Annual Survey of Bank Reputations

ANNUAL SURVEY OF BANK REPUTATIONS

July 2016 americanbanker.com ESTEEM ENGINE By strengthening ties with customers and communities, Synovus regained its status as one of banking’s most highly regarded brands

KESSEL STELLING, SYNOVUS CEO

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Q2ONE.ad.v1.indd0C2_ABM0716 2 1 6/7/201612/18/15 12:07:57 11:09 PM AM Contents JULY 2016 / VOLUME 126 / NO 7

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24 37 40 REPUTATION SURVEY Features BankThink 30 Wanted: Hackers 37 Transformers Banks try creative tactics to 18 The Large Take Charge Engaged employees recruit cybersecurity pros Big banks are starting to gain momentum in are the cornerstone of a our annual reputation rankings as regional 30 Out of Circulation customer-centric culture banks stall A timeline of the rise and fall 24 Esteem Engine of coin-counting machines BackPorch How Synovus restored its status as one of 40 Quotes from Camden banking’s most reputable brands Brieﬁ ngs Fine (on Jamie Dimon), 6 Why Add Branch Staff Dimon (on Fine) and more 7 Tip in Lieu of a Fee 8 A CEO Debate IN EACH ISSUE 10 Mortgages Simpliﬁ ed 4 Editor’s Note 10 Novel CRA Strategy

BankTechnology 11 Online Lending Woes 13 Cybertheft Response 14 Citi Tests Beacons 16 When Digital’s Critical American Banker (ISSN 2162-3198) Vol. 126 No. 7, is published monthly by SourceMedia, One State Street Plaza, 27th Floor New York, NY 10004. Subscription price: $120 per year in the U.S.; $139 for all other countries. Periodical postage paid at New York, NY and additional U.S. mailing of ces. POSTMASTER: send all address changes to American Banker, P.O. Box 47069, Minneapolis, MN 55447. Send editorial inquires and manuscripts to American Banker, One State Street Plaza, 27th Floor, New York, NY 10004. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering nancial, legal, accounting, tax or other professional service. American Banker is a registered trademark used herein under license. © Copyright 2016 SourceMedia, Incorporated and American Banker. All rights reserved. www.americanbanker.com.

JULY 2016 AMERICAN BANKER 1

001_ABM0716 1 6/8/2016 10:57:05 AM What’s going on americanbanker.com @ Providing financial services professionals with analysis of vital developments and focusing sharply on their most important concerns

MOST READ MOST SHARED MOST COMMENTED Banks’ Plan to Disrupt I Told You So, Banks at the Mercy of Payday Lenders’ Game Marketplace Lenders Regulatory Absolutism Well, it was a nice idea, and The hits that alternative Regulators have abused one Pew’s Nick Bourke liked. lenders like OnDeck Capital their role of implementing law, But the new small-dollar loan are taking shouldn’t be and are causing economic products that several banks a surprise for an industry malaise with their sustained had in mind won’t work under built on unsustainable assault on the financial services the CFPB’s most recent pro- business models, consultant industry, Eric Grover argued in posed rules for payday lending. Todd H. Baker wrote. a BankThink piece.

Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 Phone 212-803-8200 AmericanBanker.com Emails [email protected] Volume 126, No. 7 Editor in Chief Marc Hochstein 212.803.8887 Tanaya Macheel 212.803.8268, West Sara Culley 831.438.8408 Executive Editor Bonnie McGeer 212.803.8430 Managing Editor Dean Anason 770.621.9935 Ian McKendry 571.403.3857, Jacob Passy Southeast David Cleworth 843.640.3713 212.803.8209, John Reosti 571.403.3864, Copy Editor Neil Cassidy 212.803.8440 Group Editorial Director, Regulatory Policy Marketing Director Gary Siegel 212.803.1560, Jackie Stewart Senior Art Director Nick Perkins Rob Blackwell 571.403.3834 Jeannie Nguyen 212.803.8324 Executive Editor Bonnie McGeer 212.803.8430 571.403.3852, Kevin Wack 626.486.2341, Art Director Robin Henriquez Senior Editor Alan Kline 571.403.3846 Bryan Yurcan 212.803.8753 Group Director Custom Marketing Solutions Contributors Kristin Broughton, Penny Crosman, Editor at Large Penny Crosman 212.803.8673 Virginia Wiese 704.987.3224 Brian Patrick Eha, John Heltman, Austin Kilgore, Alan Group Editorial Director, Banking/Capital Markets Kline, Tanaya Macheel, John Reosti, Jackie Stewart, Technology Editor Robert Barba 212.803.8640 Richard Melville 212.803.8679 Associate Director of Classified Sales Kevin Wack, Mary Wisniewski, Bryan Yurcan BankThink Editor Joe Adler 571.403.3832 JoAnne Kao 212.803.8325 News Editor Andy Peters 404.500.5770 General Manager, Digital Content CIRCULATION/CUSTOMER SERVICE Community Banking Editor Paul Vogel 212.803.8832 Subscriptions [email protected] Paul Davis 336.852.9496 Customer Service/Renewals Director of Creative Operations Contributing Editor Daniel Wolfe 212.803.8397 [email protected] Michael Chu 212.803.8313 Digital Managing Editor 800.869.6882 Christopher Wood 212.803.8437 Executive Director of Research and Data Reprints For information about reprints and licens- Copy Editor Neil Cassidy 212.803.8440 Chief Executive Officer Douglas J. Manoni Dana Jackson 212.803.8329 ing content, visit www.SourceMediaReprints.com or Deputy Editor, BankThink contact PARS International Corp. 212.221.9595. Chief Financial Officer Michael P. Caruso Mary Wisniewski 323.380.5248 ADVERTISING Chief Revenue Officer Marianne Collins Reporters/Producers Kate Berry 562.434.5432, VP Sales, Banking & Payments Director of Content Operations Kristin Broughton 212.803.8755, Lalita Clozel Dennis Strong 212-803-8372 Theresa Hambel 212.803.8245 EVP & Chief Content Officer David Longobardi 571.403.3855, Brian Collins 571.403.3837, Chief Marketing & Digital Officer Minna Rhee Brian Patrick Eha 212.803.8715 , John Heltman N.Y., N.J., Conn., Penn. SVP, Conferences & Events John DelMauro 571.403.3847, Brian Lewis 212.803.8442, Liesbeth Severiens 212.803.8691 Yong Lim 212.803.8463, Midwest Jeffrey Dembski 847.498.4520 SVP, Human Resources Ying Wong

2 AMERICAN BANKER JULY 2016

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003_ABM0716 3 6/7/2016 12:07:56 PM Editor’s Note BY BONNIE McGEER

Why Leadership Trumps Performance Now

What a bank stands for matters more than the products it sells. relationship with the bank. But it’s not Depending on your view, that could be a radical idea or a familiar one. But either enough to inspire trust. So we see the el- way it’s a key insight to remember for banks that want to work on bolstering their evation of leadership as being a metric of reputation, says Stephen Hahn-Griffiths, a vice president at the Reputation Institute. trust that says, ‘I trust the people leading “We see a continuing pattern around how the enterprise behind the products is that company.’ ” increasingly becoming more important. In other words, the perception of the bank For banks that want to capitalize on and who you are and what you stand for is more important than the products and this insight, an important consideration services that you keep developing and innovating,” he says. involves rethinking efforts focused on “So you can’t just drive reputation by coming out with new technology or new marketing and customer acquisition. smartphone solutions or new creative ways of borrowing money or new credit card The prevailing wisdom is to entice offerings. You drive reputation around enhancing the perceptions of the enterprise. people with sweet deals — free checking “And that’s not just important for customers, it’s especially important for or a credit card with no fees, for exam- noncustomers.” ple. Banks spend millions on marketing Humanizing the corporate identity of banks is an emerging trend across the indus- messages like these. try — one that’s proving critical in helping build reputations back up after the damage “Most banks go into conversations of the financial crisis. around customer acquisition very much Integral to this approach is leveraging leadership — chief executive officers and blinded by brand market communica- beyond — to give the bank more of a personality, make it more relatable and help tion,” Hahn-Griffiths says. “Hey, if we raise its visibility in the community. spend $10 million, how many new cus- “It’s not about putting the CEO on TV and having him say great things. This is about tomers are we going to drive?” elevating the entire leadership of the organization,” Hahn-Griffiths says. “That’s how But, Hahn-Griffiths argues, resources we become viewed as more human and less the bean counters.” could be better spent on efforts that cast Efforts must go beyond press releases and blog posts. Hahn-Griffiths suggests banks in a positive light and help create getting executives involved in important local projects and prompting them to offer goodwill in the minds of consumers, so thought leadership on social issues, rather than just having them be a mouthpiece that when they see or hear a marketing for quarterly earnings. message, they are more likely to respond It’s about creating and sharing compelling content — “videos and sound bites” positively. — that bring the personalities of executives to life with transparency and emotion, “If you could start to divert some of he says. those resources from just customer ac- The Reputation Institute is our partner on the annual Survey of Bank Reputations quisition and brand messages, and re- featured in this issue. As part of the survey, it gathers data on seven factors that influ- deploy some of those resources around ence how people perceive a brand and assesses which of those factors carry the most telling the corporate story about the weight in the minds of customers and noncustomers. company behind the products, you’d This year leadership replaced performance as one of the top three drivers of bank actually be more successful,” Hahn- reputations overall — a shift in emphasis that Hahn-Griffiths considers telling. Griffiths says. “Very few banks are that “Trust, especially in this political election year, has become such a valuable com- strategic in their ability to manage the modity,” he says. “Performance is a measure of financial stability and it solidifies your conversation.” □

4 AMERICAN BANKER JULY 2016

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ARE YOUR BANK BRANCHES AS CONNECTED AS YOUR CUSTOMERS?

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005_ABM0716 5 6/7/2016 12:07:56 PM

Art: CCT15027A_001D_Finance_Swop3.tif (CMYK; 919 ppi; Up to Date), CCT- CB B4B wTag-Wht BKGD-1 Line-NEG.ai (Up to Date) Briefings make faster decisions with a goal of going from appli- BRANCHES | FEE STRATEGY | MORTGAGES | COMMUNITY REINVESTMENT ACT cation to loan commitment within a matter of days. The early returns are encouraging. Loan production has increased for three straight quarters, topping $226 million in the first quarter. At the same time, nonperforming loans fell to 0.85% of total loans at March 31, down from 1.15% a year earlier. “We’re seeing teamwork in the best sense of the word,” Nichols said. “Silos are less of an issue.” A lingering concern involves risk management, particularly in underwriting decisions. “So far things have worked well, but we’re a little scared of the model,” Nich- ols said. “Traditionally, you never want credit folks” to work closely with underwriters. But CenterState executives are cau- tiously optimistic. “We’re probably three-fourths of the way to removing our skepticism, but we may not be completely convinced until after the next down- turn,” Nichols said. At Union, the goal was to rescue “a beautiful branch” in Monroe, Conn., that tion from bigger banks and alternative was severely underperforming, said Cyn- Bucking Convention, Some lenders. thia Merkle, the $2.2 billion-asset mutu- The decision to decentralize opera- al’s president and chief executive. Banks Add Branch Staff tions runs counter to the current trend “I guess we believed if we built it, cus- where most banks aim to streamline tomers would come, but they didn’t,” and consolidate operations to reduce said Merkle, who was Union’s chief op- costs. In fact, that was a priority for the erating officer before becoming its CEO Rather than close down SOMETIMES IT MAKES SENSE TO PUT $5 billion-asset CenterState in the years early last year. “Deposits weren’t grow- branches, two banks found more employees in branches. following the financial crisis. ing. Transactions weren’t occurring.” a creative solution to bring in That’s the perspective of CenterState “We were centralizing as much as we A bigger bank might have opted to more revenue instead Banks in Davenport, Fla., and Union Sav- could because of efficiency,” said Chris close the facility. Union, however, viewed ings Bank in Danbury, Conn., after the Nichols, CenterState’s chief strategy its southernmost branch as a logical step By John Reosti companies experimented with placing officer. toward capturing business in lucrative more decision makers in their branches. CenterState, however, started to fear Connecticut coastal markets such as Each bank had its own distinct ratio- it might lose business to nimbler com- Bridgeport, Norwalk and Fairfield. nale for making changes: Union wanted petitors. So the company began intro- Union addressed its problem by creat- to take one more swipe at salvaging an ducing underwriters to its branches. By ing a so-called solutions team that includ- underperforming branch, while Cen- working on-site with commercial lend- ed a mortgage and commercial lender,

terState was concerned about competi- ers, the underwriters can theoretically BONAQUE BORJA BY ILLUSTRATION along with treasury and wealth manage-

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006_ABM0716 6 6/7/2016 4:31:36 PM make faster decisions with ment officers. a goal of going from appli- The team, which op- A Tip, Instead cation to loan commitment erates with little interfer- within a matter of days. ence from top manage- Of a Fee The early returns are ment, was deployed to This startup lets customers encouraging. Loan produc- the branch as part of a use its services for free, but tion has increased for three pilot program. most pay anyway straight quarters, topping Merkle hoped that $226 million in the first having the team work MAYBE PEOPLE ARE NOT AS AVERSE quarter. At the same time, Merkle says Union wanted to under the same roof with to fees as bankers believe. nonperforming loans fell rescue “a beautiful branch.” the branch staff would Though the banking industry has to 0.85% of total loans at March 31, down yield better results. So far the experiment struggled to get customers to pay for ba- from 1.15% a year earlier. seems to be working, she said. sic banking services, a nonbank says it is “We’re seeing teamwork in the best The solutions team has booked $45.7 having success with a model where pay- sense of the word,” Nichols said. “Silos million in business and residential loans ing is optional. are less of an issue.” since its formation in mid-2014. The Aspiration, a Marina Del Rey, Calif., A lingering concern involves risk man- team also has added 14 treasury and firm that offers online checking accounts agement, particularly in underwriting eight wealth management relationships, and investment products, is getting a ma- decisions. while significantly boosting deposits and jority of its customers to voluntarily pay “So far things have worked well, but branch traffic. fees by letting them decide what they we’re a little scared of the model,” Nich- Cross-selling has improved at the think is a fair price for its products. ols said. “Traditionally, you never want branch, reflecting an approach where Customers can choose to pay what credit folks” to work closely with under- multiple team members call on custom- Aspiration calls a “tip” on checking ac- writers. ers. Previously, Union employed a big counts, ranging anywhere from nothing But CenterState executives are cau- sales committee that met regularly to sift up to $6 a month. tiously optimistic. “We’re probably through customer lists to identify leads. More than two-thirds of Aspiration’s three-fourths of the way to removing our “It was different silos sitting at a ta- checking account customers pay a fee, skepticism, but we may not be complete- ble,” Merkle said. “After the meetings, said Chief Executive Andrei Cherny. And ly convinced until after the next down- people would go back to their offices” more than 90% of investment customers turn,” Nichols said. and return to business as usual. pay a fee for those services. At Union, the goal was to rescue “a Big meetings were replaced with Cherny, who declined to provide the beautiful branch” in Monroe, Conn., that conversations among team members in average amount paid, said the optional tion from bigger banks and alternative was severely underperforming, said Cyn- more intimate, localized settings that approach is fairer to customers. “It just lenders. thia Merkle, the $2.2 billion-asset mutu- Merkle likes to refer to as “little families.” creates a different relationship with the The decision to decentralize opera- al’s president and chief executive. Word of mouth has helped the cause. customer — and they know we’re work- tions runs counter to the current trend “I guess we believed if we built it, cus- Merkle recalled one commercial client ing hard for them.” where most banks aim to streamline tomers would come, but they didn’t,” who approached the Monroe team for a He credits Aspiration’s customer ser- and consolidate operations to reduce said Merkle, who was Union’s chief op- commercial real estate loan. “By the end vice and perks such as free access to any costs. In fact, that was a priority for the erating officer before becoming its CEO of the day, we’d booked the loan and [ac- ATM worldwide with helping attract peo- $5 billion-asset CenterState in the years early last year. “Deposits weren’t grow- quired] all his operating and cash man- ple who are willing to give the company following the financial crisis. ing. Transactions weren’t occurring.” agement accounts,” she said, adding that a tip. “We were centralizing as much as we A bigger bank might have opted to the client has provided at least six refer- They also appreciate the decent inter- could because of efficiency,” said Chris close the facility. Union, however, viewed rals since then. est rates — 1% for balances over $2,500 Nichols, CenterState’s chief strategy its southernmost branch as a logical step The pilot went so well that Union has — without “onerous and unfair fees,” officer. toward capturing business in lucrative since set up solutions teams at two other Cherny said. The company frequently CenterState, however, started to fear Connecticut coastal markets such as branches. The teams are marketed heav- waives overdraft fees as well, he said. it might lose business to nimbler com- Bridgeport, Norwalk and Fairfield. ily on billboards, in social media and at Other financial services firms have petitors. So the company began intro- Union addressed its problem by creat- community events. tried — and abandoned — the optional fee ducing underwriters to its branches. By ing a so-called solutions team that includ- “We always talked about a relation- model, said Sam Maule, director and se- working on-site with commercial lend- ed a mortgage and commercial lender, ship strategy, but we didn’t know what nior practice lead of digital and fintech at

