It's getting awfully easy for Joe DePaolo to convince big-name talent to join his small regional bank.
As chief executive of Signature Bank in New York, DePaolo recently gave himself all year to recruit four teams of veteran bankers from large rivals.
It's only August, and DePaolo has already landed 10 teams.
Bankers and consultants alike report a quiet and continuing migration of seasoned talent away from the nation's major banks and into the calmer offices of smaller regional lenders. DePaolo's recent hirings were from the likes of Toronto-Dominion Bank, and even crosstown giants Citigroup Inc. and JPMorgan Chase & Co.
The growing attraction of small-bank employment points to the continuing strife at the largest U.S. financial firms, many of which are beset by failing business models, soaring losses from bad loans and intense government scrutiny that continues to shift on the fly.
The trend also mirrors the growing exodus of disaffected top-tier investment bankers to boutique firms. "Taking jobs at small to midsize banks has become the hot thing to do," said Jeanne Branthover, a managing director with Boyden Global Executive Search. "Regional banks can finally … attract talent that would never have looked at them before."
The strategy gives smaller firms a crack at picking off large rivals' clients, said Jeff Davis, senior analyst at FTN Financial, a unit of First Horizon National Corp. Business customers are notoriously loyal to their bankers.
Signature, which has 22 offices in the New York area, has also raided the ranks of what was once North Fork Bank. More than 80 North Fork alumni have moved to Signature since Capital One Financial Corp. bought it last year. Other, smaller regional banks have landed big-bank talent, including Pinnacle Financial Partners Inc. in Nashville, which has $5 billion of assets and 33 offices across its home state.
Terry Turner, Pinnacle's CEO, said it often takes years to woo recruits but that the industry's turmoil "has shaken them loose."
In July, Pinnacle hired Harvey White, a 28-year veteran of Regions Financial Corp., to be chairman of the bank's Knoxville business unit. Regions, which has 1,900 branches in 16 states, has been rocked by troubled commercial loans tied to overheated housing markets.
"He was thrilled to come to work at a company of our size," said Turner. (White had briefly retired from Regions before joining Pinnacle.)
The poach-and-grow strategy has driven impressive growth at both Signature and Pinnacle, even as most big banks have shrunk in size and written fewer loans. Signature's loan book grew 42% during the last year, and Pinnacle's grew by almost 17%. Pinnacle recently posted a loss from souring residential construction loans, which are hammering large regional lenders. But most analysts expect Pinnacle to work through these issues efficiently.
Unlike many big-bank rivals, Pinnacle and Signature can boast that they are virtually clean of the Troubled Asset Relief Program. Signature quickly repaid $120 million in public support it accepted last year, and DePaolo said he was the first bank CEO to call Tarp funding a "scarlet letter" for banks. (JPMorgan Chase CEO James Dimon is widely credited as inventing the label.) Pinnacle plans to return its $95 million in taxpayer funding shortly.
Small banks' cultures offer other departures from Wall Street-style banking. Signature's main office is in the heart of New York's Fifth Avenue shopping district. But it is nestled in an office tower, several floors above the children's store Build-A-Bear Workshop and its steady flow of tourists and toddlers. "The Build-A-Bear," said DePaolo, "is paying all the rent."