Believe in Banking Podcast: Episode #4

In this episode, Sean and Gina talk about the inherent assets community institutions have that can be leveraged, specifically the local branch network. They discuss how banks need to be both defensive and offensive in developing and deploying their branch strategies and recognize that COVID is a catalyst for change.

Text Transcript

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. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.

Sean Keathley: This is our Believe in Banking podcast. I am Sean Keathley, president and CEO at Adrenaline.

Gina Bleedorn: Gina Bleedorn, chief experience officer at Adrenaline.

Sean Keathley: Gina, let’s pick up the conversation. We were talking about doom and gloom around the branch, but we told our listeners to not worry. We had ideas. So a little bit of pressure here. Do you want to start us off with some ideas that maybe are a little bit more hopeful and strategic as we look forward?

Gina Bleedorn: Well, yeah. I think what everyone is experiencing right now is an immense amount of negativity. There’s a lot of focus on what’s the future and where are we going? And we think that there are inherent assets community institutions have that can be leveraged. We think there’s some good news here in what, in some ways, the pandemic may even create from an opportunity perspective, as well as how you work with what you’ve got.

Gina Bleedorn: You’ve got a bunch of branches that can’t just go away. Even if you closed half of them, that’s signaling death to the communities that you serve and to your customers. Right now, you need to be doing the opposite. This is yes, defensive, but it’s got to also be offensive. So in some ways COVID is a catalyst accelerating changes that were happening already. There are a number of you who have already made decisions, pre-COVID that are going to help you be stronger post-COVID. And for those of you that haven’t, the time to make some of those decisions is probably now. Sean, what are some examples?

Sean Keathley: I would love to talk about a few, Gina, and it does start to feel more and more like the pre-COVID strategies are holding true. Let’s take a true community bank like Vera Bank, a relatively new brand that’s been created because their name was Citizens National Bank.

Gina Bleedorn: There’s a lot of those.

Sean Keathley: 315, after we rebranded Vera Bank, left. So absolutely. The problem for Vera Bank did not start with the Citizens name when they were focused in Longview, Texas, Henderson, Texas, Corsicana, some of those smaller markets. However, as we’ve been talking about, if you want positive growth, you go find the people. They were migrating to larger towns and communities looking for growth. And there’s really a couple of ways to do that, looking for growth, one, acquisition, which is a huge trend in how this bank grew into the Austin area. Second is hiring bankers that have great relationships and can bring new relationships to the bank, but they also need locations they can be proud of that also show that new community there is committed to them as well.

Sean Keathley: What was interesting, they did not forget about where they came from. Now, we didn’t spend as much money on the renovation at Henderson, Texas, population, 13,000, but that headquarters is where they’re from. And so they are raising the Vera Bank flag. They invested in a lobby renovation and an exterior upgrade at their headquarters. And it’s a good example of a bank balancing true community commitment, not just going to the new frontiers where there’s opportunity, but let’s not forget where we came from. What’s even more interesting about that, I’m not sure some of those second cities, even tertiary cities, may not be more appealing as we go into this summer then as we did last summer. Is that a crazy thought or what do you think about that?

Gina Bleedorn: Yeah. So while urbanization on the whole has been an increasing in the world, 83% of the population lives in cities. In the past decade in the U.S., the largest cities have experienced slowing growth, New York, LA. They started slowing growth rates around the beginning of the decade. And towards the end of the decade, cities like Houston, Denver, Atlanta, they started slowing. And now there is a trend towards emerging suburbs, ex-urbs and secondary cities, and further, Deloitte predicts post-COVID that movement to secondary cities is going to continue to increase. So we’re not too far from a city center or a big airport, maybe within an hour or two hours, but there’s all of a sudden amazing growth opportunity in areas that there didn’t used to be.