ers, the underwriters can theoretically BONAQUE BORJA BY ILLUSTRATION along with treasury and wealth manage- the words meant,” Merkle said. NTT DATA Americas. Green Dot initially

6 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 7

007_ABM0716 7 6/7/2016 4:31:41 PM took the pay-what-you-want approach tend to have more options, such as an Chairman and CEO Jamie Dimon said at largest branch networks in the country, with its GoBank, but later switched to a ability to buy fintech firms, he said. an investor conference in New York this finds itself in a similar situation. Dimon flat monthly fee that it waives if certain Radius Bank in Boston has taken that spring. “Facts are the facts, folks.” said that the megabank would adapt in requirements are met. message seriously. Radius — which is On the other side is Ally Financial, the face of changes in customer behavior. “I don’t see this revenue model flying Aspiration’s processing bank — has also which does not have physical branches. “While the branch will get small, and off the shelf,” Maule said. “I think you partnered with an online marketplace “Because we have no branch operating the head count may drop a little bit,” he get a group of early adopters that are lender and a mobile payments firm, said expense, we can share those efficiencies said, “the advisory part of the branch technology savvy and want to have the Christopher Tremont, the $790 million- with our customers, in the form of better may grow a little bit. Think of small-busi- latest and greatest and will pay for these asset bank’s executive vice president rates and lower fees,” argued Ally CEO ness advisers, mortgage loan officers, in- solutions.” of virtual banking. Radius has even col- Jeffrey Brown. vestment officers.” An a la carte model might work bet- laborated on a rewards product that pays For several years, traditional banks The CEOs of online-only banks ar- ter, allowing customers to select the fea- down student loan debt. have been facing difficult choices over gued, though, that their banks would tures they want, such as paper checks, The bank gets two to three offers a what to do with their physical locations. have the advantage in the future. then charging a nominal monthly fee week to partner with new fintech firms. The rapid rise of mobile banking — a sur- Brown said that Ally’s bank unit was to cover the bank’s expenses, said Lynn Though it turns down the vast major- vey by the Federal Reserve Board found built from the ground up for the internet. David, CEO of Community Bank Consult- ity of those pitches, it could add one or that 43% of mobile phone owners with The bank had $55.4 billion in retail de- ing Services. two more partnerships in the next year, bank accounts used mobile banking in posits in 2015, up from $21.8 billion five “I can’t see having the option to pay Tremont said. 2015, up from 33% two years earlier — years earlier. nothing,” David said. “You’re getting into “At Radius, we have always been makes the issue more urgent today. “We’ve been able to differentiate our- giving away things that have a hard cost more about how do these two industries Last year, 93,283 bank branches were selves because we don’t have the baggage to the bank. Why would you do that?” become friends rather than it being fin- in operation, which was the lowest total or cost load of brick-and-mortar institu- The $296 million-asset Suncrest Bank tech versus the banks,” he said. since 2005, according to data from the tions, nor the unfriendly approach of in Visalia, Calif., is among the many “I don’t have a crystal ball” on how Federal Deposit Insurance Corp. Branch endless fees,” Brown said. banks tweaking their checking accounts Aspiration’s pay-what-you-want model count peaked at 99,550 in 2009. “And we’re not saying that branches in an effort to boost noninterest income. will turn out, “but early on the signs In recent years, banks with scores of are completely going away, but they are It has launched two options: one free are very promising,” Tremont said. “It’s branches have promised to make those shrinking every day,” he added. “The and one with a fee. The free account pays about attracting a client base that is prov- locations smaller and more dependent traditional banks know that branches are 1.5% interest on balances up to $25,000 ing they will pay for good products and on technology. But they also argue that the way of the past, and digital is the way if the customer meets certain require- good services and compensate an organi- branches will remain important as ways of the future.” ments; otherwise, interest defaults to a zation for that.” — Jackie Stewart to gather low-cost deposits, dispense David Nelms, the chairman and CEO lower rate. A separate account that has a financial advice and serve as billboards of Discover Financial Services, said that monthly $5 fee comes with access to a na- for the bank. many transactions are being originated tional database of discounts on products U.S. Bancorp Chairman and CEO through direct channels now, rather than and services. The Branch Richard Davis, who once worked as a branch visits. “That’s going to be a chal- “Checking accounts have been bor- bank teller, is among those who believe lenge for the traditional banks,” Nelms ing and uneventful for a long time,” said Stays in the that the industry would be foolish to said. “They are going to have to close Ciaran McMullan, Suncrest’s president abandon its storefronts too quickly. branches. They are going to have to put and CEO. “Now, from the biggest banks Picture “We have 3,200 branches, so we are other products through branches to try to Suncrest, we are focused on building CEOs debate the value of a not trying to make a statement of clos- to keep the capacity utilization up.” core banking relationships. To do that, brick-and-mortar strategy ing locations,” Davis told the audience in Capital One Financial Chairman and we have to get more creative.” New York. “The average branch in Ameri- CEO Richard Fairbank came down some- McMullan said he thinks people are CHIEF EXECUTIVES AT LARGE U.S. ca is 53 years old. The average branch has where in between the incumbents and willing to pay under certain circumstanc- banks think differently about the future got that much legacy.” the upstarts. es — “if the service is good, if all of the fea- of brick-and-mortar banking, reflecting Davis acknowledged that U.S. Ban- Capital One operates branches in tures are there that they need and those a split between those that still have a big corp could become more efficient in eight states plus the District of Columbia, features work, and if there is some kind physical footprint and those that never the short term by closing a few hundred but the McLean, Va., company also has of emotional attachment or other value had one. branches. But he argued that the Min- an online franchise called Capital One added on.” On one side of the divide is JPMor- neapolis company would eventually pay 360. Fairbank argued that many consum- Banks, especially smaller institutions, gan Chase, which operates more than a price for that decision, in the form of ers still want a tangible connection to “can’t afford to ignore” companies such 5,000 branches across the country. higher funding costs. their money, and predicted that impulse as Aspiration, Maule said. Bigger banks “The branches are critically important,” JPMorgan Chase, which has one of the will continue for a long time.

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008_ABM0716 8 6/7/2016 4:31:41 PM Chairman and CEO Jamie Dimon said at largest branch networks in the country, But he also said that the number of The physical distribution will have value. an investor conference in New York this finds itself in a similar situation. Dimon visits to branches is plummeting, and But that physical distribution has to be spring. “Facts are the facts, folks.” said that the megabank would adapt in that a majority of Americans now prefer reinvented around a very technology- On the other side is Ally Financial, the face of changes in customer behavior. to transact digitally. first kind of architecture,” Fairbank said. which does not have physical branches. “While the branch will get small, and “There will be physical distribution. — Kevin Wack and Kristin Broughton “Because we have no branch operating the head count may drop a little bit,” he expense, we can share those efficiencies said, “the advisory part of the branch with our customers, in the form of better may grow a little bit. Think of small-busi- rates and lower fees,” argued Ally CEO ness advisers, mortgage loan officers, in- Jeffrey Brown. vestment officers.” For several years, traditional banks The CEOs of online-only banks ar- have been facing difficult choices over gued, though, that their banks would what to do with their physical locations. have the advantage in the future. The rapid rise of mobile banking — a sur- Brown said that Ally’s bank unit was vey by the Federal Reserve Board found built from the ground up for the internet. that 43% of mobile phone owners with The bank had $55.4 billion in retail de- bank accounts used mobile banking in posits in 2015, up from $21.8 billion five 2015, up from 33% two years earlier — years earlier. makes the issue more urgent today. “We’ve been able to differentiate our- Last year, 93,283 bank branches were selves because we don’t have the baggage in operation, which was the lowest total or cost load of brick-and-mortar institu- since 2005, according to data from the tions, nor the unfriendly approach of Federal Deposit Insurance Corp. Branch endless fees,” Brown said. count peaked at 99,550 in 2009. “And we’re not saying that branches In recent years, banks with scores of are completely going away, but they are branches have promised to make those shrinking every day,” he added. “The locations smaller and more dependent traditional banks know that branches are on technology. But they also argue that the way of the past, and digital is the way branches will remain important as ways of the future.” to gather low-cost deposits, dispense David Nelms, the chairman and CEO financial advice and serve as billboards of Discover Financial Services, said that for the bank. many transactions are being originated U.S. Bancorp Chairman and CEO through direct channels now, rather than Richard Davis, who once worked as a branch visits. “That’s going to be a chal- bank teller, is among those who believe lenge for the traditional banks,” Nelms that the industry would be foolish to said. “They are going to have to close abandon its storefronts too quickly. branches. They are going to have to put “We have 3,200 branches, so we are other products through branches to try not trying to make a statement of clos- to keep the capacity utilization up.” ing locations,” Davis told the audience in Capital One Financial Chairman and New York. “The average branch in Ameri- CEO Richard Fairbank came down some- ca is 53 years old. The average branch has where in between the incumbents and got that much legacy.” the upstarts. Davis acknowledged that U.S. Ban- Capital One operates branches in FTN FINANCIAL corp could become more efficient in eight states plus the District of Columbia, PORTFOLIO ADVISORS the short term by closing a few hundred but the McLean, Va., company also has branches. But he argued that the Min- an online franchise called Capital One neapolis company would eventually pay 360. Fairbank argued that many consum- a price for that decision, in the form of ers still want a tangible connection to higher funding costs. their money, and predicted that impulse JPMorgan Chase, which has one of the will continue for a long time.

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009_ABM0716 9 6/7/2016 4:31:42 PM any bearing on the decision to introduce the San Francisco bank has embedded Mortgages the new low-down-payment program. one of its client services personnel with Borrowers will be able to choose the loan JVS San Francisco. Simplified program that fits their needs, he said. JVS — formerly called Jewish Vocation- A new low-down-payment The GSEs’ foray into 97% loan-to-val- al Services — is a nonprofit that provides option from Wells Fargo is ue mortgages last year found few takers, educational programs and job training to less complex for first-timers due in large part to the programs’ strict the unemployed. eligibility requirements. In response, Bank of the West has been a partner WELLS FARGO HAS INTRODUCED A Fannie’s HomeReady and Freddie Mac’s of JVS since 2003, with its employees vol- low-down-payment mortgage to serve Home Possible created “enhanced” low- unteering to hold mock interviews and as an alternative to Federal Housing Ad- down-payment programs. These were resume reviews for participants of the ministration loans for low- to moderate- designed to be easier to qualify for, but nonprofit’s job-placement programs. income borrowers and first-time home- reserved for low-income borrowers or But the ambassador program, for buyers. those purchasing homes in Census Bu- which the bank receives Community The “yourFirst Mortgage” was devel- reau tracts with higher concentrations of Reinvestment Act credit, signals a new oped in partnership with Fannie Mae and minority populations. level of commitment both to JVS and to is modeled after the low-down-payment Wells will not restrict eligibility for its the Bay Area — a commitment the bank offerings the government-sponsored en- new product by imposing the maximum hopes will pay dividends in the form of terprises introduced with limited success income threshold and high minority Cen- leadership training for its people and a last year. sus tract location requirements that have greater understanding of the needs of However, qualifying is much simpler stymied HomeReady. Nor will it require nonprofits, which can be an important — addressing a key disadvantage of such consumers to complete a homebuyer ed- customer segment for banks. programs. “The problem in this space is ucation course to qualify for the loan. In- “We are building our leadership po- that it’s too complex for people to figure stead, those who take such a course will sition in the community,” said Jenny out,” said Brad Blackwell, an executive get a discount on the loan rate. Flores, the head of community affairs at vice president and portfolio business “We changed the entire positioning of the $76 billion-asset bank. “We are devel- manager at Wells Fargo. “Loan officers homebuyer education from an impedi- oping a talent-management program that and real estate agents walk away from it ment and a reason you can’t get a loan to helps us retain top-performing individu- because it’s too complex and consumers an incentive,” Blackwell said. als. We’re learning a tremendous deal don’t understand it.” While the initiative shares similar from this opportunity, and it’s helping Blackwell estimated that Wells, the goals to one that Bank of America also in- us to refine other partnerships we have nation’s largest mortgage lender, origi- troduced recently, one difference is that across the 19 states that we serve.” nated only 200 of Fannie’s HomeReady Wells Fargo intends to sell loans originat- Daniel Tondeau, an assistant vice loans during the first quarter. The new ed in its program to Fannie and retain the president at the bank, began his one-year program’s volume should be a lot bigger. servicing “from start to finish,” Blackwell stint at JVS in November. During his ten- “We’re not interested in doing a hand- said. — Austin Kilgore ure, Tondeau, a 15-year veteran of Bank ful of loans. We’re interested in making of the West, is focusing his efforts on a big impact on the first-time-homebuyer BankWork$, a free eight-week program market by creating a better alternative that gives job seekers the skills they need for customers,” he said. Helping Hand to obtain entry-level positions at financial Some of that expected increase in vol- Why Bank of the West is institutions, with an eye toward prepar- ume will come at the expense of Wells loaning out a star employee ing them for long careers in banking. Fargo’s FHA production at a time when to a nonprofit for a year The target wage for graduates, accord- many lenders are scaling back their in- ing to Flores, is $26 an hour. volvement in the government mortgage DESPITE BEING EAGER TO INVEST IN BankWork$ began at JVS Los Angeles insurance program. Lenders say they are their communities, most banks would in 2006 and has since spread to Portland, concerned about being unfairly targeted not go so far as to send one of their star Seattle and San Francisco. In all, nearly by the Department of Justice for viola- employees to work at a local nonprofit 1,500 people have graduated from Bank- tions of the False Claims Act. for an entire year. Work$, with about 75% of them having Blackwell would not say whether the Not so Bank of the West. As part of a immediately found jobs in the financial recent challenges with FHA lending had new community ambassador program, services industry. — Brian Patrick Eha

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010_ABM0716 10 6/7/2016 4:31:43 PM BankTechnology

this lending model as a passing fad. After Online Lending Shakeout the financial crisis, startups built more efficient processes for approving borrow- Hurts Some, Helps Others ers, while also delivering better customer experiences. Those breakthroughs will surely endure, even if some of the companies that pioneered them do not. Which banks are best ONE AFTER ANOTHER, SOME OF “The consumer still wants this prod- positioned to benefit from the biggest names in marketplace lend- uct,” said Anthony Hsieh, the chief marketplace lending’s ing have been humbled by a variety of executive of the online mortgage lender recent woes? negative developments since the end of LoanDepot. the first quarter, including Lending Club, As the troubles in the marketplace By Kevin Wack Prosper Marketplace, Avant and OnDeck lending sector play out, some banks Capital. stand to benefit, while others — particu- Though each faced different setbacks, lary those who struck up assorted part- all are connected to a sudden reversal in nerships with these companies — are sentiment among institutional investors likely to suffer alongside their online who fueled the rapid rise of the sector. brethern.

