Making Great Hires

Quickly:

  • Next week, Bank Director hosts its annual Bank Compensation & Talent Conference at the Four Seasons outside of Dallas, Texas.  In advance of the event, a few of my thoughts on how banks might be inspired by Netflix, JPMorgan Chase & Co. and Pinnacle Financial Partners.

WASHINGTON, DC — As one of the best-performing stocks on Wall Street, you can bank on Netflix spending billions of dollars on even more original programming, even without a profit. Likewise, JPMorgan Chase & Co.’s consumer and community banking unit attracted a record amount of net new money in the third quarter.

How do I know this, and what’s the same about these two things?

Read their most recent earnings reports. Netflix doesn’t hide its formula for success, and JPMorgan boasts about its 24% earnings growth — fueled by the consumer and community banking unit — which beat analyst projections.

While we all have access to information like this, taking the time to dig into and learn about another’s business, even when not in direct competition or correlation to your own, is simply smart business, which is why I share these two points in advance of Bank Director’s annual Bank Compensation & Talent ConferenceBank Director’s annual Bank Compensation & Talent Conference.  Anecdotes like these prove critical to the development of programs like the one we host at the Four Seasons outside of Dallas, Nov. 5-7.

Allow me to explain.

Executives and board members at community banks wrestle with fast-shifting consumer trends — influenced by companies like Netflix — and increasing financial performance pressures influenced by JPMorgan’s deposit gathering strategies.

Many officers and directors recognize that investors in financial institutions prize efficiency, prudence and smart capital allocation. Others sense their small and mid-size business customers expect an experience their bank may not currently offer.

With this in mind, we aim to share current examples of how stand-out business leaders are investing in their organization’s future in order to surface the most timely and relevant information for attendees to ponder.  For instance, you’ll hear me talk about Pinnacle Financial Partners, a $22 billion bank based in Nashville. Terry Turner, the bank’s CEO, shared this in their most recent earnings report:

“Our model of hiring experienced bankers to produce outsized loan and deposit growth continues to work extremely well. Last week, we announced that we had hired 23 high-profile revenue producers across all of our markets during the third quarter, a strong predictor of our continued future growth. This compares to 39 hires in the second quarter and 22 in the first quarter. We believe our recruiting strategies are hitting on all cylinders and have resulted in accelerated hiring in our markets, which is our principal investment in future growth.”

This philosophy personally resonates, as I believe financial institutions need to:

  1. Employ “the right” people;
  2. Strategically set expectations around core concepts of how the bank makes money, approaches credit, structures loans, attracts deposits and prices its products in order to;
  3. Perform on an appropriate and repeatable level.

Pinnacle’s recruitment efforts align with many pieces of this year’s conference. Indeed, we will talk strategically about talent and compensation strategies and structuring teams for the future, and explore emerging initiatives to enhance recruiting efforts. We also explore big-picture concepts like:

Making Incredible Hires

While you’re courting top talent, let’s start the conversation about joining the business as well as painting the picture about how all of this works.

Embracing Moments of Transformation

With advances in technology, we will help you devise a clear vision for where your people are heading.

Creating Inclusive Environments

With culture becoming a key differentiator, we will explore what makes for a high-performing team culture in the financial sector.

As we prepare to welcome nearly 300 men and women to Dallas to talk about building teams and developing talent, pay attention to the former Federal Reserve Chairman, Alan Greenspan. He recently told CNBC’s “Squawk Box” that the United States has the “the tightest market, labor market, I’ve ever seen… concurrently, we have a very slow productivity increase.”

What does this mean for banks in the next one to three years? Hint: we’ll talk about it at #BDComp18.

Growing the Bank – Photo Recap

Creativity and collaboration took center stage at Bank Director’s Growing The Bank conference this Monday and Tuesday at the Four Seasons Resort & Club at Las Colinas in Irving, Texas.  There, leadership teams from banks, non-banks and financial technology companies alike focused on opportunities to grow revenue, deposits, brands, market size and market share through innovation and collaboration.  Below, a few of the photos taken for us by John Sloan of  Foxtrot Photography.

For more on the issues and ideas surfaced throughout the event, check out BankDirector.com and FinXTech.com.

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.

photo

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: Is 2014 the Year of the Bank IPO?

Good things come in threes — like insightful/inspiring meetings in New York, Nashville and D.C. this week.  By extension, keep an eye out for a Sunday, Monday and Tuesday post on About That Ratio.  Yes, I’m heading to Chicago for Bank Director’s annual Chairman/CEO Peer Exchange at the Four Seasons (#chair14) and plan to share my thoughts and observations on issues like strategic planning, risk management and leveraging emerging technologies each day.  Finally, I hope the three points I share today (e.g. a look at what the future holds for branches to a rise in public offerings) prove my original sentiment correct.

banking2020-hero1

I’ve been surprised… by the # of conversations I’ve had about branch banking.

