Chief Executive Officer for Bank of the West and BancWest Corporation and respect the vision of Frank Sorrentino at ConnectOne.  This is by no means a comprehensive list, and I realize there are many, many more leaders who deserve praise and recognition.  Click the “+” button on the bottom right of this page to comment on this piece and let me know who else might be recognized for their leadership prowess.

Aloha Friday!