But banks would be unwise to dismiss Here’s an analysis of how banks are BONAQUE BORJA BY ILLUSTRATION

JULY 2016 AMERICAN BANKER 11

011_ABM0716 11 6/8/2016 12:07:11 PM likely to be affected by the shakeout — invisible to the customer. That’s for sure,” said James Wu, the chief both good and bad. Today, one potential risk for these executive of MonJa, an analytics firm that Swift Security banking institutions involves the possi- caters to institutional investors. Banks on the Back End bility that their partner will have to shut Measures Several small banks, including WebBank down. Banks Looking for an Acquisition After an $80 million and Celtic Bank in Utah and Cross River Another possible pitfall involves It is unclear how many banks are inter- cybertheft, U.S. financial Bank in New Jersey, made themselves reputational risk. If a digital lender gets ested in pursuing a strategy that involves services firms take stock indispensable to the rapid growth of on- a black eye — or if that is the perception acquiring an online lender. So far, it has line lending by facilitating the loans that of banking regulators — it could harm the not been a popular option, as banks were NEWS OF THE CYBERTHEFT OF MORE marketplace lenders make to consumers. partner bank. scared off by the sky-high valuations that than $80 million from the Bangladesh They are probably the banks with the “A bank’s regulators are going to be venture capitalists assigned to lending Bank’s account at the Federal Reserve most to lose. looking at any companies that they part- startups. Bank of New York earlier this year — Over the last few years, so-called issu- ner with,” said Alex Johnson, an analyst But in the current environment, the and speculation that the hackers may ing banks developed symbiotic relation- at Mercator Advisory Group. price tags on these companies seem like- have gained access to the payments- ships with marketplace lenders. Their ly to fall. “The calculus for many bankers related messaging system Swift — has banking licenses allowed the digital lend- Banks That Are Buying the Loans on how to approach alternative lending caused many U.S. banking companies ers to avoid state-by-state interest rate This category ranges from some of the is changing rapidly,” Javelin Advisory Ser- to take stock of their internal security caps, which helped fuel the sector’s phe- biggest names on Wall Street all the way vices wrote in a report published in May. precautions. nomenal growth. For the banks, the rela- down to small community banks. Banks that waited for the right acqui- Executives across banks of all sizes — tionships could be quite lucrative. These institutions saw an opportunity sition opportunity allowed their competi- from the likes of JPMorgan Chase to the But assuming the online lending in- to make an investment profit by buying tors to get a head start. But their patient $2.4 billion-asset Stonegate Bank — said dustry is now in the midst of a substantial the loans underwritten by marketplace approach may yet be vindicated. they reviewed how they handle Swift contraction, revenue at these banks will lenders. transcations and, in some cases, tight- likely sustain a significant hit. In some cases they held that debt on Banks That Built Their Own Platform ened their controls. The lending slowdown comes at a their own balance sheets. In other in- Wells Fargo and Goldman Sachs are At JPMorgan Chase, employee access time when both judges and regulators stances, they bought loans with the in- among the banks that eschewed partner- to the Swift payments system has been are starting to express skepticism about tention of bundling them into bonds and ships with online lenders and instead adjusted. these partnerships. So for this group of reselling them. went it alone. The New York banking giant grants small banks, which have been riding If more consumers and small-business This approach has taken longer to get different levels of security access to the the marketplace lending wave, the good borrowers start missing their payments off the ground than some partnerships Swift system. While some employees times may have been about to come to an on these loans, the banks that bought involving rival banks did. But in light of have permission only to view activity on end anyway. them may be vulnerable. Credit perfor- the recent upheaval in the online lend- the system, others can work in it directly. mance in the industry has recently starting sphere, building a platform internally Following the cyberattacks, the company Banks Getting Help with Online Loans ed to worsen, as loans to borrowers with looks like a smart approach. reviewed the security rights that each Some banks struck up alliances as a way lower credit scores are showing signs of Banks that built their own platforms employee has to the Swift system, and to offer better digital lending options to deterioration. should be able to marry the banking scaled back the number of employees their own customers. These institutions But these arrangements are more industry’s stable, low-cost funding base granted direct access. recognized that they were at risk of los- transactional than strategic for the banks with at least some of the advantages Bruce Livesay, chief information offi- ing business to online competitors and that entered them, which means that pioneered by marketplace lenders. cer of First Horizon National in Memphis, decided that the fastest way to adapt was they should be relatively easy to exit “It does seem like the tide is turning Tenn., immediately began a review of his by partnering with one. cleanly. back toward banks, which we think is bank’s own Swift environment, paying Examples of banks that adopted this In addition, a consortium of more great,” said Dan O’Malley, chief digital particular attention to potential vulnera- approach include JPMorgan Chase and than 200 small banks has halted its officer at Eastern Bank in Boston. bilities tied to usernames and passwords. Regions Financial. purchases of Lending Club loans, at least Eastern built its own platform for “We looked at how do we have this The partnerships take different temporarily. small-business lending in its innovation configured,” said Livesay, whose $26.9 forms. Some of the banks operate co- In the end, the purchasing banks may lab, and after several pilots with small billion-asset bank has an international di- branded websites, built with an online have more leverage over the troubled groups of customers, recently launched vision. “Do we have it on a separate net- lender’s loan-underwriting tools, where online lending platforms than the other it across the bank. work, what software are we using, how the bank’s own customers can apply for way around. O’Malley said he’s not surprised by do we manage user IDs and passwords credit. Other banks rely on an online “I think that Lending Club would have the upheaval with the online lenders. and make sure we do authentication cor- lender’s technology, but in ways that are to work hard to regain the trust of banks. “We’ve expected it.” rectly. Things like that.”

12 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 13

012_ABM0716 12 6/8/2016 12:07:12 PM That’s for sure,” said James Wu, the chief User-access controls, especially ad- In its Swift environment, First Ho- executive of MonJa, an analytics firm that Swift Security ministrative rights, called for special at- rizon uses a tool called CyberArk that caters to institutional investors. tention so that anyone with a random allows a separation between the user ID Measures user ID and passcode cannot get in, and password. “The tool prevents people Banks Looking for an Acquisition After an $80 million he said. from knowing what their own password It is unclear how many banks are inter- cybertheft, U.S. financial ested in pursuing a strategy that involves services firms take stock acquiring an online lender. So far, it has not been a popular option, as banks were NEWS OF THE CYBERTHEFT OF MORE scared off by the sky-high valuations that than $80 million from the Bangladesh venture capitalists assigned to lending Bank’s account at the Federal Reserve startups. Bank of New York earlier this year — But in the current environment, the and speculation that the hackers may price tags on these companies seem like- have gained access to the payments- ly to fall. “The calculus for many bankers related messaging system Swift — has on how to approach alternative lending caused many U.S. banking companies is changing rapidly,” Javelin Advisory Ser- to take stock of their internal security vices wrote in a report published in May. precautions. Banks that waited for the right acqui- Executives across banks of all sizes — sition opportunity allowed their competi- from the likes of JPMorgan Chase to the tors to get a head start. But their patient $2.4 billion-asset Stonegate Bank — said approach may yet be vindicated. they reviewed how they handle Swift transcations and, in some cases, tight- Banks That Built Their Own Platform ened their controls. Wells Fargo and Goldman Sachs are At JPMorgan Chase, employee access among the banks that eschewed partner- to the Swift payments system has been ships with online lenders and instead adjusted. went it alone. The New York banking giant grants This approach has taken longer to get different levels of security access to the off the ground than some partnerships Swift system. While some employees involving rival banks did. But in light of have permission only to view activity on the recent upheaval in the online lend- the system, others can work in it directly. ing sphere, building a platform internally Following the cyberattacks, the company looks like a smart approach. reviewed the security rights that each Banks that built their own platforms employee has to the Swift system, and should be able to marry the banking scaled back the number of employees industry’s stable, low-cost funding base granted direct access. with at least some of the advantages Bruce Livesay, chief information offi- pioneered by marketplace lenders. cer of First Horizon National in Memphis, “It does seem like the tide is turning Tenn., immediately began a review of his back toward banks, which we think is bank’s own Swift environment, paying great,” said Dan O’Malley, chief digital particular attention to potential vulnera- officer at Eastern Bank in Boston. bilities tied to usernames and passwords. Eastern built its own platform for “We looked at how do we have this small-business lending in its innovation configured,” said Livesay, whose $26.9 lab, and after several pilots with small billion-asset bank has an international di- groups of customers, recently launched vision. “Do we have it on a separate net- it across the bank. work, what software are we using, how O’Malley said he’s not surprised by do we manage user IDs and passwords the upheaval with the online lenders. and make sure we do authentication cor- “We’ve expected it.” rectly. Things like that.”

12 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 13

013_ABM0716 13 6/8/2016 12:07:13 PM is,” he said. “They couldn’t even give up will stop the transaction and review it. ignition and battery that help operate the their password inadvertently because CBW also uses statistical modeling to whole thing.” they don’t know it.” try to find red flags on transactions. Beacons are more commonly used in The software also records every ac- Heath Tarbert, a former Treasury of- retail settings to inform shoppers of dis- tion the user takes. Computers running ficial who is now a partner with Allen & counts as they navigate a store. A large Swift software are blocked from net- Overy, said banks should consider the department store may use beacons to works other than Swift’s. incident “a big wake-up call,” especially provide an offer that is specific to the de- Some community bankers say they after word came down in late May that partment the shopper has just entered, are also monitoring the issue either be- the hostile North Korean government for example. cause they are in niche businesses that might have been involved in some recent Citi started testing beacon technology use Swift or because they fear spillover breaches. with iPhone and Apple Watch owners in regulatory risk. “This is a bank robbery — a cyber New York City in March. A pilot rollout Stonegate in Pompano Beach, Fla., bank robbery,” Tarbert said. “I think to 10 branches was recently finalized, uses Swift because of its business deal- in that respect it represents some- according to Deirdre Leahy, a spokes- ings with Cuba. But Dave Seleski, its chief thing new, and in this particular case woman for the bank. executive, said it has had no issues so far. it’s a cyber bank robbery of a central Customers that opt in to the pilot “Our volume is very low with Cuba, so bank. If a community bank lost $80 can also receive “contextually relevant” it is easy to monitor at our end,” he said. million, that would be catastrophic.” location-based notifications if they’re For its part, Swift says it is being trans- — Penny Crosman and Kristin Broughton within roughly 30 feet of the branch, parent with its users about what has hap- Anzola said. (The range actually varies pened and what steps banks should be depending on environmental factors Citi taking to protect themselves. is taking into account during this testing “We are sharing information on Citi Brings phase.) fraudulent payment cases known to us, For example, Leahy said, in the winter notifying our community of any related Beacons into some branches offer customers hot apple malware used in customers’ local envi- cider when they come inside. With this ronments and providing indicators of Branches technology, passing customers would re- compromise,” among other things, a Bluetooth pilot provides ceive an alert informing them of the op- spokeswoman said. cardless access to ATMs tion to warm up inside with a hot drink. She said the majority of banks’ ques- “We want to make it fun. We want tions are technical or operational, as they CITIGROUP IS TESTING BLUETOOTH to make it useful for people,” Anzola try to ensure they have the most up-to- technology in a pilot that gives custom- said. “It’s not just a question of serving date measures in place. ers cardless access to branch ATMs after marketing messages to people — I think Although some fintech companies business hours, among other services. that’s the fear,” that customers could feel claim to offer an alternative to Swift, The beacons, small devices that com- spammed with notifications, especially in several bankers said they do not see any- municate with mobile apps over Blue- densely populated New York, where one one providing a real alternative anytime tooth, effectively turn mobile phones could conceivably pass three branches in soon. into “keys” that unlock the door when just a couple of blocks. “People don’t understand the magni- they sense a customer is near, removing “There’s a frequency limit on all tude of Swift,” said Suresh Ramamurthi, the need to fumble for bank cards to gain of these [notifications], so if you work chief technology officer of CBW Bank entry to the ATM vestibule. across the street, you’re not going to get in Weir, Kan., which is a member of the Mike Anzola, Citi’s vice president of this message every hour or every day,” Swift network. “Outside of the U.S., every mobile product management, likened Leahy said. bank has a Swift ID. There’s no alterna- the feature to keyless car entry, where The customer also can choose not tive way to get every bank in the world.” doors unlock by sensing the driver’s to acknowledge the notification, Anzola The $22.7 million-asset CBW requires proximity. said. “It disappears on its own; you won’t two-factor authentication for Swift trans- The beacon “doesn’t know anything have this huge thread of notifications.” fers; Ramamurthi did not want to get spe- about the owner of said key, it just knows How long the pilot runs will depend cific about what kind. And if a customer that it’s in sight,” Anzola said. “The same on customers’ responses. Leahy said is trying to send money to an entity that’s applies for us. The phone and the app 450,000 customers are currently eligible not a preapproved beneficiary, the bank are the key and [the beacon] is like the to participate, and those who have opted

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015_ABM0716 15 6/7/2016 12:08:02 PM

