A Tennessee Bank Emphasizes Culture
Once a month, employees of Pinnacle Financial Partners Inc. gather to share their reactions to a recently read book, generally from the business self-help category.
This month they are reading “Execution: The Discipline of Getting Things Done.” Past titles have included “Built to Last: Successful Habits of Visionary Companies” and “Power Failure: The Inside Story of the Collapse of Enron.”
The leader of this book club is not some avid reader from middle management but the $750 million-asset bank’s chief executive, Terry Turner. The group meets not in an office or even the local library but in Mr. Turner’s living room.
“It’s a great experience and a great way to create a dialogue about things important to the company,” Mr. Turner said in an interview.
The book club is just one of the ways Pinnacle tries to keep its employees engaged, and the strategy is working: Except for a few who left for personal reasons, no employee has quit the Nashville company since its creation in October 2000.
Since its opening Pinnacle’s assets have increased 18-fold, employee rolls have more than tripled, to 123, and earnings have been outstanding. Its net income grew 91% last year, to $5.3 million.
Mr. Turner, 49, credits an enthusiastic staff for Pinnacle’s success and said he plans to build on it to make the company a multibillion-dollar “urban community bank” in the near future.
Pinnacle serves a straightforward market: downtown Nashville, which has $23 billion of deposits and is dominated by three giants based outside Tennessee: AmSouth Bancorp., Bank of America Corp., and SunTrust Banks Inc.
“We are excited about $750 million in four years and $600 million in deposits, but that really is only 2.5% of the market, so there is a tremendous opportunity left in the Nashville market,” Mr. Turner said.
Pinnacle’s network of seven branches has enough excess capacity to service twice its asset size, he said. The company will open two branches and add 34 employees this year and open another two branches in 2006.
It has been taking customers away from larger rivals, mainly by hiring their staff.
“There is no question that the organization has become a thorn in the side of SunTrust and AmSouth,” said Jeff Davis, an analyst with First Horizon National Corp.’s FTN Midwest Research in Nashville.
Before hiring competitors Pinnacle courts them for months to ensure a good fit.
“The basic formula for growth is that we hire experienced bankers with a large client following that are successful where they are,” Mr. Turner said. “So when they come here they are happy and successful and can move their book of business effectively.”
That was the case with Mike Hammontree, now a senior vice president and financial adviser. He was hired from AmSouth in December 2002 after nine months of discussions with Pinnacle executives, and 75% of his 50 clients came with him, he said.
Mr. Hammontree turned aside overtures from other large banks in favor of Pinnacle.
“Here I was able to take care of the client and had a company standing behind me,” he said. “They are about building relationships, where the big-bank mentality is more about transactions and getting as many deals as you can.”
The reason these bankers choose Pinnacle is not the money, according to Mr. Turner, who said it rarely “pays up” when hiring. Instead it is the atmosphere, where building relationships and teamwork are emphasized and everyone is trying to create a larger and more dominant bank.
“Truly this is an opportunity to get involved with something special,” Mr. Hammontree said.
Of course money is part of the equation. Every employee — from teller to senior loan officer — receives stock options and bonuses. The options of those who have been with Pinnacle from the start have nearly quadrupled.
Stock options “create great excitement and engagement for people coming here, and they create a very positive work environment,” Mr. Turner said.
Pinnacle’s stock has been on a steady rise since late 2000, gaining 54% in the last 12 months.
Like many community banks, Pinnacle tries to create a family environment. In addition to the book club, it holds parties to celebrate milestones, such as reaching asset targets, and an annual bash to mark the company’s anniversary. All new employees go through a three-day orientation conducted by Mr. Turner.
Many of Pinnacle’s executives knew Mr. Turner or Pinnacle’s chairman and chief financial officer, Robert M. McCabe Jr., from First American National Bank in Nashville. Both worked there from 1985 to October 1999, when AmSouth bought the $22 billion-asset bank.
Mr. Turner had run retail banking and the investment services group; Mr. McCabe was First American’s vice chairman.
“The founding group of board members and management have roots that date bank to First American and AmSouth, and they are tapping into those relationships and contacts and building a company while adding new people along the way,” said Bryce Rowe, an analyst with Legg Mason Wood Walker Inc. in Baltimore. He upgraded Pinnacle’s stock to “buy” on Jan. 25.
Though most analysts are wary of new banks that grow rapidly, Pinnacle has been a darling of the analyst community. Eight firms cover it — well above the average for banks its size.
Chris Marinac of FIG Partners in Atlanta said he likes Pinnacle’s simple business model of developing relationships with and lending to commercial companies, while also helping their executives with wealth management.
Pinnacle does well because it offers the basic services and lending limits of large banks, as well as personal service, Mr. Marinac said.
“There is not really a trick of the trade,” he said. “It’s just solid commercial banking, and they work very hard and are very proactive.”