With many of the mega and super-regional banks focused on expense control, I find myself talking fairly regularly about how these institutions are taking a “fresh look” at reducing their branch networks.  Typically, these conversations trend towards well-positioned regional and community banks — and how many now look to branch acquisitions as low risk and cost effectives ways to enter a new market or bolster an existing market.  I expect these conversations to continue next week in Chicago — but thought to share today as it again came to the fore earlier this week in NYC.  While there, I had a chance to catch up on PwC’s latest offerings and perspectives.  Case-in-point, one of their current research pieces shows that, despite the emergence of new competitors and models:

“the traditional bank has a bright future – the fundamental concept of a trusted institution acting as a store of value, a source of finance and as a facilitator of transactions is not about to change. However, much of the landscape will change significantly, in response to the evolving forces of customer expectations, regulatory requirements, technology, demographics, new competitors, and shifting economics.”

banking2020-hero3

The two images above come from an information-rich micro-site (Retail Banking 2020) PwC shares.  Personally, I found these statistics fascinating and foreshadow my second point about creative approaches to win new business.

I’ve been thinking about… fin’tech companies + their “solutions.”

Here, I want to give major props to our friends at the William Mills Agency in Atlanta.  Their annual “Bankers as Buyers” report shares ideas, concepts and research about financial technology from 30 of the top influencers in the country and those forces driving change today.  This year’s report lays out trends for the coming year, including:

  • Branch Network Transformation;
  • Mobile 3.0;
  • Big Data Drives Marketing & Fights Fraud;
  • Payments Technology Stampede;
  • Banks Focus on Underbanked and Wealthy; and
  • Compliance Strategies.

Take a look at their work and download the free report if you’re interested.

I’ve been talking about… the number of banks going public.

Is 2014 the year of the bank IPO? According to Tom Michaud, the president and CEO of Stifel Financial’s KBW, it just might be.  I had a chance to get together with Tom earlier this week and he got me thinking about how many are going to pursue a public market to raise capital versus doing so privately.  He shared the story of Talmer Bancorp (TLMR), which went public on Valentine’s Day.  When it did, it marked the biggest bank IPO in three years (yes, KBW’s Banking & Capital Markets teams completed the $232 million Initial Public Offering, acting as joint bookrunner).  As he shared their story with me, it became clear that as more banks go public, we will see more buyers entering into the M&A market — since most bank deals are being done with stock these days.  It strikes me that going public presents an alternative for private banks… rather than sell now, they might find a more receptive market should their story be a good one.

Aloha Friday!

The Strategy to Sell

earplugs at the Four Seasons in Chicago
Needed for the wind here in Chicago… not our speakers

Each year, Bank Director hosts a two day “peer exchange” for CEOs and Chairmen of financial institutions from across the U.S.  This year’s event, held in Chicago at the Four Seasons, kicked off this morning with a spirited presentation by Cathy Nash, the former President & CEO of Citizens Republic Bancorp and Jim Wolohan, the former Chairman of the bank.  I spent some time talking with Cathy and Jim before their presentation; what follows are the highlights of their talk on re-building, and subsequently selling, a bank.

In 2012, there were 230 acquisitions of healthy banks totaling $13.6 billion.  Yes, this equates to more takeovers than the year before, but they were generally smaller in size. While the largest transaction was the $3.8 billion buyout of Hudson City by M&T, the Akron, Ohio-based FirstMerit acquisition of Flint, Michigan’s Citizens Republic garnered quite a lot of attention.

When the deal was announced last September, it was as a stock-for-stock exchange worth $912 million at the time of the announcement (*to put this in perspective, last week’s acquisition of Provident New York by Sterling Bancorp came in at $344 million).  The price to Citizens’ tangible book value at the time of the announcement was 130% — and the combined entity will have roughly $24 billion in assets across five Midwestern states, 415 branches and more than 5,000 employees.

Against this backdrop, we asked this dynamic duo to share their experiences with their peers, starting with how a CEO works with the board to create a successful strategic plan.  According to Cathy, you need to come to the table with options.  Jim elaborated on her point, sharing the bank’s board explored organic growth, a partnership or outright sale of the bank and a combination of organic growth coupled with M&A under Cathy’s leadership.  Both executives knew the bank needed to return to sustainable quarterly profitability; when neither felt they could match their peers’ median returns in an appropriate time frame, a decision started to come into focus.  If they couldn’t deliver more than the cost of capital to their shareholders, exploring a sale had to take the lead. 

The two also explained how to know when it’s time to pare back your offerings to your customers.  According to Jim, shrinking the bank’s asset size once Cathy took the reins from $14 billion to just under $10 billion made sense thanks to rules and regulations like the Durbin amendment found in Dodd-Frank. In Michigan, as the economy soured, the soft and hard costs of growth made the decision slightly easier to bear.  But their focus on the long-term return on equity and investment drove much of their strategy to get ahead by going small(er).

Thanks to Cathy and Jim for opening up.  The decision to buy another bank often takes center stage at events like these, and their honesty in addressing both their struggles and excitement certainly set the tone for today’s program.

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More to come this afternoon; specifically, an update on the state of the financial industry specific to the 43 institutions (21 of which are public) joining us at this year’s Bank Chairman/CEO Peer Exchange.