8162 DFI American Banker Ad.indd 1 6/2/16 12:50 PM in so far have done so without aggressive by streamlining Ally’s their trusted image from prompting by the bank. online banking channel, a lineup. Now, customers The beacons are made by Gimbal, one making logins simpler and register their device with of the largest beacon providers that also predicting what custom- a code Ally sends the first serves clients like South by Southwest, ers might need once they time they log in with that the NFL and the U.S. Open. do log in. device. From then on, the Inside Citi “smart branches,” beacons One place where username and password are placed underneath the workbench branches have an advan- suffice. desks, where employees and customers tage over digital bank- Sumlin said this was transact together on computers or mo- ing is in financial advice. done to make the login bile devices. When the beacons sense a Without branches, Ally process speedier. customer has been waiting too long for a has had to come up with “It’s not less secure; Sumlin says simplifying is key teller, it can send a notification directing ways to fill that void. for better customer experiences. it just adds to the overall the customer to a workbench. To that end, the bank experience and removes a “We can tell how long you’ve been launched its Ally Assist function in May step that customers previously had to do waiting. We don’t know who you are or 2015 on its mobile banking app for Apple to log in,” she said. anything about you, we just know there’s users. While mobile banking is a hot topic, someone there that’s lingering,” Anzola Using automated intelligence and cus- approximately half of Ally’s retail deposit said, adding that the team strives to find tomer data profiles, Ally Assist analyzes customers primarily use online banking. the “delicate balance” of maintaining accounts and transactions to generate Last year it overhauled its online banking customers’ comfort levels with notifica- useful information, including smart re- platform with streamlined navigation, a tions. — Tanaya Macheel minders, potential issues and financial faster login process and a consolidated recommendations. snapshot of all accounts. The service also acts as a virtual assis- The move also gives the bank greater tant in responding to specific customer flexibility and control in introducing fu- requests, via speech or typed entries, to ture enhancements. When Digital provide customers with timely responses Sumlin said the online banking plat- and information based on their specific forms across smartphones, tablets and Is Critical needs. computers are now consistent experi- Online customers are the The system learns from individual in- ences. “We created a new interface and only ones that Ally has, so teractions and transactional behavior to design, and also made it mobile-centric,” it must excel technologically determine the likelihood of needed infor- Sumlin said. “If you access online bank- to keep them happy mation, Sumlin said. ing using a tablet web browser, and then “It does a review and analysis for later on a desktop, the navigation and OFFERING GOOD DIGITAL BANKING what customers might be needing assis- functions would flow seamlessly together capabilities is important to all banks tance on, based on their transaction his- and not appear disjointed at all.” these days, but for Ally Bank, it is an tory,” Sumlin explained. For example, a Offering top-notch digital capabilities absolute must. customer can use Ally Assist to initiate is critical for a bank like Ally, because it As a direct bank, Ally has to provide bill payments, request more detailed in- is the primary avenue for building loyalty its customers with everything they might formation on a particular transaction, or and value with its customers, said Jacob need on their desktop or in their palm ask for insight into their spending and Jegher, senior vice president at Javelin if it intends to keep its customers happy savings habits. Strategy & Research. and get new ones to sign up. “And if the customer isn’t interest- “If your customers don’t have any- “Digital is very critical for us,” said ed” in what Ally Assist predicted they where to go other than digital channels, Carrie Sumlin, the digital consumer might be, “they can navigate elsewhere,” the pressure is on you to perform,” he executive of the $111 billion-asset Ally. Sumlin said. said. “For a bank like Ally or other types “Our philosophy is to put a high value on Ally has also simplified its mobile of direct banks, it creates interesting the digital customer experience. There’s login experience by taking it from a opportunities as well as challenges for not a backup plan for them to walk into a two-step process to a one-step process. them. Every bank wants to be the best” branch and complete a transaction.” Before, customers had to enter their at digital, “but they have to be the best.” In the past year, Sumlin and her team username and passwords and then pick — Bryan Yurcan have enriched the customer experience

16 AMERICAN BANKER JULY 2016

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017_ABM0716d31285-Re-Size 17 of AB House ads.indd 2 6/7/20165/4/16 12:08:03 5:11 PM PM espite Bernie Sanders’ best efforts, the banking industry managed an ever so slight rise in popularity this year. The reputation of the industry as a whole nudged up to 67.1 on a 100-point scale, helped by an improving Deconomy. The score is just average, by the Reputation Insti- tute’s reckoning, but that is not so bad for an industry devastated by the financial crisis in recent memory. “We’ve seen some improvements broadly around financial services, but there’s still a hangover effect from the Great Recession,” said Stephen Hahn- Griffiths, a vice president at the Reputation Institute. “I think it’s still a work in progress in many ways.” To put things in perspective, banking is still below other industries the Reputation Institute tracks, including health care and energy. But it has seen a consistent rise in reputation since THE 2011 and its increase of 1.5 points this year is slightly better than the average increase of one point across all industries. Some standout banks are doing far better than average. Of the 33 banks evaluated in the American Banker/Reputation Institute Survey of Bank Reputa- LARGE tions this year, five have strong overall reputations, when taking the perceptions of both customers and noncustomers into account. That’s up from just two last year. Breaking down the overall scores to separate cus- START tomers from noncustomers shows how much harder banks have to work to create a favorable impression with the general public. Banks generally have a strong reputation among customers, with a score of 78.4. But their reputation is TO TAKE just barely average among noncustomers, with a score of 60.5. The gap of 18 points between the two scores is unchanged from last year. “If you’re not an everyday customer, your opinion is formed by what others tell you, what you hear CHARGE and read and observe. And right now the general sentiment around banks is still in recovery mode,” In our annual Survey of Bank Hahn-Griffiths said. “There’s still some skepticism out Reputations, large banks gain there.” Even so, a dive into the rankings yields some suc- momentum as regional banks stall cess stories. A handful of regional banks are showing significant progress with improving their reputations. Another noteworthy trend in the data is how large By Bonnie McGeer banks have improved as a group.

18 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 19

018_ABM_0716 18 6/8/16 11:52 AM OVERALL REPUTATION RANKINGS espite Bernie Sanders’ best efforts, the banking industry managed an 2016 2015 Change ever so slight rise in popularity this 1 Regions 73.9 68.6 5.3 year. 2 Synovus Financial 73.8 69.9 3.9 The reputation of the industry as a whole nudged up to 67.1 on a 3 Cullen/Frost Bankers 72.5 71.0 1.5 100-point scale, helped by an im- 4 KeyBank 72.4 63.4 9.0 proving economy. D 5 FirstMerit Bank 70.1 66.6 3.5 The score is just average, by the Reputation Insti- tute’s reckoning, but that is not so bad for an industry 6 Ally Bank 69.7 67.8 1.9 devastated by the financial crisis in recent memory. 7 First Niagara 69.5 67.7 1.8 “We’ve seen some improvements broadly around 8 BOK Financial 69.4 71.9 -2.5 financial services, but there’s still a hangover effect from the Great Recession,” said Stephen Hahn- 9 Zions Bank 69.2 68.4 0.8 Griffiths, a vice president at the Reputation Institute. 10 SunTrust Banks 68.8 66.2 2.6 “I think it’s still a work in progress in many ways.” 11 Capital One 68.8 60.2 8.6 To put things in perspective, banking is still below other industries the Reputation Institute tracks, in- 12 Comerica 68.8 64.2 4.6 cluding health care and energy. 13 PNC 68.5 65.3 3.2 But it has seen a consistent rise in reputation since 14 Chase 68.4 63.9 4.5 THE 2011 and its increase of 1.5 points this year is slightly 15 TD Bank 68.2 67.3 0.9 better than the average increase of one point across all industries. 16 U.S. Bank 67.7 62.1 5.6 Some standout banks are doing far better than 17 Associated Bank 67.6 68.2 -0.6 average. Of the 33 banks evaluated in the American 18 Northern Trust 67.4 68.9 -1.5 Banker/Reputation Institute Survey of Bank Reputa- LARGE tions this year, five have strong overall reputations, 19 Wells Fargo 67.3 60.2 7.1 when taking the perceptions of both customers and 20 BMO Harris Bank 67.1 67.6 -0.5 noncustomers into account. 21 BB&T 66.9 68.7 -1.8 That’s up from just two last year. Breaking down the overall scores to separate cus- 22 M&T Bank 66.6 66.1 0.5 START tomers from noncustomers shows how much harder 23 Bank of the West 66.6 66.3 0.3 banks have to work to create a favorable impression 24 MUFG Union Bank 66.6 64.0 2.6 with the general public. Banks generally have a strong reputation among 25 Huntington Bank 66.5 69.0 -2.5 customers, with a score of 78.4. But their reputation is 26 BNY Mellon 66.0 65.1 0.9 TO TAKE just barely average among noncustomers, with a score 27 BBVA Compass 65.1 67.5 -2.4 of 60.5. The gap of 18 points between the two scores is unchanged from last year. 28 Citizens Bank 65.1 64.8 0.3 “If you’re not an everyday customer, your opin- 29 Citibank 64.4 59.1 5.3 ion is formed by what others tell you, what you hear 30 Fifth Third Bank 62.7 63.4 -0.7 CHARGE and read and observe. And right now the general 31 Banco Santander 59.7 61.1 -1.4 sentiment around banks is still in recovery mode,” Hahn-Griffiths said. “There’s still some skepticism out 32 HSBC 56.8 64.1 -7.3 there.” 33 Bank of America 55.9 53.4 2.5 Even so, a dive into the rankings yields some suc- Excellent/Top Tier Above 80 cess stories. A handful of regional banks are showing Strong/Robust 70-79 significant progress with improving their reputations. Average/Moderate 60-69 Weak/Vulnerable 40-59 Another noteworthy trend in the data is how large Poor/Bottom Tier Below 40 banks have improved as a group. Source: American Banker/Reputation Institute Survey of Bank Reputations, 2016

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019_ABM_0716 19 6/8/16 11:52 AM 2016 SURVEY OF BANK REPUTATIONS

RANKINGS BASED ON CUSTOMER SCORES

2016 2015 Change

1 Regions 85.7 83.3 2.4 2 KeyBank 84.6 79.4 5.2 REGIONALS AT THE TOP “Why? Because you’re focusing on the stuff that’s most 3 Capital One 82.0 73.2 8.8 All five of the institutions with strong overall reputations important.” are regional banks — Regions Financial, Synovus Finan- Leadership has replaced performance as one of the 4 SunTrust Banks 81.8 79.6 2.2 cial, Cullen/Frost Bankers, KeyBank and FirstMerit Bank top three reputation drivers since last year. 5 Cullen/Frost Bankers 81.8 76.4 5.4 — and nearly all of them posted meaningful gains from So Hahn-Griffiths recommends banks make their top 6 Synovus Financial 81.4 80.7 0.7 last year. executives more visible in the community and demon- KeyBank, which is fourth in the overall rankings, had strate thought leadership on social issues. 7 TD Bank 80.9 79.2 1.7 a whopping nine-point increase, the largest improve- “Presenting a more human face for your banking 8 PNC 80.7 77.4 3.3 ment of any bank. organization and what it stands for has become more 9 Ally Bank 80.7 79.1 1.6 Dennis Devine, co-president of Key Community important,” he said. “We’ll see banks that do a better Bank and head of Key Consumer and Small Business, job of elevating their leadership and making them more 10 Chase 80.2 72.1 8.1 attributes this to a focus on living out its corporate pur- front and center as part of the rhetoric are probably the 11 Union Bank 79.6 80.4 -0.8 pose, which it expresses as “KeyBank helps clients and ones that are going to do better.” 12 FirstMerit Bank 79.5 78.1 1.4 communities thrive.” 13 Comerica 79.4 80.6 -1.2 Devine pointed out Key has eight consecutive out- standing ratings under the Community Reinvestment LARGE BANKS START TO WIN SOME LOVE 14 U.S. Bank 79.4 76.9 2.5 Act — which, he said, “is unequaled by almost every one Among the three categories of banks — large, regional 15 Bank of the West 79.0 81.6 -2.6 of our peers and is a function of our real genuine focus and nontraditional — the scores for large banks still put 16 Citizens Bank 78.5 79.7 -1.2 on communities.” them in third place. And in the overall rankings, the Key also recently made a splashy announcement to three banks with weak reputations are all large ones. 17 Huntington Bank 78.0 82.1 -4.1 commit $16.5 billion in lending to low- and moderate- But Hahn-Griffiths said it is the large banks that are 18 Wells Fargo 77.7 71.2 6.5 income communities in several states, as part of its ac- the bigger story this year, thanks to an improvement 19 Citibank 77.1 73.9 3.2 quisition of First Niagara. with their customers. The agreement Key signed with the National Com- Their customer score is at 75.8, up five points. And 20 First Niagara 77.1 81.3 -4.2 munity Reinvestment Coalition essentially doubles Hahn-Griffiths said the changes they’ve made to rack up 21 Associated Bank 76.8 79.3 -2.5 its lending to low- and middle-income borrowers that increase are notable. 22 BOK Financial 76.4 78.6 -2.2 and expands its community development lending by “All the action is around the bounce-back of large $4.5 billion, among other benefits. banks. In the court of public opinion, I think the larger 23 BBVA 76.3 77.1 -0.8 The Reputation Institute also credits Key’s corporate banks have done a better job of engendering themselves 24 BMO Harris Bank 76.0 78.6 -2.6 social responsibility initiatives with helping drive its im- to their customer base, meaning within the footprints of 25 Zions Bank 76.0 78.5 -2.5 provement in the rankings, along with its strong com- where they operate and where they have core custom- munity presence and exceptional customer service. ers,” Hahn-Griffiths said. 26 Northern Trust 75.7 79.0 -3.3 As a group, regional banks’ reputation score with “They’ve just done a better job of romancing those 27 Bank of America 75.0 66.2 8.8 customers is strong at 78.5, roughly the same as last customers, taking better care of them, whereas you 28 BNY Mellon 74.8 80.4 -5.6 year. don’t see that continuing momentum at the regional 29 M&T Bank 74.7 76.6 -1.9 The stalled momentum for the regionals makes Key banks.” stand out all the more. JPMorgan Chase’s bank unit is a case in point. 30 BB&T 73.7 77.3 -3.6 Hahn-Griffiths said the best way for banks to pull Chase posted a customer score of 80.2, the highest of 31 HSBC 73.2 81.2 -8.0 ahead of their peers is to put effort into the reputation any large bank, and its improvement of 8.1 points is one 32 Banco Santander 72.2 72.8 -0.6 drivers that matter most. of the biggest increases with customers among the 33 This year the three factors most heavily influencing banks in the survey. It vaulted to No. 10 on the customer 33 Fifth Third Bank 71.8 73.0 -1.2 how people perceive banks are products and services, ranking this year, up from No. 30 last year. Excellent/Top Tier Above 80 governance, and leadership, according to the Reputa- It is also the only large bank that enjoys an excellent Strong/Robust 70-79 Average/Moderate 60-69 tion Institute’s calculations. reputation with customers. Weak/Vulnerable 40-59 “If you succeed on those fundamentals, the chances Barry Sommers, the chief executive of consumer Poor/Bottom Tier Below 40 are you’ll probably outperform” on reputation com- banking at Chase, credits the improvement to efforts Source: American Banker/Reputation Institute Survey of Bank Reputations, 2016 pared with the rest of the industry, Hahn-Griffiths said. that have been underway for years.

