In this episode of the Believe in Banking podcast, Gina and Juliet discuss challenges and change in the community banking sector. Making up 97% of all financial institutions, community banks and credit unions are purpose-driven institutions, uncovering opportunities to grow through their unique community connections. Their conversation covers M&A activity among community banks and how “mergers of equals” provide for scale and strength to enhance competitive advantage. They talk about locality as a superpower and how younger generations show strong affinity for community banks and credit unions, especially as they seek out advice at the branch. Finally, Gina and Juliet emphasize the importance of investment from the brand to the branch as proven strategies to increase customer acquisition, drive growth, and build loyalty among people in the communities they serve.
Text Transcription
Intro: This is Believe in Banking, a podcast series for decision makers, influencers, and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower.
Gina Bleedorn (00:18): Welcome to the Believe in Banking podcast. I’m Gina Bleedorn, President and CEO of Adrenaline.
Juliet D’Ambrosio (00:23): And I’m Juliet D’Ambrosio, Chief Experience Officer at Adrenaline.
Gina, in the last episode of our podcast, we were so lucky to have Al Dominick from Cornerstone Advisors join us. We really went deep into a broad industry-wide view about how financial institutions are scaling for strength, and we look at it from the macro perspective today. I’d love for us to dig into what this really means for community institutions. What are we seeing around the M&A deal activity, and how is this affecting our community bank and credit union clients?
Gina Bleedorn (01:07): There is a real blessing and a curse to being a community institution right now, because the need to scale up and grow to be competitive is permeating everything. But at the same time, the locality and community connection – connections to real people and customers are what makes community banks special. We’ve said before: locality is your superpower. So, how do you retain and enhance the uniqueness that created you while at the same time scaling up for growth in the right way and in smart ways? And so, it’s really a tough time, but also an incredibly opportunistic time to be a community financial institution, which by the way, make up 97% of all financial institutions — of about 10,000, 9,500 of those are really community institutions.
Juliet D’Ambrosio (02:10): Which is what we’re seeing that actually 9 out of 10 M&A deals are among those community financial institutions. S&P just reported that. And what’s even more interesting as we are looking out is that “mergers of equals” (MOEs) are becoming more and more common. They have, and we saw this really start during the Covid era if you will forgive that term, but we’re five years later, and we’re really seeing those mergers of equals continuing as a trend as community financial institutions are seeking scale and strength and really just the ability to serve their customers, their members, their communities better and become more competitive. Gina, you used a term that I think has so much inherent interest to it, which is “locality is the superpower” of community banking institutions. Unpack that a little bit for us.
Gina Bleedorn (03:10): Yeah. locality means that you are likely born out of the communities that you’re serving or you were headquartered near them, and you are present in them in a very unique way because you’re not in 500 markets, maybe you’re just in five. And so, your dedication to knowing them, to serving them legitimately and to truly being a fabric of those communities is so authentic in a way that a big bank cannot come in and do. At the same time, also, your locality is why people choose you. Banks of all sizes, period, if you are not physically there, you’re not in the consideration set. So, doubling down on the places where you already are amplifying that presence and then differentiating yourself within it, that’s how to capitalize on that superpower.
Juliet D’Ambrosio (04:07): Yeah, I think you absolutely nailed it. And that idea of your locality is a superpower because it makes you top of mind – when people see you, they know you, they consider you, and they will ultimately enter into some kind of relationship. And it reminds me very much of our guests who will be joining us for our next podcast where we’ll be featuring the Vice President of Brand Marketing and Chief Brand and Marketing Officer of EastRise Credit Union. That was the result of a merger of equals that have merged to create Vermont’s largest credit union with this merger. The EastRise brand, which brought together VSECU and NEFCU into a singular brand, literally doubled their branch presence and their brand presence and how visible they were in the community. And they came together as an organization in a way that the values of each membership base, of each community is as visible and as present in the new brand, enabling them for success.