Sean Keathley: This creates, I think, an exciting opportunity for these community minded organizations. Go to where the people are. Some of the people are coming to where they’ve been. And when you were talking to, Gina, I was thinking about Andrew Young, a hero of mine, incredible individual. He’s impacted so many things so positively. The city of Atlanta and broader have the honor of hearing him speak about 16, 17 months ago. And so COVID-19 wasn’t a thing. Urbanization was more apparent to people and he was asked by someone in a crowd, “What do you think is going to happen to small town America? Will it shrivel up and die?”

Sean Keathley: And his answer surprised me, but he said, “I bet on small town America.” And he said, “I really believe, as this new generation retires and slows down, there is going to be a place for lots of space, maybe chickens, organic foods, no traffic, and just get me to the airport in 90 minutes.” And I thought a lot about it. And now as we sit here today, it feels so relevant. I guess it’s 45 honorary degrees, Dartmouth, Yale. He’s a smart guy, and I’m not sure he’s not onto something. And I mentioned that Vera Bank example. Both being in those city centers, but those towns that are 50 minutes away from those big airports, that’s a real strong play for a community bank to really make a big difference and make a difference, not just in success with the organization, but creating success in those communities.

Gina Bleedorn: So if we hone in on what people like Vera Bank have done and are doing, there’s two sides of the house to think about. The one is the branches, the presence in the communities, which now as, Sean, you just explained, has new opportunity. You can not have to go to the biggest cities in order to get to growing markets and places where people are moving into. And that creates a tremendous opportunity, but there’s another side of the coin that Vera Bank also enacted, which was their brand. And interestingly, they did it kind of because they had to.

Gina Bleedorn: They had to change their name because of where they were moving. But they used that as an opportunity to reorient themselves around core values, which happened to be, for them, honesty and transparency, and their new tagline was genuine banking. And they come from farming roots of just true integrity, which happens to play now more than ever. But that combination of the branch presence and then the layer on top of it of the brand converting from a name that many others have to one that’s totally unique and ownable by you and a position on top of that, that is ownable to you and relevant give you leverage that national organizations don’t have because you have a locally relevant brand and locally present branches.

Sean Keathley: And as I think about how we ended our last podcast and had these concerns, what I feel today is what you’re saying. These solid strategies as you enter this year will help you go through these tough and turbulent times because of what you just described.

Gina Bleedorn: If we get a little more functional even into the how. So we kind of explained the why and the what, but how they did it, this goes into optimization. And it’s something we talk a lot about. It is critical now that you become as optimized as you can. This doesn’t mean closures, although it can, but it means a reallocation of investment and in many cases, actually investing in savings.

Gina Bleedorn: So in the case of Citizen’s National Bank, even before they were Vera Bank, they started renovating their branches to remove teller lines, bringing in TCRs and moving to a universal banker model that allowed them to reduce average FTE by branch by one and a half people per branch per year. That has a significant impact positively on the bank’s bottom line. Not to mention the effect of the brand experience, especially as the new brand rolled in creates an optimized experience for customers and for staff at decreased operating expenses for the bank.

Sean Keathley: Without hurting the customer experience. That’s the balance we’re looking for. They have fewer total branches than when that effort started, and they are yet more convenient. A lot of that is the ITM spokes. They have upgraded facilities, better for the consumer, also better for the employee and all of this working in unison. Again, not immune from the economic hit we’ve taken, but because they did all of that, they will come out of this on the other side much stronger.

Gina Bleedorn: Ooh, ooh, so talk about the ITMs. ITMs are so hot right now. Well, remote drive up ITMs.

Sean Keathley: It starts with understanding technology. We no longer have to design a branch based on where the drive-up will be, and that has all kinds of big benefits, including the experience for the people that stop and come inside. They don’t want to see the back of somebody working at drive up, too. I think we think about the role of the branch in the future. If we believe what we’re saying about advice, complicated issues, it’s not to just deposit a check. We really want to separate things done for convenience and things that are complex and want to be done in person.

Sean Keathley: And so once we go down the ITM route, we’ve got great bankers on video, helping people, customized hours by location. We can now start to cost-effectively support and scale ITMs.