20 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 21

020_ABM_0716 20 6/8/16 11:52 AM RANKINGS BASED ON NONCUSTOMER SCORES

2016 2015 Change

1 Synovus Financial 67.1 62.1 5.0 REGIONALS AT THE TOP “Why? Because you’re focusing on the stuff that’s most 2 Regions 65.3 62.3 3.0 All five of the institutions with strong overall reputations important.” 3 Ally Bank 64.9 63.3 1.6 are regional banks — Regions Financial, Synovus Finan- Leadership has replaced performance as one of the 4 First Niagara 64.7 59.4 5.3 cial, Cullen/Frost Bankers, KeyBank and FirstMerit Bank top three reputation drivers since last year. — and nearly all of them posted meaningful gains from So Hahn-Griffiths recommends banks make their top 5 FirstMerit Bank 64.5 60.1 4.4 last year. executives more visible in the community and demon- 6 Zions Bank 64.4 62.3 2.1 KeyBank, which is fourth in the overall rankings, had strate thought leadership on social issues. 7 BB&T 63.7 65.0 -1.3 a whopping nine-point increase, the largest improve- “Presenting a more human face for your banking ment of any bank. organization and what it stands for has become more 8 Northern Trust 63.3 63.9 -0.6 Dennis Devine, co-president of Key Community important,” he said. “We’ll see banks that do a better 9 M&T Bank 63.1 60.5 2.6 Bank and head of Key Consumer and Small Business, job of elevating their leadership and making them more 10 Cullen/Frost Bankers 62.7 66.4 -3.7 attributes this to a focus on living out its corporate pur- front and center as part of the rhetoric are probably the pose, which it expresses as “KeyBank helps clients and ones that are going to do better.” 11 Comerica 62.7 58.3 4.4 communities thrive.” 12 BOK Financial 62.4 63.9 -1.5 Devine pointed out Key has eight consecutive out- 13 TD Bank 62.4 61.8 0.6 standing ratings under the Community Reinvestment LARGE BANKS START TO WIN SOME LOVE 14 Union Bank 61.5 59.2 2.3 Act — which, he said, “is unequaled by almost every one Among the three categories of banks — large, regional of our peers and is a function of our real genuine focus and nontraditional — the scores for large banks still put 15 BNY Mellon 61.4 58.1 3.3 on communities.” them in third place. And in the overall rankings, the 16 Bank of the West 61.3 60.5 0.8 Key also recently made a splashy announcement to three banks with weak reputations are all large ones. 17 Associated Bank 61.3 61.9 -0.6 commit $16.5 billion in lending to low- and moderate- But Hahn-Griffiths said it is the large banks that are income communities in several states, as part of its ac- the bigger story this year, thanks to an improvement 18 U.S. Bank 61.2 56.5 4.7 quisition of First Niagara. with their customers. 19 BMO Harris Bank 61.1 61.7 -0.6 The agreement Key signed with the National Com- Their customer score is at 75.8, up five points. And 20 Citizens Bank 60.9 60.9 0 munity Reinvestment Coalition essentially doubles Hahn-Griffiths said the changes they’ve made to rack up its lending to low- and middle-income borrowers that increase are notable. 21 KeyBank 60.9 57.9 -3.0 and expands its community development lending by “All the action is around the bounce-back of large 22 SunTrust Banks 60.7 61.9 -1.2 $4.5 billion, among other benefits. banks. In the court of public opinion, I think the larger 23 Chase 60.5 57.8 2.7 The Reputation Institute also credits Key’s corporate banks have done a better job of engendering themselves social responsibility initiatives with helping drive its im- to their customer base, meaning within the footprints of 24 Huntington Bank 60.0 63.1 -3.1 provement in the rankings, along with its strong com- where they operate and where they have core custom- 25 Wells Fargo 59.9 56.0 3.9 munity presence and exceptional customer service. ers,” Hahn-Griffiths said. 26 PNC 59.4 61.1 -1.7 As a group, regional banks’ reputation score with “They’ve just done a better job of romancing those customers is strong at 78.5, roughly the same as last customers, taking better care of them, whereas you 27 Fifth Third Bank 58.9 60.1 -1.2 year. don’t see that continuing momentum at the regional 28 BBVA 58.8 62.7 -3.9 The stalled momentum for the regionals makes Key banks.” 29 Capital One 58.0 53.9 4.1 stand out all the more. JPMorgan Chase’s bank unit is a case in point. 30 Citibank 57.8 54.2 3.6 Hahn-Griffiths said the best way for banks to pull Chase posted a customer score of 80.2, the highest of ahead of their peers is to put effort into the reputation any large bank, and its improvement of 8.1 points is one 31 HSBC 51.8 56.5 -4.7 drivers that matter most. of the biggest increases with customers among the 33 32 Banco Santander 49.9 54.6 -4.7 This year the three factors most heavily influencing banks in the survey. It vaulted to No. 10 on the customer 33 Bank of America 44.9 48.1 -3.2 how people perceive banks are products and services, ranking this year, up from No. 30 last year. - Excellent/Top Tier Above 80 governance, and leadership, according to the Reputa It is also the only large bank that enjoys an excellent Strong/Robust 70-79 tion Institute’s calculations. reputation with customers. Average/Moderate 60-69 Weak/Vulnerable 40-59 “If you succeed on those fundamentals, the chances Barry Sommers, the chief executive of consumer Poor/Bottom Tier Below 40 are you’ll probably outperform” on reputation com- banking at Chase, credits the improvement to efforts Source: American Banker/Reputation Institute Survey of Bank Reputations, 2016 pared with the rest of the industry, Hahn-Griffiths said. that have been underway for years.

20 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 21

021_ABM_0716 21 6/8/16 11:52 AM 2016 SURVEY OF BANK REPUTATIONS

Regionals Lack Momentum Both the large and nontraditional banks improved their reputations this year, at least among their customers. But the regional banks stalled. “We’re spending massive time with our customers, All of the feedback is reviewed and acted on. “We get thou- getting feedback, taking bus trips, listening to employ- sands of comments, and they all go to a central group that LARGE BANKS ees,” Sommers said. “Those conversations have led to makes sure they get to the right areas and literally, without hundreds of changes to the way we do business.” exception, we respond to every single one of those emails,” The bus trips started six years ago, with Jamie Sommers said. “And it’s not always a ‘yes.’ Sometimes we Dimon, the company’s chairman and CEO, spending actually find that it’s a great opportunity for us to commu- 75.8 54.5 about a week on the road visiting branches, talking to nicate why we can’t do certain things. One of the things we employees in local markets and hosting town halls. learned from this whole process is, sometimes the second +5.0 +1.0 “We pull branch employees on to the bus — we take best answer is to give a quick ‘no’ and to really explain to our hostages, as a fun thing, and we say, ‘Tell us every- customers and our employees why.” thing,’ ” Sommers said. One example of a change Chase has made because of Last year the bus went to three states — Wyoming, customer feedback is its decision to increase the limits for its REGIONAL BANKS Utah and Colorado. This summer it will travel through Quick Deposit and Quick Pay products, Sommers said. “Cus- California. tomers loved our new technology, but one of the frustrations “The feedback we’ve gotten from the trips really they had was with the limits, so we addressed that and raised changed this place,” Sommers said. the limit,” he said. 78.5 62.2 Now the listening has expanded to a constant thing, Though he appreciates the validation provided by the with an “ear” icon on the bank’s employee website Survey of Bank Reputations, Sommers said it is actual busi- -0.3 +1.7 that they can click on to offer feedback and suggest ness results that really underscore how well Chase is doing in improvements. polishing its reputation. In the first quarter of the year, its consumer banking business achieved record deposit growth of $41 billion, a 10% NONTRADITIONAL BANKS Industry Comparison increase from a year earlier. Attrition also is at an historic Though still below other industries, banking has seen low of 8.6%. a consistent improvement in its reputation since 2011. “We haven’t see attrition this low ever,” Sommers said. He thinks it is likely not a coincidence that the reputation 82.3 61.7 CONSUMER 74.5 and business results coincide for Chase. “The best way to gauge how you’re doing with customers INFORMATION & MEDIA 72.5 +5.3 +1.4 is by customers making you their primary bank, giving you more money and staying around longer,” he said. RETAIL 72.3

ALL BANKS - INDUSTRY AVERAGE HEALTH CARE 71.0

INDUSTRIAL 70.4 SURVEY METHODOLOGY

TECHNOLOGY 70.2 COMPANY SELECTION: 78.4 60.5 Companies drawn from the Federal Reserve’s list of large commercial banks, with final selections by American Banker HOSPITALITY 69.4 based on size of assets and deposits +0.5 2016 Gap = 18 pts +0.6 Only those with significant etailr brands were considered FINANCIAL 67.5 RATINGS: ENERGY 67.4 Ratings were collected via online questionnaire Scores from customers Excellent/Top Tier Above 80 in the first quarter of 2016 Scores from noncustomers Strong/Robust 70-79 All companies were rated by at least 100 Average/Moderate 60-69 BANKING 67.1 Increase from 2015 customers and 100 noncustomers Weak/Vulnerable 40-59 Each respondent was very or somewhat familiar Not a meaningful change Source: Reputation Institute Strong/Robust 70-79 with the companies they rated Average/Moderate 60-69 Source: American Banker/Reputation Institute Survey of Bank Reputations, 2016

22 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 23

022_ABM_0716 22 6/8/16 11:52 AM What matters most when forming perceptions about a brand? P ance roduc ce Prod rm ts/ an ucts rfo S orm /S e er rf er P vi e v c P ic 1 e e % 6 s s .2 .6 % 14 4 % .0 .9 p p 4 % i 1 i h h 1

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ees,” Sommers said. “Those conversations have led to makes sure they get to the right areas and literally, without

1 C 3 4 i . C t 5 i . hundreds of changes to the way we do business.” exception, we respond to every single one of those emails,” z % % it 2 e 6 iz % % n . e 8 s 1 4 e n . e The bus trips started six years ago, with Jamie Sommers said. “And it’s not always a ‘yes.’ Sometimes we h 4.4 1 c s 1 4 c ip % la h 5. 1 la p ip 4 % p rk rk Dimon, the company’s chairman and CEO, spending actually find that it’s a great opportunity for us to commu- o o Go W W vern Go about a week on the road visiting branches, talking to nicate why we can’t do certain things. One of the things we ance vernance employees in local markets and hosting town halls. learned from this whole process is, sometimes the second The top 5 scorers for each of the reputation drivers “We pull branch employees on to the bus — we take best answer is to give a quick ‘no’ and to really explain to our Customer Noncustomer hostages, as a fun thing, and we say, ‘Tell us every- customers and our employees why.” thing,’ ” Sommers said. One example of a change Chase has made because of Products Products Last year the bus went to three states — Wyoming, customer feedback is its decision to increase the limits for its 1. Regions 1. Regions Utah and Colorado. This summer it will travel through Quick Deposit and Quick Pay products, Sommers said. “Cus- 2. KeyBank 2. Synovus 3. Ally 3. Chase California. tomers loved our new technology, but one of the frustrations 4. Synovus 4. U.S. Bank “The feedback we’ve gotten from the trips really they had was with the limits, so we addressed that and raised 5. Comerica 5. Ally changed this place,” Sommers said. the limit,” he said. Leadership Leadership Now the listening has expanded to a constant thing, Though he appreciates the validation provided by the 1. Regions 1. Synovus with an “ear” icon on the bank’s employee website Survey of Bank Reputations, Sommers said it is actual busi- 2. KeyBank 2. First Niagara that they can click on to offer feedback and suggest ness results that really underscore how well Chase is doing in 3. Chase 3. Regions 4. Cullen/Frost Bankers 4. BOK Financial improvements. polishing its reputation. 5. FirstMerit Bank 5. BB&T In the first quarter of the year, its consumer banking Workplace Workplace business achieved record deposit growth of $41 billion, a 10% 1. KeyBank 1. Synovus Industry Comparison increase from a year earlier. Attrition also is at an historic 2. PNC 2. Regions low of 8.6%. 3. Regions 3. First Niagara Though still below other industries, banking has seen 4. SunTrust 4. Cullen/Frost Bankers a consistent improvement in its reputation since 2011. “We haven’t see attrition this low ever,” Sommers said. 5. FirstMerit Bank 5. Zions Bank He thinks it is likely not a coincidence that the reputation Governance Governance CONSUMER 74.5 and business results coincide for Chase. 1. Regions 1. Synovus “The best way to gauge how you’re doing with customers 2. KeyBank 2. Regions INFORMATION & MEDIA 72.5 is by customers making you their primary bank, giving you 3. FirstMerit Bank 3. First Niagara 4. Ally 4. FirstMerit Bank more money and staying around longer,” he said. 5. Cullen/Frost Bankers 5. Cullen/Frost Bankers RETAIL 72.3 Citizenship Citizenship HEALTH CARE 71.0 1. KeyBank 1. Regions 2. Regions 2. Synovus 3. FirstMerit Bank 3. First Niagara INDUSTRIAL 70.4 SURVEY METHODOLOGY 4. SunTrust 4. FirstMerit Bank 5. PNC 5. Cullen/Frost Bankers TECHNOLOGY 70.2 COMPANY SELECTION: Companies drawn from the Federal Reserve’s list of large Innovation Innovation commercial banks, with final selections by American Banker 1. Regions 1. Regions HOSPITALITY 69.4 based on size of assets and deposits 2. KeyBank 2. Ally Only those with significant etailr brands were considered 3. Ally 3. FirstMerit Bank FINANCIAL 67.5 4. Cullen/Frost Bankers 4. Capital One 5. FirstMerit Bank 5. First Niagara RATINGS: ENERGY 67.4 Ratings were collected via online questionnaire Performance Performance in the first quarter of 2016 1. Regions 1. Regions 2. Capital One BANKING 67.1 All companies were rated by at least 100 2. KeyBank customers and 100 noncustomers 3. Ally 3. Chase Each respondent was very or somewhat familiar 4. PNC 4. KeyBank 5. U.S. Bank Source: Reputation Institute Strong/Robust 70-79 with the companies they rated 5. Cullen/Frost Bankers Average/Moderate 60-69 Source: American Banker/Reputation Institute Survey of Bank Reputations, 2016

22 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 23

023_ABM_0716 23 6/8/16 11:52 AM Synovus Financial struggled along with its customers during the financial crisis. Now that it’s healthy again, it credits the strong ties it built with those customers, and the involvement of its executives in the communities they serve, with helping restore its status as one of banking’s most reputable brands. REPUTATION REBOOT

By Alan Kline FOR MOST OF HIS BANKING CAREER, Synovus Financial Chairman and Chief Ex- Photography by ecutive Kessel Stelling believed that borrow- Ryan Gibson ers who failed to pay their debts were “bad people” who should be written off by banks. “It’s kind of how you were raised in this business,” Stelling said. “If you lost money on someone, you never did business with them again, period.” Then the financial crisis struck and Stel- ling’s views began to change. While he still had little sympathy for borrowers who had the means to repay and chose not to, he wanted to help those who fell behind on payments because they had lost their jobs or their businesses went bust. Even with investors and regulators pres- suring the Columbus, Ga.-based company to quickly dispose of problem loans, Synovus chose to be patient with delinquent borrowers who were making an effort to pay their debts. Stelling also vowed then that when the crisis was over and the economy — and Synovus — returned to health, the company would be there for down-and-out customers. “I saw people lose their life savings, their businesses, their homes,” Stelling said.

