BMO branch sale signifies opportunity for community banks

BankNews.com Digital Managing Editor Sam Wilmes sat down with Haberfeld president Sean Payant to discuss how smaller banks can attract new customers impacted by last week’s announcement from BMO that it is selling 180 branches across the Midwest to Raleigh, N.C.-based First Citizens Bank & Trust..SW: How is BMO’s recent sale and acquisition of branches an opportunity for community banks to attract deposits? SP: Anytime there is churn in a market, there is an opportunity for a local community bank to step in and capture market share. Mergers and acquisitions naturally create opportunities. There's conversions that have to happen, and people often decide they want to make a change as a part of that. Now this one with BMO is really interesting because many of these customers went through a conversion two years ago when they bought Bank of the West. This one is even more interesting, because you now have customers who, if they stayed, are going to end up going through essentially their second conversion in a two to three year timeframe. That is going to be a rare opportunity, because it usually doesn't happen. But in the world of merger and acquisition right now, we are realizing it is happening and it is happening frequently.SP, continued: There's been an opportunity that's been created through the change in administration that's allowing for more flexibility with M&A. The BMO one is interesting because they ended up with this footprint as a result of the Bank of the West acquisition, that I don't think fits their long-term strategic priorities. So when you're selling off this many branches in the middle of the United States, but you're committing to add essentially 150 more in other areas, they are trying to realign and reposition their footprint like every other regional and large bank in this country. SW: If you are a community bank, how do you attract those customers at this point? SP: When we help our clients execute a strategy in these situations, we map where their physical branches are in relation to the acquired branches. And then we look at that footprint using data and analytics to send in a message to individuals who may be banking with that other institution. Proximity drives that, and so we tend to send a defined message around that. That's one way to do it. The biggest challenge is, if you are going to attract people in a transition like this, you need to have a compelling offer to get them to pick you at a high level. And so the challenge is, your products, your policies, your processes, your people all have to be slightly better for the individuals who are going through these mergers and acquisitions, ‘You know what?I am going to change financial institutions.’ But for community banks, it is about narrowcast targeted marketing within that footprint where those two locations exist close to each other. SP, continued: I drive by a client of ours in Lincoln on the way to work every morning, and from that drive I can see a BMO branch. In this scenario, they are perfectly positioned for an opportunity, because you can see them each at the same time. And that is not uncommon for many institutions, particularly community banks from around the country.SW: Is there anything else banks can do to attract them?SP: Since a lot of businesses bank with a bank that is near a physical location, boots on the ground is helpful. Getting people out there calling on the businesses around there, not specifically with the question of, is your bank changing hands? But, we are out here and this is what we have to offer our business customers and we'd love an opportunity to visit with you. Those conversations are really meaningful because the one thing business owners do not want more than anything is disruption in their banking relationships. SP, continued: This is another one of those rare opportunities where stumbling across businesses that may be in this situation, banking with one of the branches that is being sold, it's a rare opportunity for boots on the ground around there as well. That doesn't even hurt if they don't bank there, because if your boots are on the ground and you are coming across people who are banking at any other financial institution and you have a better offer backed by people who are willing to deliver on it, nothing can go wrong. That is an opportunity for growth, regardless of the institution where a business banks. SW: Is there anything you would advise banks looking to attract customers of a bank that sells? Is there anything you would suggest they not do?SP: Do not ever bad mouth a competitor. There is no way to get anywhere by saying anything negative, reminding them about multiple acquisitions over the last few years. It is all about what we have to offer from our institution. That would be my advice. Nothing good is gained from it regardless of it being M&A or not. It is about staying focused on what you have to offer and why selecting you is a better choice for your personal and business banking needs.SW: How long is the window for banks to attract new customers? SP: There's two windows: The announcement window, which people are probably in the next couple months thinking, do I want to go through this again? Maybe it's time to pull the plug. The second one is the conversion window because no matter how well planned it is, something is always going to go wrong in conversion. And now you have the potential, in this case, for another conversion. And that creates opportunities during that time period, so it is really after the deal closes and the conversion process starts where you start seeing more churn in the market as well.SW: Is there any example you can recall of a bank customer of yours that did this and it worked? SP: It works all the time. We do it regularly from geofencing other locations with digital advertising to putting print media in there. I can go back into the heart of the Great Recession, and one that comes to mind is we were aware about six months beforehand that a bank was going to be failing. It was known, the chances were there. We had done the analytics for the client that overlapped those branches, pre-printed the marketing materials and we had them printed and sitting on a shelf and it was announced on a Friday they were closing. We pulled the list over the weekend, updated it, and we were dropping those pieces by Tuesday in-home, on top of those branches.SP, continued: This is not a huge community, but this is a nice-sized community bank. We could tie back 562 openings to that one mailing. This was during a different time too, because we had banks failing and people were concerned about what was going on. But even now, with all of these opportunities, we're looking at this one right now because we have a lot of clients in this footprint.Proximity still matters. That's why we look at where the acquired branch is and where the client branch is and we make sure they are within a proximity that makes sense for somebody who would find them both convenient.SW: Is there anything else we have not gone over?SP: We've heard so much about the bank branch being in the past, but this is one of those other stories that says it is not. It is about repositioning your footprint in a way that makes sense with your strategic priorities. Chase is a perfect example of this. They've been building 500 new branches in five years. I just drove by the fourth that is under construction in Lincoln. We didn't even have a Chase branch in Nebraska until 2018. Even in New York City, you can walk by a corner and see that a Chase branch has been shuttered, and then you walk seven or eight blocks and you can see that they are building a new location on a corner. It is thinking strategically about that footprint and how you want to lean into that. And we're seeing it with Chase. Bank of America recently announced they are adding branches. You are seeing it in all the large banks. We've got the acquisition coming with PNC, which is moving into whole new markets as well. They are also trying to expand their footprint.