I don’t want to go too much into it because it’s a great story, and I can’t wait to dive in. I am also continually surprised… As you may know, I am the parent of two GenZers and there is a myth-busting behavior that’s happening with GenZ. And we see this reflected in the research, and I see it reflected anecdotally that half of Gen Z and Gen Y, otherwise known as Millennials, are very much interested in a community bank, a community credit union, to become their primary financial provider. So, at the same time that this community presence is important in serving legacy customers, new generations actually are very interested in having local connections, banking or transacting with purpose. This is all according to a survey from PYMTS.com. And we’re also seeing interesting trends around branch usage as well.
Gina Bleedorn (06:30): It’s kind of nuts that Gen Z is going into branches three times as frequently as Baby Boomers. It’s completely counterintuitive like you were saying, Juliet, and it’s because they’re looking for advice. I think it’s also because they’ve grown up in the age of the knowledge economy where they can get advice and knowledge is everywhere, and they’re not afraid to ask for it, if they can’t get the advice they need electronically. When it comes to finances, because it’s so complex, you can’t usually get the advice electronically.
Even with AI models, one of the things I’ve been interested to see is how fast AI financial advising is going to pick up. And what I’ve been told from a number of AI experts is that it’s going to be a while before AI catches up to human advice giving, when it comes to financial services specifically. There’s many other areas of course, that AI’s putting people out of jobs and doing things better than humans, but financial advisory is complex and bespoke to a person’s financial situations with so many options, etc. That conversation is what Gen Z wants to have. A danger for community institutions especially, but really for all institutions, is when Gen Z comes in, if they are not able to get that advice they’re looking for, they will go elsewhere to get it. And your opportunity – that was a precious one – has been lost.
Juliet D’Ambrosio (08:07): They will go elsewhere, and the branch remains the number one sales channel. I mean, talk about counterintuitive that we’re having this conversation in 2025 after the sort of mad rush around fintech and the idea of digital transformation initiatives, which are still ongoing. The number one sales channel remains the branch, and it’s just the key to growth among these new audiences among the Gen Z for all of those community financial institutions that have, as you mentioned, this precious opportunity to have something new to offer, something different to offer and something relevant to offer to that audience.
I do want to talk a little bit about the advantage of branch overall, and what we are seeing. We recently published a report called The Branch Advantage, which features hot off the press data and analytics around essentially the ROI of investment in branch. And one of the things that we saw is that compared to industry average growth, those financial institutions that engaged in design and construction with Adrenaline.
So that means there is some kind of branch investment, whether it is a refresh, whether it is a full ground up [build], and as a result, they collectively generated nearly 22.2% in excess branch deposits. And that’s just one of the many data points that we have here.
Gina, I would love for you to talk a little bit about what we have always anecdotally said, and we know it because we’ve seen it over time, but this report really lays out the data so clearly. Talk to us a little bit about that, and what even surprised you as we went through the process of this research.
Gina Bleedorn (10:02): I was especially surprised by that excess industry growth figure, because we normalized growth based on the market, so it was excess growth to the market. It didn’t just reward you if you happen to be in a high growth market. So, that is really proof that is supporting why branching investment, and the speed of going to market with branches has accelerated to what it is. And something else from our research in the paper that I really liked was the customer and member growth following branch investment. More than one-third grew their customer base between 6-10% and more than one-fifth grew greater than 15%, with the industry average is just a little over 3%. Those are kind of staggering numbers.
That also makes me think of a stat from an Adrenaline-Curinos webinar we just did together with them and Andrew Hovet, who’s also been on our podcast, explained why relationships that originate in the branch versus digital have been proven to be far more quality and durable than ones that are digital only, which again makes sense, and goes back to why banks and credit unions are doubling down on branch investment.