24 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 25

024_ABM0716 24 6/7/2016 2:58:14 PM REPUTATION REBOOT

FOR MOST OF HIS BANKING CAREER, Synovus Financial Chairman and Chief Ex- ecutive Kessel Stelling believed that borrowers who failed to pay their debts were “bad people” who should be written off by banks. “It’s kind of how you were raised in this business,” Stelling said. “If you lost money on someone, you never did business with them again, period.” Then the financial crisis struck and Stel- ling’s views began to change. While he still had little sympathy for borrowers who had the means to repay and chose not to, he wanted to help those who fell behind on payments because they had lost their jobs or their businesses went bust. Even with investors and regulators pres- suring the Columbus, Ga.-based company to From left, Gloria Banks, chief quickly dispose of problem loans, Synovus compliance officer; Kessel chose to be patient with delinquent borrow- Stelling, chairman and chief ers who were making an effort to pay their executive officer; and Liz Dukes debts. Stelling also vowed then that when Wolverton, chief strategy officer the crisis was over and the economy — and Synovus — returned to health, the company would be there for down-and-out customers. “I saw people lose their life savings, their businesses, their homes,” Stelling said.

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025_ABM_0716 25 6/7/16 4:28 PM “I saw good people get hurt and still try sary round of layoffs all helped Synovus ment organizations — not merely serve licly traded, top-50 bank holding com- as hard as they could to honor their ob- get through the crisis and emerge a stron- on their boards — and Stelling said that pany that happened to be dealing with ligations. We want to lend to people with ger, more diverse company. type of leadership resonates with cus- unprecedented losses on soured real good credit, but we have to look at the But the bonds it maintained with its tomers and noncustomers alike. estate loans in an area hit especially hard circumstances and be willing to give peo- customers and communities played no It resonates in Statesboro, Ga., by the financial crisis. ple a second chance.” small part in the recovery, said Liz Dukes for example, where one of Synovus’ At times he felt overwhelmed, and There were sound business reasons Wolverton, Synovus’ chief strategy officer. market CEOs, Darron Burnette, co-chairs the investment community noticed; af- for trying to work through problem loans Many of its bankers have been with a downtown revitalization effort that ter one earnings call early in his tenure rather than unloading them for pennies the company or predecessor banks has put Statesboro in the running for a as CEO, one analyst wrote in a research on the dollar. for two or three decades and, during national award that comes with a $3 mil- note that Stelling seemed “like a deer in Chris Marinac, a managing principal the dark days, they worked overtime lion cash prize. the headlights.” and head of research at FIG Partners strengthening relationships, resolving It resonates in Cobb County, Ga., “I read that and said, ‘Wow, I can in Atlanta, said that many banks “gave problem credits and assuring longtime where another market CEO, Rob Gar- never let that happen again,’ ” Stelling away value” when they quickly sold off customers that Synovus was a bank they cia, chairs an economic development recalled in a recent interview. troubled loans following the 2008 real could trust, she said. agency that was the driving force behind With Synovus losing more than $200 estate crash. The decision to be more “There was a lot written, pretty luring Major League Baseball’s Braves million a quarter and its stock price trad- patient with borrowers may have hurt accurately, about our financial condi- from downtown Atlanta to the northern ing at under $3, Stelling’s primary job at Synovus in the short term — the company tion,” Wolverton said. “If we didn’t have suburbs. (The Braves will begin playing the time was reassuring investors, cus- lost roughly $3 billion over a three-year that local connectivity and presence in in the new Cobb County stadium next tomers and employees that the company stretch and was one of the last region- the community, it would have been very year.) would survive — and engaging in what he als to repay the Troubled Asset Relief easy for a lot of people to walk away from And it resonates in tiny Tallapaloo- calls “guerilla warfare” to make sure that Program — but looked smart years later Synovus.” sa, Ga., where a local branch manager it actually did. when real estate values rebounded and Those outreach efforts during the cri- helped raise $20,000 to feed the hungry. Key to that effort was the June 2010 Synovus was able to move assets off its sis — and since — have gone a long way “People who don’t bank with us, they merging of Synovus’ roughly 30 banks in books at higher prices, Marinac said. toward helping Synovus regain its status see what we are doing, they read the five states into a single charter under the Mostly, though, Synovus’ decision to as one of the banking industry’s most articles, they hear the messaging at the legal name of Synovus Bank. The com- wait was about doing right by custom- reputable brands. local church about what we’re doing to pany retained many of its local brand ers. “We had a fiduciary responsibility In the annual American Banker/Repu- address hunger,” Garcia said. “All that names, but for regulatory purposes its to look out for our shareholders, but we tation Institute Survey of Bank Reputa- translates into goodwill.” bank was a single entity overseen by two were also trying to treat borrowers with tions, Synovus came in at No. 2 on the regulators — one each at the federal and dignity and respect,” Stelling said. “We overall ranking this year, based on how CRISIS CLEANUP state levels. Prior to the collapsing of the weren’t trying to get the last nickel out of well it rates with both customers and Stelling has been the public face of Syno- charters, Synovus reported to three fed- every deal.” noncustomers. vus since mid-2010, when he replaced eral regulators and five state regulators. For decades, Synovus had prided itself Among existing customers, it was Richard Anthony as CEO just three “Because the charters were separate, any on its culture of service to its customers part of a select group of banks to receive months after being tapped to become regulator on any given day could ask for and communities, and Stelling’s view was an “excellent” score — above 80 on a Anthony’s top deputy. It was supposed more capital,” Stelling said. that the company would ultimately “be 100-point scale — for two years running. to be an interim gig, but when Anthony, Synovus had just raised close to $1 bil- judged by how it treated people during Perhaps even more tellingly, Synovus who was suffering from a rare blood dis- lion in fresh capital through a stock sale the crisis.” vaulted to the No. 1 position among non- order, was unable to return, the board re- and collapsing the charters “was critical customers, up from No. 10 last year. moved the “interim” tag and named Stel- to us managing through in a way that was THE IMPORTANCE OF Stelling suspects that the improved ling full-time CEO in late 2010. (He added fair to our shareholders,” he added. “It GENERATING GOODWILL standing with noncustomers is a result the chairman title soon after.) certainly allowed us to manage capital It would be a stretch to suggest that of its bankers’ high visibility in the com- It was a rapid ascent for Stelling, who more efficiently.” the $29 billion-asset Synovus is healthy munities they serve throughout Georgia, less than a year earlier was responsible Far more painful for Stelling was the again because of its compassion. Two Florida, Alabama, Tennessee and South for running just one of Synovus’ subsid- decision in early 2011 to shutter roughly capital raises, the consolidation of its 30 Carolina. Synovus makes it part of the job iary banks, the $4.7 billion-asset Bank 30 branches and eliminate close to 1,000 separate charters, a de-emphasis on real description for local market executives to of North Georgia. With his promotion, jobs. The cuts were viewed by local me- estate lending and a painful but neces- chair nonprofits and economic develop- he was suddenly in charge of a pub- dia outlets as being inconsistent with the

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026_ABM0716 26 6/7/2016 2:58:23 PM ment organizations — not merely serve licly traded, top-50 bank holding com- culture of the company — Synovus’ one- Synovus also has made significant on their boards — and Stelling said that pany that happened to be dealing with time tag line “culture of the heart” was all strides in boosting fee income, largely by type of leadership resonates with cus- unprecedented losses on soured real about putting employees first. recruiting teams of investment advisers tomers and noncustomers alike. estate loans in an area hit especially hard “That was a very difficult time, but the and wealth managers from rival firms. It resonates in Statesboro, Ga., by the financial crisis. way we had to look at it was that by cut- FIG’s Marinac said that Stelling for example, where one of Synovus’ At times he felt overwhelmed, and ting 1,000 jobs we were saving 5,000,” deserves much of the credit for Synovus’ market CEOs, Darron Burnette, co-chairs the investment community noticed; af- Stelling said. turnaround. While it’s true that Stell- a downtown revitalization effort that ter one earnings call early in his tenure The outlook for Synovus started ing bore some blame for the company’s has put Statesboro in the running for a as CEO, one analyst wrote in a research brightening after that. With asset quality problems in the first place — the subsid- national award that comes with a $3 mil- note that Stelling seemed “like a deer in slowly improving, the company returned iary he previously ran had some of the lion cash prize. the headlights.” to profitability in mid-2011 and a year worst loan troubles among all of Syno- It resonates in Cobb County, Ga., “I read that and said, ‘Wow, I can later it was able to recapture its deferred- vus’ bank units — Marinac said he proved where another market CEO, Rob Gar- never let that happen again,’ ” Stelling tax asset. By July 2013, it was healthy to be the perfect leader during the crisis. cia, chairs an economic development recalled in a recent interview. enough to redeem the nearly $1 billion “Kessel came in at a time when they agency that was the driving force behind With Synovus losing more than $200 needed someone to rally them and that’s luring Major League Baseball’s Braves million a quarter and its stock price trad- the role he played,” Marinac said. “He from downtown Atlanta to the northern ing at under $3, Stelling’s primary job at “Kessel came in at a time had a game plan and grabbed his team by suburbs. (The Braves will begin playing the time was reassuring investors, cus- when they needed some- the shirt collar and said ‘We can do this,’ in the new Cobb County stadium next tomers and employees that the company one to rally them and and they did.” year.) would survive — and engaging in what he Stelling, for his part, said he probably And it resonates in tiny Tallapaloo- calls “guerilla warfare” to make sure that that’s the role he played. gets more credit than he deserves for sa, Ga., where a local branch manager it actually did. He had a game plan and guiding the company through the crisis helped raise $20,000 to feed the hungry. Key to that effort was the June 2010 and not enough blame for his role in the “People who don’t bank with us, they merging of Synovus’ roughly 30 banks in grabbed his team by the events that got it into trouble. Nonethe- see what we are doing, they read the five states into a single charter under the shirt colar and said ‘We less, he is grateful that the board put its articles, they hear the messaging at the legal name of Synovus Bank. The com- can do this,’ and they trust in insiders like him to fix the prob- local church about what we’re doing to pany retained many of its local brand lems rather than bring in people from address hunger,” Garcia said. “All that names, but for regulatory purposes its did,” Marinac says. outside who were unfamiliar with the translates into goodwill.” bank was a single entity overseen by two culture. regulators — one each at the federal and it had received from Tarp, and to the de- He’s grateful, too, that he’s no longer CRISIS CLEANUP state levels. Prior to the collapsing of the light of investors, it announced a $250 spending the bulk of his time with regu- Stelling has been the public face of Syno- charters, Synovus reported to three fed- million stock repurchase in fall 2014, lators. “They were just doing their jobs, vus since mid-2010, when he replaced eral regulators and five state regulators. followed by another $300 million repur- but talking to them all the time wasn’t Richard Anthony as CEO just three “Because the charters were separate, any chase announcement in late 2015. fun,” he said. “Now I’m out telling our months after being tapped to become regulator on any given day could ask for All the while, Synovus was becom- story to investors. That’s fun. And I’m Anthony’s top deputy. It was supposed more capital,” Stelling said. ing a more diverse company, reducing telling the story to people I’m recruiting. to be an interim gig, but when Anthony, Synovus had just raised close to $1 bil- its reliance on real estate and construc- That’s a lot of fun, too.” who was suffering from a rare blood dis- lion in fresh capital through a stock sale tion lending and moving into new areas order, was unable to return, the board re- and collapsing the charters “was critical of commercial lending, including health SWEATING THE DETAILS moved the “interim” tag and named Stel- to us managing through in a way that was care, equipment financing and Small There’s no question, though, that the ling full-time CEO in late 2010. (He added fair to our shareholders,” he added. “It Business Administration loans. Today, experience of the crisis changed Stelling the chairman title soon after.) certainly allowed us to manage capital only about 7.2% of its loans are in con- and his view of what a bank should be. It was a rapid ascent for Stelling, who more efficiently.” struction and land development, down He has become a bigger believer in less than a year earlier was responsible Far more painful for Stelling was the from almost 17% six years ago, and its financial education and, to that end, for running just one of Synovus’ subsid- decision in early 2011 to shutter roughly ratio of commercial and industrial loans Synovus has teamed up with Operation iary banks, the $4.7 billion-asset Bank 30 branches and eliminate close to 1,000 to total loans has increased to 16.6% from Hope to offer financial literacy training of North Georgia. With his promotion, jobs. The cuts were viewed by local me- 11.5% in that same period, according to for adults in Atlanta and Columbus, Ga., he was suddenly in charge of a pub- dia outlets as being inconsistent with the Federal Deposit Insurance Corp. data. and financial education for students in

