First Cherokee State Bank is trying to grind it out.

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.

"I don't believe, given the glacial nature of market share gains and losses among banks, that you will see any tangible results in this for a capital raise that needs to happen in next 12-24 months," says Steven Reider, president of Bancography, a Birmingham, Ala., consulting firm. Acru "is a good idea from marketing standpoint, but I don't believe it addresses the capital-raise issue."

Matt Hames says Acru, which is preparing a marketing campaign, was not meant to be the bank's "saving grace," but it should establish a capital-raising story and a plan for the future. Acru helps "diversify our income, reduce [real estate] concentrations and sets us on the course to increase capital," he says. "We view Acru more as the future of our bank."

Since opening, Acru has completed a transaction with more than 70% of visitors who were offered a product, Matt Hames said. Its $400 million in assets under custody do not balloon the balance sheet, saving capital.

Acru operates separately from the bank, but Matt Hames said he hopes it will eventually become the bank's name once First Cherokee is in good financial standing.

Some banks have tried similar concepts, such as Washington Mutual's Occasio branches with teller pods. But consultants say they have not seen a bank fully morph into a wealth manager. (JPMorgan Chase shut down the Occasio concept after buying the failed Wamu in 2008.)

Reider says Acru faces a major hurdle: its suburban Atlanta location is in the area some call the Circle of Death, a 25-mile radius around the city where many bank failures have taken place since 2008. "Regardless of how well they convey the strategy, they're fighting geography," he says.

Matt Hames realizes that but says such a concern spurred the rebranding. Management spent nearly two years on research, hiring outside consultants to look beyond banking to discover what made consumers interact in stores like Apple and Starbucks.

"People and businesses are making different decisions about financial institutions than they ever had in the past," says Lani Hayward, executive vice president of creative strategies at Umpqua Holdings Corp. in Portland, Ore. "They're scrutinizing, and they're asking difficult questions."

Consultants credit the $11.8 billion-asset Umpqua for having one of the most successful retail branching models, coined as "stores." Rebranding began 15 years ago with interactive displays at six branches. The model has evolved into what Hayward calls a "community center," with public conference rooms and game tables. Umpqua, with 193 branches, recently began selling local retailers' products in its stores. Matt Hames and his management team visited Umpqua during their research.

"The trick is to make sure that [the] story is authentic and has legs that can take you into the future," Hayward says. "In this environment, if you don't have a value proposition, your company is in jeopardy."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.