Juliet D’Ambrosio (11:21): They’re doubling down on branch investment and in brand investment. And a lot of the conversations that we are having with our clients are really just looking out across the industry is that it’s around distinction and around differentiation. That focus on having a brand that is meaningfully, noticeably, intuitively different than the credit union or bank down the street is proven to help grow in the same way that we saw data that was a very clear. And the data don’t lie. It’s very clear proof positive of branch investment in helping to create sustainable business advantage.
We know that the compound annual growth rate of rebranded banks – so banks that rebrand around an utterly distinct idea and identity – exceed the industry average by… buckle up… 33%. That’s enormous. CAGR is 33% higher on average of Adrenaline rebranded banks or credit unions than those that haven’t rebranded. And in fact, 75% or 3 out of 4 banking brands that we surveyed in our report, the ROI of Rebranding said that their brand value critically impacts their business value. So, it’s more than a symbiotic relationship between brand, business, and branch – it’s all connected, it’s all one. And this hyper focus now of the industry that is undergoing change, consolidation, M&A as we know is really demanding just a new way of thinking about both brand and branch investment.
Gina Bleedorn (13:15): So, harkening back to where we started about locality being your superpower, you have to be there, but then you have to be seen and actually connect and cut through the clutter. And that starts with the brand, which is then amplified through all the ways the brand shows up – certainly at the branches on bank branches, but also in marketing. And we have two pretty recent case studies of great work, one from a bank and one from a credit union, both community [in nature] that show very different styles and approaches to super-effective community financial branding and marketing.
Juliet D’Ambrosio (13:58): Yeah, Byline Bank is a great example of this, and I don’t want to give too much away. I would love our listeners to read these case studies and also to get to see some of the visuals on our website. But Byline Bank, which serves, and I love this term, the Chicagoland area. Chicagoland just sounds like this mythical place. But they serve Chicagoland and have a strong brand, but needed to do a couple things. One is to first of all streamline their design system in a way that helped them again achieve more of that differentiation and allow them the flexibility to market more effectively to all the audiences they serve.
So, they have recently undergone a much more meaningful approach to their marketing and messaging to connect with all of their customers, but with a focus on small business customers. It just launched this past fall. They have a new creative approach that is so refreshingly honest and real, and it’s just like you’re having a conversation with someone in Chicago. That’s what it feels like. There’s this sense of locality built within the marketing even outside of Chicago. There is a resonance, a real pride of this new marketing approach, a pride of being by, for, and about the people and the businesses of Chicago. So Byline Bank is a great example of that.
On the other side, we have Harvard Federal Credit Union. Again, there’s a full case study on the Adrenaline website that goes in depth, but they’re such an interesting study in the power of rebranding around something very distinct and unique. The Harvard University brand is among the most recognized brands in the world. Full stop, mic drop. You can go anywhere in the world, and someone knows what Harvard is. They have a very distinct visual identity, too. But Harvard Federal Credit Union, which had formerly been lovingly referred to as HUECU, Harvard University Employees Credit Union, really served more than just the employees and needed to distinguish themselves both from their prior brand and from all of their competitors in the Cambridge and broader Massachusetts area and finally connect in a meaningful way with Harvard University, but also separate themselves from it.
So, they have this very powerful brand positioning called “The Impact for Life.” And whether you’re a student, an alumnus, a doctor or a nurse or employee or a janitor at one of Harvard’s medical systems, that you are going to have a strong financial future with them. There was a lot of push and pull between how much Harvard versus vs how much sort of new and fresh elements that we can bring in. There was a focus on modernizing, on amplifying the energy around that, both of which are great examples of how you separate yourselves, how you differentiate, and ultimately how you connect to the community. Going back to your emphasis on locality, Gina.
Gina Bleedorn (17:24): Love those beautiful examples. When you see the visuals, it comes together. Here at our company and Believe in Banking, we believe in banking, and the majority of banking is [comprised of] community financial institutions. So, we love talking about helping, empowering, and advancing their mission forward.
Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site believeinbanking.com.