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027_ABM_0716 27 6/7/16 3:05 PM Birmingham, Ala. The company also is his marketing team by tweaking scripts next spring, will receive $3 million to put partnering with Operation Hope on an and rejecting certain actors. His com- toward its revitalization. affordable-lending program under which munications team said Stelling is also Burnette said the America’s Best Com- it is offering low- or no-down-payment expert at catching typos in news releases munities initiative is a huge source of loans to qualified homebuyers in and that have already gone through several pride in Statesboro. Though the bank’s around Atlanta. proofs. “To me every word is important involvement has helped it attract new John Bryant, Operation Hope’s CEO, because it’s an extension of the compa- customers, what’s more important to said that he used to view Synovus as ny,” Stelling said. “I feel that way about him is the help the bank is giving to its being “provincial,” but found in working everything Synovus does.” hometown. “We are making a difference with its leaders — particularly Stelling — not by going into our bank every day, but that they are very progressive. A CULTURE OF INVOLVEMENT by being engaged in activities that are “As soon as the bank got out of its fi- As with many banks, high-ranking ex- vital to keeping an area thriving,” he said. nancial difficulties, I got a call immediate- ecutives are expected to be very active The connection Synovus has with ly, saying, ‘We’re through the darkness in their communities. At Synovus, it’s an its communities is a big reason why so and we want to work with you,’ ” Bryant expectation that predates Stelling, who many small banks have opted to sell to said. “It wasn’t tokenism; it was a serious joined the company in 2006 when it the company over the last two or three commitment [involving] serious dollars.” bought a bank he ran and merged it into decades, said Stelling, who once made Bryant noted that he deals mostly the Bank of North Georgia. that very decision himself. He had many with top-level executives, including “We don’t dictate to our people which suitors when he was shopping Riverside Stelling and General Counsel Allan organizations they support, but we do Bank more than a decade ago, but opted Kamensky, rather than community re- expect them to be leaders in their com- to team with Synovus because it was the investment people in the lower ranks. munity,” Stelling said. most community-oriented. “I’ve met with most of the people in the Darron Burnette, the CEO of Synovus’ “I almost sold Riverside to a compa- C-suite more than once,” he said. Sea Island Bank in Statesboro, is doing his ny I wouldn’t have worked for, but I got That type of engagement at the top is part by serving as co-chair of community cold feet,” Stelling said. “How do you sell unique for a company of its size, accord- revitalization effort that involves spruc- your company and your employees to a ing to Gloria Banks, who is Synovus’ chief ing up a tired, one-mile stretch between company you wouldn’t work for?” compliance officer and oversees its com- the bank’s downtown headquarters and Now that Synovus is healthy again, munity reinvestment initiatives. Shortly the campus of Georgia Southern Univer- Stelling said he has fielded numerous after joining Synovus in 2012, Banks cre- sity. His bank also is heavily involved in calls over the last two years from small ated a Community Reinvestment Act and the effort, offering low-interest loans to banks gauging his interest in buying Fair-Lending Council to make sure the business owners or developers looking to them. Synovus has plenty of capital for company “was doing all the things we set up shop on the strip. acquisitions, but Stelling said he won’t needed to be doing” for its communities. Things are going so well — several re- strike a deal “just to get our name in the “And on that council,” she said, “there tail businesses and roughly 80 new resi- headlines.” are at least five executive vice presidents dential units have moved into the neigh- “I’ve had enough headlines over the or higher, right off of Kessel’s manage- borhood in the last 18 months — that last five years and most of them weren’t ment team, as well as market CEOs. It’s Statesboro has entered a first-of-its-kind good,” he said. “If we do a deal, it has to very rare to see people at that level ac- contest called “America’s Best Commu- make good financial sense for Synovus. tively engaged in CRA and fair lending.” nities.” More than 300 communities en- We’re going to be very disciplined.” Stelling himself seems to sweat the tered the contest, sponsored by Frontier Marinac, the bank analyst, said there’s details. He personally reads every cus- Communications, the Dish Network, the no need to rush. “Synovus has a nice foot- tomer complaint that comes through the Weather Channel and CoBank, when it print, a good healthy balance sheet, a lot company database, and as Synovus got kicked off last year, and after the most of capital to buy back stock, and strong ready to launch a major advertising cam- recent round of judging in April, there market share in a lot of different areas of paign two years ago (with its “Bank of are eight left, including Statesboro. The the Southeast,” he said. “This is a compa- Here” tag line), he would sometimes irk winner, to be announced in New York ny that doesn’t have to do anything.” □

28 AMERICAN BANKER JULY 2016

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051_ABM0716 51 6/8/2016 12:31:34 PM d31451_calendar events.indd 1 6/8/16 11:18 AM WANTED: MARY WISNIEWSKI

t’s hard finding a good hacker skilled candidates. By 2020, Symantec in this market. So banks are getting more these days — a hacker to work for expects that number to increase to 1.5 creative with their efforts to lure cyber banks, that is. million. talent. Even though cybersecurity Gary Warzala, chief information secu- “You really have to get in front of the jobs can offer six-figure salaries, rity officer at PNC Bank, describes the cy- people doing security,” said Jeff Combs, generous signing bonuses and ber workforce as experiencing negative founder of J. Combs Search Advisors, other perks, banks are struggling to find unemployment. “Clearly, the demand for which specializes in information security peopleI to hire. talented people has never been greater,” recruitment. Part of it is perception — banks don’t he said. That’s what PNC’s Warzala has been seem nearly as cool as all of the other The stakes could not be higher for doing. He serves as a board member of industries that are just as aggressively banks, which are expected to have for- the Economic Crime & Cybersecurity In- targeting the same talent pool. tresslike protection. Indeed, 77% of the stitute of Utica College. He also speaks at But another — and more serious — fac- 161 directors and senior executives who security events like the CISO Executive tor is that the demand for cybersecurity participated in Bank Director’s 2016 risk Summit and has participated in cyberse- experts is vastly outstripping supply. The practices survey ranked cybersecurity as curity contests. digital security firm Symantec estimates their top concern. Some banks are hosting coding events, there are 500,000 to 1 million open cy- Industry insiders and experts say the allowing college interns to work remotely bersecurity jobs across the nation that usual recruiting tactics — such as attend- during the school year, and demoing se- cannot be filled due to a shortage of ing college career fairs — aren’t enough curity hacks to teens. They also are send-

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030_ABM0716 30 6/7/2016 4:35:06 PM in this market. So banks are getting more creative with their efforts to lure cyber talent. “You really have to get in front of the people doing security,” said Jeff Combs, founder of J. Combs Search Advisors, which specializes in information security recruitment. That’s what PNC’s Warzala has been doing. He serves as a board member of the Economic Crime & Cybersecurity In- stitute of Utica College. He also speaks at security events like the CISO Executive Summit and has participated in cybersecurity contests. Some banks are hosting coding events, allowing college interns to work remotely during the school year, and demoing security hacks to teens. They also are send-

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031_ABM0716 31 6/7/2016 4:35:11 PM ing their senior executives to mingle at what they do.” ethical hacking competitions and global Even the government has run into information events like Black Hat. this challenge. FBI Director James Comey These bankers, so often decked out caused a media frenzy in 2014, when he in suits, are noticeably dressed down said the bureau couldn’t staff enough for such occasions, the better to connect hackers because too many failed its drug with the young people they are seek- test. ing to hire. Jamie Dimon, chairman and Additionally, recruiters say banks chief executive of JPMorgan Chase, wore should strengthen their pipeline of po- a tracksuit to one of these events a few tential candidates by backing initiatives years ago. that support women as well as veterans. Eastern Bank began working with Dakota State University runs cyber- Northeastern University of College of security camps — sponsored this year by Computer and Information Science Citibank and First Bank and Trust — for about a year and a half ago to help its re- female middle school and high school cruitment efforts, according to Ive Gon- students. zalez, the bank’s vice president of talent Companies such as Bank of New York acquisition and inclusion director. The Mellon and Capital One have partnered $9.9 billion-asset Eastern also has joined with Girls Who Code, a program designed security LinkedIn groups, among other to close the gender gap in technology. things, to find candidates. Citi also launched its own “Women in Later this year, Gonzalez plans to host IT” program a few years ago in Florida, a meetup in the bank’s innovation lab to where the company’s global consumer demo technology and to debunk the idea technology division is based. that banking is dull. During the program, Citi execs — in- “It’s about pipelining,” she said. cluding Khan — try to spark an interest While the youth focus is essential in in information security among teenage recruiting for these roles, those work- girls. But it’s not easy. ing in the field are more diverse than the Khan recalls an occasion when he cybersecurity stereotype of young men These are scenes from the “Women in IT” program Citi has in Florida. In the photo above, participants asked participants whether they found in hoodies. help design and program robots. At top, another group works to complete tech challenges assigned by cybersecurity interesting. Two hesitant Citi execs. “Don’t get me wrong, we have those hands went up in a group of 16 girls. people and we need them,” said Ash ting hung up on whether a candidate has Despite the lack of a degree, the com- Then, he talked up some of things Khan, head of information security for a college degree rather than focusing on pany offered around $150,000 a year that make the field jazzy, such as when Citi’s Global Consumer Banking division. whether they have the skills to excel in with a $40,000 signing bonus. “It’s a the security team helped Citi launch an But Khan also needs people who can the job. “To find the best people, you seller market, not a buyer’s market,” Ai- Apple Watch app. At the end of his talk, easily explain risks to senior executives, have to be willing to hire those without ello said. when he asked his original question among other competencies. “Cybersecu- degrees,” Combs said. Drug screens are another potential again, every hand went up. rity is a very broad discipline,” he said. When a software-as-a-service com- hiring limitation for what is known as Hiring those who worked for the Cyber want-ads reflect that. They pany sought to hire someone to uncover one of the most conservative industries. military is an increasingly common re- are seeking everyone from individuals its security weaknesses, it found a strong Aiello said that, in states where mari- cruiting tactic for banks. Warzala, for with process engineering skills to those candidate banks may have overlooked: a juana is legal, drug testing could cause example, happily hires those with mili- with an aptitude for teaching. One of the 21-year-old without a college degree. recruiting setbacks. “With pot becom- tary or law enforcement backgrounds. most-sought after traits is an analytical “They recognized his value,” said ing legal in some many states, it can get JPMorgan Chase, which has been aggres- mindset. Mark Aiello, president of Cyber 360, a in the way of hiring ethical hackers that sively courting military members, last At least some of the factors limiting cybersecurity staffing firm hired by the may enjoy recreational substance on year hired retired Army Gen. Raymond banks are of their own doing — like get- SaaS company. weekends but are still very talented at Odierno as a senior adviser on cyberse-

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032_ABM0716 32 6/7/2016 4:35:17 PM what they do.” curity and other issues. And Huntington Through his work at the university, Even the government has run into Bancshares recently added a cybersecu- Streff happens to knows a few potential this challenge. FBI Director James Comey rity expert who formerly worked for the up-and-coming cybersecurity experts. caused a media frenzy in 2014, when he National Security Agency to its board of But even Streff doesn’t have an end- said the bureau couldn’t staff enough directors. less pipeline of candidates for his other hackers because too many failed its drug “You get some wonderful training employer, Secure Banking Solutions. test. from the military,” said Doug Johnson, He said all of the 500 students cur- Additionally, recruiters say banks senior vice president for payments and rently studying cybersecurity at Dakota should strengthen their pipeline of po- cybersecurity policy at the American State will find jobs. “We have 100% place- tential candidates by backing initiatives Bankers Association. ment rates,” Streff said. “That will con- that support women as well as veterans. To help overcome the problem of too tinue.” Dakota State University runs cyber- few candidates for too many jobs, indus- And many of them will just be more security camps — sponsored this year by try insiders say banks must continue to excited by the prospect of working for Citibank and First Bank and Trust — for try to inspire people to work in this field. the FBI, Google or a hip startup, rather female middle school and high school “It will get worse every year, unless than a bank. students. we encourage the younger generations But for all their supposed dullness, Companies such as Bank of New York to get involved with cybersecurity,” said banks have at least one advantage in re- Mellon and Capital One have partnered Dr. Kevin Streff, the department chair at cruiting cybersecurity talent. with Girls Who Code, a program designed Dakota State University Center for Cyber The dangers banks continually face to close the gender gap in technology. Security and a managing partner for Se- work in their favor when it comes to hir- Citi also launched its own “Women in cure Banking Solutions, a consultancy ing: People in cyber prefer working for IT” program a few years ago in Florida, that helps community banks tackle cyber high-risk employers so they can actually

where the company’s global consumer threats. American Banker QTR Page.pdf 1 1/27/2016 2:55:32use PM their skills. □ technology division is based. During the program, Citi execs — including Khan — try to spark an interest in information security among teenage ready to send in your girls. But it’s not easy. Khan recalls an occasion when he These are scenes from the “Women in IT” program Citi has in Florida. In the photo above, participants asked participants whether they found When it comes to mortgages, does the help design and program robots. At top, another group works to complete tech challenges assigned by cybersecurity interesting. Two hesitant blocking and tackling for community banks. Citi execs. hands went up in a group of 16 girls. C IN-HOUSE SERVICING OF ALL Despite the lack of a degree, the com- Then, he talked up some of things M CONVENTIONAL AND GOVERNMENT LOANS pany offered around $150,000 a year that make the field jazzy, such as when Y with a $40,000 signing bonus. “It’s a the security team helped Citi launch an 3-DAY TURN TIME

CM seller market, not a buyer’s market,” Ai- Apple Watch app. At the end of his talk, MARKET COMPETITIVE ello said. when he asked his original questionMY PRICING AND PROGRAMS Drug screens are another potential again, every hand went up. CY TALK DIRECTLY WITH hiring limitation for what is known as Hiring those who worked for the CMY OUR UNDERWRITERS one of the most conservative industries. military is an increasingly common re- Aiello said that, in states where mari- cruiting tactic for banks. Warzala, forK (QUARTERBACK SNEAK!) juana is legal, drug testing could cause example, happily hires those with mili- NO CREDIT OVERLAYS recruiting setbacks. “With pot becom- tary or law enforcement backgrounds. ing legal in some many states, it can get JPMorgan Chase, which has been aggres- in the way of hiring ethical hackers that sively courting military members, last may enjoy recreational substance on year hired retired Army Gen. Raymond GET YOUR GAME PLAN AT YOURSPECIALTEAMS.COM weekends but are still very talented at Odierno as a senior adviser on cyberse-

32 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 33

033_ABM0716 33 6/7/2016 4:35:22 PM THE RISE AND FALL OF BANK COIN-COUNTING MACHINES Coin-counting machines came into vogue in the 1990s when soured on the machines in recent years as usage Commerce Bank started installing “Penny Arcades” in its declined and maintenance costs increased. branches throughout New Jersey. They were a huge hit for Capital One pulled the plug on its machines a while. in 2014 and two of its rivals, TD Bank and Vernon Hill, Commerce’s chief executive at the time, used PNC Bank, followed suit this year. to credit the presence of coin counters with helping drive Here are some milestone moments in deposit growth at his bank in the early 2000s. But banks have coin-counting history. –Alan Kline No Longer a Free-for-All Roughly two years after buying Commerce, TD dropped its free-for-all policy and started charging noncustomers a 6% fee for using its coin counters. The bank’s retail chief said at the time that it discontinued Competitive Pressure the free service because it Commerce’s rapid expansion up and down was distracting employees from the East Coast led some banks to take a more helping actual customers. The move Commerce-like approach to consumer banking. may have also been an attempt to re- In preparation for Commerce’s entry into the duce wear and tear on the machines, Washington, D.C., market in 2005, Chevy Chase which tended to malfunction when odd Bank stationed ATMs in most Metro stations and objects – such as paper clips or lint – would installed coin counters – also free for noncus- get mixed in with the coins. Around the same tomers – in many of its branches. It was around time, Capital One Bank – which inherited this time that PNC Bank, which competed with coin counters when it bought Chevy Chase in Commerce in New Jersey and Pennsylvania, 2009 – also started charging noncustomers. began rolling out coin counters in its branches. 1990s 2005 2008

TD Bank Ramps Up A Leap Across the Pond A Matter of Convenience When it bought Commerce in 2008, Vernon Hill replicated the Commerce Commerce Bank in Cherry Hill, N.J., TD Bank said it would not only keep model in Great Britain with the launch of started installing its Penny Arcade the Penny Arcade coin-counting Metro Bank in 2010. Like Commerce, coin-counting machines in all of its machines in the Commerce branches, London-based Metro offered extended branches in the late 1990s as part of but also install new machines in its hours, free pet treats and, you guessed its quest to become “America’s Most own branches as well. It eventually it, free-for-all coin counters. Convenient Bank.” Under founder had coin counters in more than 1,100 and CEO Vernon Hill, Commerce branches along the East Coast. became famous for staying open seven days a week and offering free dog treats. It even welcomed noncustomers to use the coin counters in Commerce branches free of charge. Hill credited that increased foot traffic with helping to drive deposit growth.

