To survive its location in the so-called Circle of Death, the banking abyss known as metropolitan Atlanta, First Cherokee is slowly throwing its business model to the wind. It's rebranding itself around wealth management, a new name (Acru, pronounced accrue) and a refined wood-and-brick coffee shop called the Copper Coin. Borrowing liberally from a certain high-tech company, the bank has "wealth strategists" linger at the shop's "Wisdom Bar." Artists perform on the weekends.
The struggling bank's managers will not concede to desperation. They hope the friendlier atmosphere — free Internet, meeting space — will brew trust among suburbanites. The ultimate goal is to rejuvenate the bank by luring outside investors.
"We're not of the opinion that if you hang on long enough, things will go back to the way they used to be," says Matt Hames, Acru's chief executive. His father, Carl, is a founder and the CEO of First Cherokee. "The game has fundamentally changed [in] how consumers prefer to interact with the financial services industry as a whole and with community banks," says the younger Hames.
Management has placed its 10-year-old trust company, once called CNT Financial, at the forefront of the 22-year-old bank. Despite financial constraints and a cease-and-desist order, the company has used a portion of its $15 million in capital raised locally since 2009 to develop Acru.
Acru opened in downtown Woodstock in May, adding a coffee company and a handful of certified wealth strategists to serve as points of reference for any financial request.
Matt Hames says management wanted to grow in areas besides commercial and industrial loans — as do many other banks — as First Cherokee tackles credit issues. "We have to change how the organization interacts with the community as well as diversifying our revenue stream," he says.
It is debatable whether investors, burned in the past by other innovative banking concepts, would prefer adaptation over plain-vanilla banking. "With investors there are those people who think, and probably correctly so, that technology and delivery will be a huge part of the success of community banks going forward," says Walter Moeling 4th, a lawyer at Bryan Cave LLP who is advising First Cherokee. "Also, you will find people who prefer going back to the nuts and bolts. And both are right."
Such conflicting views abound.
"I love boring, but bank managers mostly don't like boring," Joseph Stilwell, general partner at Stilwell Group, said during an Oct. 31 American Banker analyst roundtable. "They're all looking to do something because it's not fun to manage a business in a difficult environment like this."
R. Scott Siefers, an analyst at Sandler O'Neill & Partners LP, said expanding into wealth management made more sense than getting into "more esoteric businesses" like capital markets. "You already have relationships on the small-business side," he said.
As banks look to boost noninterest income, many see wealth management as a seamless and cost-effective fit. But some have struggled to develop a full-service advisory skill set and the patience to generate revenue. Gideon Haymaker, CEO of Seaside National Bank and Trust in Orlando, Fla., says it can take eight months to build a wealth management relationship, versus 30 days to close a loan. The $738 million-asset bank offers commercial loans and wealth management through teller-free offices that resemble posh resort lobbies. "If a bank is under a C&D and there are imminent issues to deal with, that's a long time," he says. The $244 million-asset First Cherokee has been under a cease-and-desist order since September 2009. At Sept. 30 it had a total risk-based capital ratio of 4.6%, and more than 16% of its assets were nonperforming.
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