Gina Bleedorn: What about Guarantee Bank?

Sean Keathley: Another great example. Again, true community bank, great people. DeSoto County was expansion for them done through acquisition, really the same kind of idea, renovating some historical buildings in small towns in Mississippi, raising the flag. We are not leaving. We want jobs here. We want to do small business lending. We need to create a better branch experience, but using the ITMs and linking for that network effect, historic downtown buildings can’t have drive ups. There is no real good parking. It’s for a lot of the pedestrian people that work downtown. A mile and a half away, there is a Guarantee Bank branded drive up ITM.

Sean Keathley: And that starts to be a really important spoke. It expands to a different part of the city and we opened that in late February. And we got into March and April and lobbies were closing, and talking to Hugh, the CEO at the bank, he really wishes he’d have been more aggressive in his accelerated plan to roll out those ITMs. It’ll continue to have long-term benefits. And he’s now committed to that seeing the success of the pilot, but had he had even more of those, it would have been even a better tool during COVID when branch lobbies were closed.

Gina Bleedorn: So last episode, we talked about the importance of the physical presence driving consideration, but how do you do it as efficiently as possible? How do you seem everywhere, but not be everywhere, and these remote ITMs, especially, or mini branches, micro branches, they are ways of being very efficient, but also being present. Keep in mind, you want to get smaller where there is less opportunity connecting regions, connecting corridors, and focus on more hub flagship experiences where the opportunity is greatest. The greatest example of the network effect in action is Chase. Chase’s branching strategy has followed this exactly.

Sean Keathley: It’s so true, Gina. We obviously follow Chase very closely. They’ve announced, and they continue to move forward with the plan. It’s 15 new markets and they don’t just go in with a branch or two. Take the greater DC area. It will be 70 locations. That is the right number for them to create that network effect, and it has to be done strategically so that you don’t over invest in the wrong places, but you really maximize opportunities at all different levels in all different size communities.

Gina Bleedorn: And when Jamie Diamond is asked by many, “Why do you keep opening branches? Why?” And he says, “Because when we do it, we grow.” The branches will be profitable in two to three years because they do it with this repeated formula. They support the physical presence with their virtual brand presence in advertising and marketing and community integration. These concentrated strategies, creating a network effect supported by their brand, creating a halo effect. And that drives growth.

Sean Keathley: Gina, they’ve done some of this in the DC area, I mentioned, and now we have some data. So they’ve got branches in Washington, DC that have 67 million in deposit 15 months later. That’s well above breakeven. So what you’re saying is ringing true, and what’s interesting about Jamie Diamond, he was, early in his career, well known for being a ruthless cost cutter. So the fact that he is pressing on the gas to invest in these new communities, tell you he’s doing so with thought, purpose, strategy, data, and understands there’s an ROI behind it.

Gina Bleedorn: As much as urban cores maybe are not growing as fast as they were. There’s some interesting things happening with real estate there.

Sean Keathley: Oh, totally. We really closely follow commercial property trends and it is no secret with the unemployment numbers and the specific sectors that have been hit so hard. Take restaurants. There are large number of restaurants that will not reopen. So what’s interesting as everyone is managing their entire fleet of locations, thinking about it as a network strategy, not a branch by branch decision, there are going to be real estate opportunities that did not exist a hundred days ago.

Gina Bleedorn: We’ve attempted to talk today about the non doom and gloom way of thinking about your situation and leveraging what you have. You have a lot of issues coming at you right now. You’ve got 99 problems, but the branch ain’t one. right, Sean?

Sean Keathley: I can’t believe we said that.

Gina Bleedorn: I’m sorry. Okay. You’ve got a lot of problems right now, but the branch is not as much of a problem as an opportunity. We have talked about some ways to leverage it, how to deploy it efficiently and effectively to create cohesive power of your network. But it’s really your brand layered on top of it that creates a halo effect. That combined power of your branches and your brand is how you are going to thrive in this moment and beyond.

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,