34 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 35

034_ABM0716 34 6/8/2016 2:27:30 PM THE RISE AND FALL OF BANK COIN-COUNTING MACHINES soured on the machines in recent years as usage declined and maintenance costs increased. Capital One pulled the plug on its machines Capital One in 2014 and two of its rivals, TD Bank and Pulls the Plug PNC Bank, followed suit this year. In 2014, Capital One Here are some milestone moments in started to remove the coin coin-counting history. –Alan Kline counters from the former No Longer a Free-for-All Chevy Chase branches in Roughly two years after buying Commerce, the Washington area, say- A Question of Accuracy ing they were unreliable. TD dropped its free-for-all policy and started TD said in April that it was TD, though, remained charging noncustomers a 6% fee for using its temporarily suspending its coin- steadfast in its support coin counters. The bank’s retail chief said at counting service after undercover of the machines. Though the time that it discontinued investigations by two news organi- overall usage had been the free service because it zations found the machines were declining as consumers was distracting employees from miscounting coins and shortchang- payments’ habits were helping actual customers. The move ing customers. Consumers reacted changing, customers may have also been an attempt to re- quickly, filing a federal class action in “find added value in the duce wear and tear on the machines, New Jersey claiming TD’s machines convenience” that the coin which tended to malfunction when odd undercounted coins for years and counters offer, a TD official objects – such as paper clips or lint – would gypped consumers of millions of said at the time. get mixed in with the coins. Around the same dollars. Meanwhile, PNC, which time, Capital One Bank – which inherited had already begun phasing out the coin counters when it bought Chevy Chase in machines due to waning demand, 2009 – also started charging noncustomers. responded to the reports by removing its remaining coin counters. 2008 2010 2014 PRESENT

TD Bank Ramps Up A Leap Across the Pond End of an Era When it bought Commerce in 2008, Vernon Hill replicated the Commerce TD announced in mid-May that it TD Bank said it would not only keep model in Great Britain with the launch of is discontinuing its coin-counting the Penny Arcade coin-counting Metro Bank in 2010. Like Commerce, service and will remove all machines in the Commerce branches, London-based Metro offered extended Penny Arcade machines from its but also install new machines in its hours, free pet treats and, you guessed branches. Citing reports that the own branches as well. It eventually it, free-for-all coin counters. machines shortchanged users, had coin counters in more than 1,100 Michael Rhodes, TD’s head of branches along the East Coast. consumer banking said, “We have determined that it is difficult to ensure a consistently great experience for our customers. In addition, the usage of our coin- counting machines has declined steadily over the past few years. For these reasons, we have decided to retire the fleet.”

34 AMERICAN BANKER JULY 2016 JULY 2016 AMERICAN BANKER 35

035_ABM_0716 35 6/6/16 6:52 PM Was Your Company Featured in ?

WEDNESDAY OCTOBER 1, 2014 VOL. 179 No. 152 AMERICANBANKER.COM dailybriefing TH ANNUAL MOST POWERFUL WOMEN IN BANKING Somali-Americans Catch a Break on Remittances 12 1 Somali-Americans who send cash home to their relatives can breathe a bit easier following the decision by Merchants Bank of magazine Follow us on Twitter @AmerBanker California. Page 1 Virginia National Pressured to Pursue Merger of Equals 2 A former employee wants the company to look at a merger SUBSCRIPTIONS: 800.221.1809 of equals or selling its wealth management operations to increase shareholder value. Management, meanwhile, wants to grow in a way that diversifies income and reduces risk. ‘New Era’ Citi’s Corbat: Shadow Market Must Fill Banking ‘Voids’ 3 Citigroup Chief Executive Michael Corbat reflectedPage 4 with Warburg Pincus CEO Joseph Landy and Paulson & Co. CEO John In CFPB’s Paulson on the growth paradigm of tomorrow’s financial markets, the role of shadow banking within it and how the world for megabanks has become permanently smaller. Policing of Drive for Lottery-Like Savings Awards Gains Steam Servicers 4 Credit unions have shown that a chance to winPage a 4prize helps motivate consumers to save. However, U.S. regulations have stymied many banks from offering lottery-style savings programs, Action against and efforts are increasing to make the necessary changes to federal and state laws. Flagstar Bank has

Page 10 far-ranging impact ‘New’ PayPal Gains Chance to Seek New Partners Bob Beauprez, left, a former community banker and Republican congressman, is challenging incumbent John Hickenlooper in Colorado’s gubernatorial race. 5 EBay’s planned spinoff of PayPal is a necessary and inevita- By Rachel Witkowski ble response to the influx of disruption coming to the payments industry from unconventional sources. WASHINGTON — The Consum- er Financial Protection Bureau’s Bank Deal Playing Role in action against Flagstar Bank on What Branchless Banking Means for the CRA Monday marked a series of firsts Back page 6 As the industry turns to online-only banking and partner- for the agency, including the first ships with third-party retail distributors, it’s getting harder to use Colorado Governor’s Race time it enforced its new mortgage geographical boundaries to define the communities that banks servicing rules and the first time it serve. That’s why the Community Reinvestment Act needs an By Robert Barba banned a servicer from servicing update, Andrea Luquetta writes. A precrisis bank acquisition has worked its way to the center new loans until fixes are made. of Colorado’s gubernatorial race. advantage based on an averaging But the importance of the In Defense of Payday LendingPage 8 move was arguably even more Bob Beauprez, a former Repub- of several polls, the site reports, 7 Millions of Americans rely on payday loans to meet their though his lead is well within the far-reaching than that, as the short-term credit needs, and new research suggests that they lican congressman, is challenging polls’ margins of error. CFPB cited Flagstar for activity understand the costs and terms associated with the product, incumbent John Hickenlooper, a 9/3/14 6:24 PM that predated the mortgage ser- Dennis Shaul writes. Democrat. The race is tight, with Beauprez was a community A SENSE OF realclearpolitics.com calling it a banker before entering politics vicing rule under which the agen- Page 8 toss-up. Heading into the home- and, in September, a pro-Hicken- cy took action. PNC to Buy Connecticut IPO Consulting Firm stretch, Beauprez has a 1.8-point looper group that calls itself Mak- Flagstar, of Troy, Mich., was or- 8 PNC Financial Services Group in Pittsburgh has agreed to ing Colorado Great began releas- dered to pay $37.5 million in fines PURPOSE buy Solebury Capital Group, a Stamford, Conn., consulting firm and restitution for its foreclosure ing ads that attack Beauprez and that focuses on taking companies public. EFFECTING POSITIVE newsmaker his industry involvement, both as activities beginning in 2011, even a legislator and as the seller of a though the servicing rule did not CHANGE AT WORK Subprime Credit Cards Make a Comeback bank. go into effect until January of this 9 It’s becoming easier for Americans withPage low 10credit scores to year. CFPB officials billed the reg- get a credit card, according to a new report. The industry con- “In Colorado he owned a bank, AND BEYOND then Beauprez went to Congress ulatory action as a critical shift in tracted sharply during the recession. and supported a law to loosen the regulatory approach to issues with servicers. “Today’s action signals a new First Connecticut Expands intoPage Massachusetts 2 10 See page 6 era of enforcement to protect setts by openingFirst Connecticut a commercial Bancorp lending is expandingoffice and into two Massachu- branches in Hampden County. California Bank Keeps Doors See page 3 Back page Open to Somali Transmitters

By Kevin Wack A small West Coast bank that caused alarm with its plan to stop serving a raft of Somali money end of September. transmitters has now reversed The bank’s decision to contin- that decision, according to the ue the relationships indefinitely October 2014 chairman of the Somali-American was confirmed by a second source EXCLUSIVE CLUB: “If you don’t have Money Services Association. with knowledge of the situation. scale in a particular product or busi- Merchants Bank of California Merchants Bank of California de- ness line today, you probably can’t recently informed roughly 10 So- clined to comment. buy it. Therefore, you have to build mali remittance firms that their Because war-torn Somalia lacks AB100114EDIT.indd 1 it,” Citigroup’s Michael Corbat says. accounts can stay open, said a formal banking system, Soma- Abdullaziz Sugulle, the group’s li-Americans depend on money chairman. That is despite an ear- transmitters to get money home See page 4 lier warning that the companies to their relatives. The informal would lose their accounts at the remittance system, which is cen- tered in Dubai, has come under Use That Opportunity to Enhanceclose regulatory scrutiny because

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To Transform Banking Start with Employees Most organizations want to become customer-centric. Unfortunately, they a bankwide livestream, and managers often focus on the wrong things, believing that somehow they can create a customer- were charged with leading discussions friendly layer around their existing customer-ignoring culture. They can’t. with their teams immediately following Engaged employees are the cornerstone of a customer-centric culture. Our data the broadcast. Managers received shows that, compared with unengaged employees, engaged employees are more a launch kit built around a series than four times as likely to do something good for the company that is not expected of questions to ask their teams (for of them, four times as likely to make a recommendation for an improvement at the example, what does the story mean to company and 2.5 times as likely to stay late at work to get things done. us, and how are we already doing some The challenge is most organizations fall short of inspiring this level of enthusiasm of the things the story talks about?). in their entire workforce. Only 26% of employees in the financial industry are highly 4. Grassroots Mobilization: engaged, according to the 2016 Temkin Employee Engagement Index, and the Empower Employees to Change. percentage of highly or moderately engaged employees in this industry is down seven Front-line employees should help to points from the prior year. both shape the change and deliver it. When we researched how large organizations can successfully become customer- SunTrust gathers input about upcoming centric, we uncovered a critical insight: The way to change the customer experience changes from an online community of is to change the way employees do their everyday jobs. employees. A weekly set Mastering these five practices will help with aligning employees: of company-generated 1. Vision Translation: Connect Employees with the Vision. Clearly OPINION posts spur discussions, define and convey not only what the future state is, but why moving For more viewpoints and when changes vetted away from the current state is imperative. When BMO Financial began its on industry issues, visit by the community roll the BankThink page on customer experience journey, it aligned employees to its vision by explicitly out, they are branded as AmericanBanker.com translating its brand principles into eight actions that every employee “reviewed by the Bright could demonstrate, like “Our heads are up, not down.” Managers led the Ideas community.” rollout and received a launch kit with materials that covered key messages along with 5. Captivating Communications: anticipated Q&As to prepare them to lead discussions with their teams. Share Impactful Messages. In any 2. Persistent Leadership: Attack Ongoing Obstacles. Realizing that change is transformation, communication plays a long-term journey, leaders commit to working together until the organization has an essential role. Share information fully embedded the transformation into its processes. One way leaders can actively about the change through a variety of sustain momentum during the inevitable ups and downs is by highlighting successes. means that balance the practical with the At Eastern Bank, “wow alerts” are sent to leaders when a customer survey response inspirational for each target audience. mentions an employee who delivered great service. Alerts like this can be used to One way Fidelity Investments shares celebrate those who demonstrate the behavior that will make the change successful. customer experience messages is via its 3. Middle Management Activation: Enlist Key Influencers.When asked which “Voice of the Customer Ambassadors” groups of employees are the toughest to change, executives almost always say middle program. These ambassadors inspire managers. But if you want to create sustainable change, then middle managers are their peers with local evangelism and a critical building block. ATB Financial’s branch managers were one of the earliest dialogue around customer experience audiences to learn about its new brand story and culture. The launch event began with efforts in their respective phone centers and branches. Aimee Lucas, a vice president, and Bruce Temkin, a managing partner, are customer Is being customer-centric a goal at

experience transformists for Temkin Group. your bank? Then focus on employees. □ ILLUSTRATION BY JOSUE EVILLA

JULY 2016 AMERICAN BANKER 37

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Advertising Contacts PUBLISHER MA/MIDATLANTIC/ MIDWEST/SOUTHWEST SOUTHEAST JEFF DEMBSKI DAVID CLEWORTH 95 Revere Dr., Suite C 4474 Betsy Kerrison Parkway Northbrook, IL 60062 Johns Island, SC 29455 Tel: 847.498.4520 Tel: 843.640.3713 Fax: 847.498.5911 Fax: 843.640.3966 [email protected] [email protected] NY/NJ/CT/PA CLASSIFIED ADVERTISING LIESBETH SEVERIENS JOANNE KAO One State Street Plaza One State Street Plaza New York, NY 10004 New York, NY 10004 Tel: 212.803.8691 Tel: 212-803-8325 Fax: 646.264.6800 Fax: 212.843.9672 [email protected] [email protected] WEST SARA CULLEY 173 Spreading Oak Drive Scotts Valley, CA 95066 Tel: 831.438.8408 Fax: 831.438.8407 [email protected] SERVICE DIGITAL ACCOUNT CUSTOMER SERVICE MANAGER SOURCEMEDIA NATALIE FLEYSHER One State Street Plaza One State Street Plaza New York, NY 10004 New York, NY 10004 Tel: 800.221.1809 Tel: 212.803.8305 Fax: 212.292.5216 [email protected] [email protected]

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ANNE VLADECK BLAIR “You may no longer have strippers coming for HILLYER afternoon entertainment, but that doesn’t mean “We all are now you are treated as an equal.” operating banks with Labor law attorney with Vladeck, Raskin & Clark, discussing the Washington as our 20th anniversary of the infamous “Boom-Boom Room” lawsuit and saying bias against women persists on Wall Street co-CEO.” Chairman and CEO at First National Bank of Dennison, urging big and small banks LORD ADAIR to call a truce and push for TURNER regulatory relief together ROSS CAMDEN DELSTON FINE “We should be calling “Just because Jamie it the pillow-top Dimon says ‘let’s sing regulation.” kumbaya’ doesn’t Attorney with anti-money- mean community laundering expertise, saying a new rule requiring banks banks are going to to better track corporate line up like a Greek “The losses on customers is too soft to help chorus.” peer-to-peer combat financial crime Independent Community lending which will Bankers of America CEO, emerge within the after Dimon wrote an op-ed calling on community bankers next five to 10 CHRISTOPH to stop bashing big banks years will make JENTZSCH the worst bankers “Of course this venture look like absolute is fraught with risks.” JAMIE lending geniuses.” German programmer who DIMON wrote the code for the DAO, “I think the guy who wrote a company that has no executives, is built on a public that is a jerk, OK?” Former U.K. regulator, predicting big losses ahead for marketplace lenders and blockchain and raised $165 Chairman and CEO of JPMorgan describing their borrowers as bank rejects million of capital to invest in Chase, reacting to what Fine said BLOOMBERG NEWS other blockchain ventures

JAN HOLLAR “I failed retirement after NEEL KASHKARI I realized that working in “This notion that we’re going to change flower gardens and baking the culture of Wall Street is like saying breads wasn’t all it was we’re going to change the culture of cracked up to be.” Las Vegas. Good luck with that.” Newly appointed CEO of HCSB President of the Minneapolis Fed, expressing Financial, on why she decided to skepticism that bank culture has changed since come out of retirement to helm a the financial crisis struggling bank

40 AMERICAN BANKER JULY 2016

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