Sometimes it makes sense to put more employees in branches.
That's the perspective of CenterState Banks in Davenport, Fla., and Union Savings Bank in Danbury, Conn., after the companies took steps to breathe new life into their operations by placing more decision makers in their branches.
Each bank had its own distinct rationale for making changes: Union wanted to take one more swipe at salvaging an underperforming branch, while CenterState was concerned about competition from bigger banks and alternative lenders.
The decision to decentralize operations runs counter to the current trend where most banks aim to streamline and consolidate operations to reduce costs. In fact, that was a priority for the $5 billion-asset CenterState in the years following the financial crisis.
"We were centralizing as much as we could because of efficiency," said Chris Nichols, CenterState's chief strategy officer.
CenterState, however, started to fear it might lose business to nimbler competitors. The company has been introducing underwriters to its branches. By working on-site with commercial lenders, the underwriters can theoretically make faster decisions with a goal of going from application to loan commitment with 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 probably three-fourths of the way to removing our skepticism, but we may not be completely convinced until after the next downturn," Nichols said. "We're seeing teamwork in the best sense of the word. … Silos are less of an issue."
The only lingering concern involves risk management, particularly in underwriting decisions.
"So far things have worked well, but we're a little scared of the model," Nichols said. "Traditionally, you never want credit folks" to work closely with underwriters.
At Union, the goal was to rescue "a beautiful branch" in Monroe, Conn., that was severely underperforming, said Cynthia Merkle, the $2.2 billion-asset mutual's president and chief executive.
"I guess we believed if we built it, customers would come, but they didn't," said Merkle, who was Union's chief operating officer before becoming its CEO early last year. "Deposits weren't growing. Transactions weren't occurring."
A bigger bank might have opted to cut losses and close the facility. Union, however, viewed its southernmost branch as a logical step toward capturing business in lucrative Connecticut coastal markets such as Bridgeport, Norwalk and Fairfield.
Union addressed its problem by creating a so-called solutions team that included a mortgage and commercial lender, along with treasury and wealth management officers. The team, which largely operated autonomously, was deployed to the branch as part of a pilot program.
Merkle hoped that having the team work elbow-to-elbow under the same roof, with minimal interference from top management, would improve the branch's results. So far the experiment seems to be working, she said.
The solutions team has booked $45.7 million in business and residential loans since its formation in mid-2014. The group has also added 14 treasury and eight wealth management relationships, while significantly boosting deposits and branch traffic.
Cross-selling has also improved at the branch, reflecting an approach where multiple team members call on clients. Previously, Union employed a big sales committee that met regularly to sift through client lists to identify leads.
"It was different silos sitting at a table," Merkle said. "After the meetings, people would go back to their offices" and return to business as usual.
Big meetings were replaced with conversations among team members in more intimate, localized settings that Merkle likes to refer to as "little families."
Word of mouth has also helped the cause. Merkle recalled one commercial client who approached the Monroe team for a commercial real estate loan. "By the end of the day, we'd booked the loan and [acquired] all his operating and cash management accounts," she said, adding that the client has provided at least six referrals since then.
The pilot went so well that Union has since set up solutions teams at two other branches. The teams are also marketed heavily on billboards, in social media and at community events.
"We always talked about a relationship strategy, but we didn't know what the words meant," Merkle said.