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Cliché, perhaps, but strong culture vital for winning banks

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good


Cliché, perhaps, but strong culture vital for winning banks

Kevin Dobbs isa senior reporter and columnist. The views and opinions expressed in this piecerepresent those of the author or his sources and not necessarily those of S&PGlobal Market Intelligence. Follow on Twitter @Kevin1Dobbs.

Culture.

Creditculture. Workplace culture. Merger-and-acquisition culture.

"Sometimes,people forget the culture part of it," John D'Angelo, presidentand CEO of Baton Rouge, La.-based InvestarHolding Corp., said while speaking this week during a bank conferencehosted by Hovde Group in Scottsdale, Ariz.

The best banks, however, never forget, D'Angelo added, punctuating a message thatpermeated the two-day conference from various corners — from bankers, investorsand analysts. Investar has more than tripled in size over the past five years, tomore than $1 billion in assets, growing net income seven-fold in that span.

It is, of course, almost cliché for community banks to trumpetcultures of great customer service, of conservative risk-taking. But touting itand living it are differing things, top bankers said at the Hovde event.

Successful banks that generate uninterrupted growth — organicallyand via deals — are led by executives who make it a top priority to constantly focuson sound credit quality; on consistent performance among lenders and myriad otherstaffers; on continuous and positive communication with regulators and investors;and on recognizing compatible approaches in the vendors they hire, and in the caseof M&A, with the lawyers and investment bankers they partner with to get dealsdone.

A culture that envelops all of those things is one that definesa successful bank, D'Angelo and otherssay.

John Allison, chairman of Conway, Ark.-based , amplified this thinking.At his bank, it starts with management but its culture of intelligent growth iscarried out by the smart people it hires and cultivates, he said. "I look forthose people who separate themselves from the pack," he said at the conference."People are so important."

Staffers are vital in dealing with customers and in working tokeep lines of communication open with regulators. Success on those fronts helpsAllison and the bank's top managers to communicate with confidence to their investors,he said.

Additionally, Allison said, it is vital for banks to find partners,including investment bankers on the M&A front, that mesh well with the bank'sculture and its ethics. "Truly, there are some people out there you don't wantto deal with," he said.

The same thinking, he said, applies to targets a bank buyer looksto acquire. Home Bancshares has closed six open-bank deals since2012 and it cinched another six FDIC-assisted bank deals following the last financialcrisis. It has more than doubled in size since 2012, growing to more than $9 billionin assets. Its net income level also roughly doubled in that time.

Allison said his bank is more than willing to take close looksat stumbling banks — "Where there's something bad there's something good,"he said — but he said a target's culture must be one that can be woven togetherwith Home Bancshares. "What I will walk on is culture," he said.

Kent Ellert, president and CEO of Weston, Fla.-based , echoedmuch of what Allison said, putting a particular emphasis on everyone at the bankbeing on the same page when it comes to risk-taking.

"You absolutely can't replace strong credit culture"with some other strength, Ellert said at the conference.

He said his bank, which also has been active on the M&A fronthaving completed an open-bank acquisition in 2014 after a series of failed-bankdeals in 2010 and 2011, also makes it a top priority to keep regulators informedearly and often on any major developments, notably including deals. The "over-communicate"policy, as he called, removes the specter of unwanted surprises and helps the bankaddress any regulatory concerns more seamlessly.

"I think that's been very constructive," Ellert said.

The same way of thinking, he said, applies to his management team'sinteraction with the bank's board as well as its investors. In fact, Ellert said,not only do investors want to be informed, but they often are sources of great ideasand advice that help strengthen strategic plans. Having as part of FCB Financial'sculture a desire to learn from all stakeholders, he said, has helped the companyadvance both organically and via deals. It has more than doubled in size since 2012,to more than $7 billion in assets, with net income surging.

"It's a tremendous gift," if utilized consistently,Ellert said of relations with investors.

Investors and analysts, for their part, said at the conferencethat they prize banks that have the confidence to regularly communicate with stakeholders, that have the wisdom to operatewith transparency. And that, said investor Martin Friedman, co-founder and managingmember of FJ Capital Management LLC,starts with leaders like Ellert who make it a priority, make it an integral partof the bank's culture.

"It always starts with the management teams," he said.