ICBA Membership Focus
Lessons learned competing head to head in megabank hometowns
By Tam Harbert
Has your community bank ever sent Valentine’s Day cards?
For the last two years, Carolina Premier Bank has sent them to the residents in its marketplace of Charlotte, N.C. Actually, the bank’s cards are more like anti-Valentine’s Day notes: The vintage designs on their cards say things like “You said you were my honey, but then you took my money. Bee mine no more.”
Carolina Premier Bank’s mischievous missives are part of a clever marketing campaign targeting people who don’t yet bank with the community bank. The cards encourage recipients to forward the cards on to their current bank, which in Charlotte is likely Bank of America: About 85 percent of all deposits in Charlotte are held by either Bank of America or Wells Fargo, estimates John Kreighbaum, president and CEO of Carolina Premier Bank.
“I can walk out of my office today and throw a rock in any direction and hit a BofA location,” he says.
Creative marketing is just one of the ways that the $250 million-asset community bank, which first opened its doors in 2006, competes in the Queen City, home to $2.2 trillion-asset Bank of America and a high-profile hub for several other giants, including Wells Fargo and BB&T.
It’s sometimes hard enough for community banks in any region to compete against the megabanks, given the billions of dollars in too-big-to-fail government and market subsidiaries those big banks reap. But what if the 800-pound gorilla is right in your own backyard?
Community bankers operating on the big-bank home turfs of Charlotte, New York and Pittsburgh offered some insights on what it’s like to dance between the steps of the giants. Those community bankers say they respond by being nimble, quick, flexible and creative. And despite the massive shadow megabanks cast in their hometowns, community banks operating right next door still can and do thrive and shine by focusing on highly personal and responsive relationship-based banking.
Referrals in Pittsburgh
In Pittsburgh, PNC Bank is the big daddy. But Allegheny Valley Bank, a community bank with $410 million in assets and 10 retail locations, has a long history of going up against it.
“PNC is one of the few banks that was chartered before Allegheny Valley Bank,” says Andrew Hasley, president and CEO of the community bank. In fact, Allegheny Valley Bank was formed in 1900 by a group of businessmen who felt they couldn’t get the service they wanted from the two giant banks of the day.
Today, Hasley estimates that PNC Bank controls about half of the banking assets in the Pittsburgh market. As such, he’s realistic about his bank’s strategy. “We’re not going to out-market them, and we’re not going to outspend them,” he admits. “Our asset size is probably a rounding error in their marketing budget.”
Instead, Hasley makes sure Allegheny Valley Bank’s pricing stays competitive with PNC Bank on everyday products like deposits and mortgages. But where the community bank differentiates itself is by stressing customized, personal service, particularly in commercial business and real estate loans, cash management for businesses and wealth management.
One big differentiator Allegheny Valley Bank uses as a competitive edge is its ability to tailor almost any product or service to a customer’s particular needs, Hasley says. “We tell customers we have no specific product we want to sell you. We create the product that’s right for the customer.”
With a mortgage loan program dubbed “you call the shot,” Allegheny Valley Bank will tailor a new mortgage to the particular needs of a current homeowner from another bank. If a current homeowner has seven more years of payments on an existing mortgage, the bank might offer a favorable refinancing deal for a loan it will keep in portfolio. “It’s a differentiator, and it helps us get more mortgage business,” Halsey says.
To get people’s attention, Allegheny Valley Bank also uses a quiet, personal approach—earning word-of-mouth referrals from customers. The bank also has built a referral network among the professional services firms it serves, including accounting and law firms.
Although referrals are a simple technique, they should not be underestimated, Hasley says. “We believe people only make changes in their banking relationship if they get a recommendation from somebody they trust,” he says. “If I’ve got 1,000 commercial customers that are happy with Allegheny, and I get a few referrals out of them every other year, that’ll make us incredibly successful.”
Hasley also watches what goes on at PNC Bank, remaining ready to take advantage of any missteps. If it makes an acquisition that requires customers to change account numbers and get new checks, for example, that’s an opportunity to interest customers in changing banks as well. Sometimes the big bank will add a new fee that upsets its customers. Or perhaps there’s a small business that’s looking for an $800,000 loan and wants a seasoned banker to personally handle the transaction.
In short, living in the shadow of a giant can have its advantages. Says Hasley: “Sometimes just being a community bank in the same area as a big bank automatically opens some opportunities for us.”
Niche in New York City
That approach is easier said than done in New York City, the world’s financial capital. How do you compete with JPMorgan Chase (currently $2.3 billion in assets), Citigroup ($1.8 trillion in assets) and all the other financial institutions there?
“The truth of the matter is—we don’t,” offers Phillip “Phil” H. Sorace, president and COO of Community Federal Savings Bank in Woodhaven, Queens. “We just ignore them.”
Community Federal Savings Bank was purchased in 2011 by a private family and recapitalized. Standing at $81 million in assets today, the bank’s goal is to grow significantly larger by focusing on serving midsize and small businesses. While still working out a specific strategy, Sorace is guiding the bank to carve out a market in several vertical industries, such as health care. To acquire a deeper expertise for executing this plan, the bank may even hire professionals with experience in those industries.
“We think there are a number of health care providers, such as physician’s practices and imaging groups, that are small and local and could benefit from a relationship with us because we have the flexibility to meet their needs,” Sorace says. “If we understand all the issues involved with a physicians’ group or a small clinic, such as how they code and bill the insurance companies, we’ll understand how to tailor services to those customers.”
That’s something that may not be on the radar of megabanks, which tend to offer cookie-cutter services, Sorace says. If a doctor’s office needs some type of special financing, for example, Community Federal Savings can offer quick, personal service, along with its deep understanding of small business and knowledge of the health care industry. The bank’s decision-makers are local, and they can craft financing to fit the doctor’s needs.
Sorace plans to test out such services in Woodhaven, Community Federal Savings’ one and only branch location, and then eventually expand into Manhattan, the city’s other boroughs and even into the broader region. Anticipating that growth, the bank has already moved its headquarters to Midtown Manhattan.
Migration in Charlotte
Although Carolina Premier Bank’s whimsical marketing campaigns get people to physically visit its five retail locations, the bank’s ultimate challenge is “getting them to make a decision to move away from the [big] banks,” Kreighbaum says. In addition to its Valentine’s Day card campaign, the bank has left real-looking cardboard wallets with real-looking money all over town. If people return them to the scrappy community bank, they get a $10 gift card. And Carolina Premier Bank employees are easy to pick out in traffic—they have bumper stickers on their cars that read: “Is your bank well-behaved? Mine is.”
And yet, Kreighbaum relishes the outsized megabank competition. Carolina Premier Bank, with no legacy infrastructure and the latest, cutting-edge technology, offers speed and convenience (electronically) while also providing personal, customized service, he says. In fact, Carolina Premier Bank recently won some business from a large global company headquartered in Charlotte specifically because the bank was willing to customize an expense card for its executives.
The key is to focus keenly on providing what the megabanks cannot, Kreighbaum explains.
“We’re not hesitant about going out and calling on big national businesses, primarily because of the confidence we have in our technology underpinnings,” he adds. “If community banks focus on technology, along with the relationship dynamics that we offer, we can sometimes just knock the socks off the big banks.”
Tam Harbert is a writer in Rockville, Md.