A question being asked more frequently by bank presidents and consultants is whether they should pick a site or pick key people first when considering a new geographic market.  What do you think?  Should we be more concerned with where we put our sticks and bricks or with the people that we place within them? The latter has been the answer among a few growing banks of late and when you look at their prosperity compared to that of their market peers the margin of success is more often due to the bankers themselves.

When you think about the success of a particular bank, do you attribute it to its locations or its people?  National Bank of Commerce’s Atlanta operation added very little to the company's “income”.  However, the “value” of the Atlanta operation changed when it bought its way into the market by acquiring Wachovia/First Union branches. Its earning assets changed very little and its profits suffered because of these purchases, but these branches certainly added to the appeal of NBC as an acquisition target now that it had a small branch network, albeit one that did not earn any “income”.  

What is the point? While Wall Street analysts may still value bricks and mortar, bricks and mortar continue to be a very expense delivery channel and thus a drain on income.  More and more successful banks are gaining the edge by building offices around key people who will anchor these offices versus taking a “if we build it they will come” approach.  Opening a new stand-alone office even if it is in the path of progress is going to hurt earnings for 24-48 months.  You can cover up these losses by moving loans to your new office, which is what most banks do when they get tired seeing the red ink. The best thing for shareholders (unless your pursuit is to sell within 24 months) is to open an office around existing talent.  A base of experienced employees will give you a running head start and break-even becomes perhaps only a 6-9 month endeavor, if not sooner. 

If your goal is to increase EPS, open branches around an existing team.  If your goal is to increase your Price/Book ratio then open numerous branches in hopes of branding and establishing yourself by region.  These branches will be a drain on income unless you inculcate a cookie cutter sales/operating procedure where you can operate with less experienced talent such as new college graduates or lesser producing lenders and pay them peanuts and manage the heck out of them. The problem is that as sound and efficient as these “process organizations” may be, there is no monopoly on good ideas. But there is certainly a finite amount of good experienced bankers. We can duplicate and enhance upon our competitor’s procedural successes but ultimately it is the key individuals that will make the difference.

The fastest way to gain a foothold in a new market is to find those bankers who are already having success in it. Then woo them to the benefits of your culture and corporate strategy. The value of having sustainable prosperity, community confidence and great company morale by hiring the right people is immeasurable. In a business that is seemingly encompassed entirely by money, the real assets, as it has been said, ride the elevators and sit in the chairs. It is the investment in people, not buildings or systems that will most help your organization achieve success.

Brian Smith is a CFM and an ex-banker with 10 years experience within the Finance industry.  He currently is a partner with BankersforHire.com, an executive search firm committed to the executive human capital needs of Georgia and Florida financial institutions.