The conversation turns to relationship banking, and Miller relates a story about a business owner that S&T tried to land as a customer a few years ago. On the first try, even though one of S&T's directors had referred the bank to the business owner, the S&T team couldn't persuade him to change banks.
Several months ago, the same S&T people approached the potential client again.
"We go through the same program and he moves, moves everything," Miller says.
The customer had been with his former banker for many years, but three relationship managers in two years left him confused and frustrated.
"His exact words were, 'It got to the point where I didn't even know who to call at that bank,'" says Miller.
For the business customer, a good banker is at least as important a member of an advisory team as a lawyer or accountant. Jim Cooper, president of Unionvale Coal Co. and an S&T customer for 19 years, lauds S&T bankers for their knowledge of his business.
Says Cooper: "They've always done a good job for us, and I recommend them all the time."
S&T Bancorp, with $2.8 billion in assets and 850 employees, is trying to grow without sacrificing the brand equity it has accrued by priding itself on personal service and community banking.
Of size and service
Two weeks after S&T's presentation, the top brass of National City Bank, including Chairman and CEO David Daberko, came to Pittsburgh to lead 1,500 bank employees on a blitz of calls on small business owners in the region.
The Cleveland-based bank was touting some of its new products and special loan packages and was seeking information from business owners for developing potential new products and services. When the conversation turned to the interest that out-of-town and some regional banks have demonstrated in gaining a toehold on the turf of National City and other big banks in recent years, Daberko didn't show much concern.
"I think it's the view that the markets have in general that big companies can't provide personalized service. That's what they market when they go out," Daberko says. "What else are they going to market? Their products aren't as good, their rates generally are not as good."
Daberko went on to point out that many don't have the extensive branch networks that big banks have, so access isn't as broad.
"So what are you going to market?" says Daberko. "You're going to market personal service."
The debate over whether the big banks can offer personalized service that matches that of their smaller competitors, or whether regional banks have the resources to compete with the super-regionals could go on forever. Much less debatable is the interest that banks from within and outside the region show in Southwestern Pennsylvania, particularly in Allegheny and the contiguous counties, and how important it is to connect with the customer for the long term.
The value of connecting with its customers isn't lost on National City. It has spent $120 million on technology upgrades at its branches, much of it dedicated to customer relationship management.
PNC spent $40 million on CRM technology in 2001. Citizens Financial Group plans to spend more than $100 million over the next three years on CRM initiatives.
While locals often view the business climate in Western Pennsylvania as sluggish, at least some financial services firms take a different tack. S&T has expanded in Westmoreland and Allegheny counties, opening branches and other financial service centers and adding capabilities to challenge its peers and its larger counterparts.
Northwest Bancorp, of Warren, Pa., acquired small banks this year that will give it 11 branches in Allegheny County, and Sky Financial Group, of Bowling Green, Ohio, last year bought Three Rivers Bancorp and its 25 branch offices in metropolitan Pittsburgh. And rumors have circulated recently in Pittsburgh that Cincinnati-based Fifth Third Bank is looking for entry into the market.
One of the reasons banks are showing interest in the region may be the nature of the local economy.
"The economy in Western Pennsylvania never seems to change too much. It never gets hot and it doesn't cool down that much during recessions," says Wilson Smith, an analyst with Cohen Bros. & Co. in Philadelphia.
Founded as Savings & Trust Company of Indiana in 1903, S&T has followed a modest acquisition strategy for most of its history. Beginning in the early 1980s, S&T began to acquire banks with a few branches near its Indiana headquarters.
In 1991, it acquired Vanguard Savings Bank and Atlantic Financial Savings Bank. In 1997, it bought Peoples Bank of Unity, an institution with solid community support at its seven branches, giving S&T a concentrated presence in eastern Allegheny County.
"PBU was kind of the quintessential merger partner," says Miller. "We'd like to do one of those a year."
Miller's joking about the frequency, but his point is serious. Peoples Bank of Unity was financially strong and done as a stock deal, which means local shareholders continue to hold a stake in S&T's ongoing success. And from a geographic perspective, it offered visibility in Allegheny County. S&T used its east suburban presence as a platform to open a city office in Shadyside.
In 2002, the acquisition of Peoples Financial Corp. bolstered S&T's presence in Armstrong County and gave it its first location in fast-growing Butler County.
Miller says S&T will likely remain within what it defines as its footprint, the nine counties where it currently operates and the counties contiguous to that cluster.
"It's been incremental," says Miller of S&T's acquisition activity. "We always wanted to be close enough so we could see it, touch it, really manage it."
Miller says S&T is always on the hunt for an acquisition, although it becomes difficult at times to acquire small banks in some rural areas. An esoteric formula used by banking regulators to gauge market concentration can exclude a bank from acquiring even a small bank in a locale where it already has a presence.
In more populous areas, including Allegheny County and the near fringes of its contiguous counties, the market concentration issue fades; thus, those are areas where S&T sees the most potential.
The targets, says Miller, are other financial services and related businesses, as well as banks and thrifts.
"There are at least a dozen on our radar screen at any given time," Miller says.
Sticking to the basics
In an economic environment that poses challenges and conditions in combinations that haven't appeared before, how does a bank -- or any business -- approach its future and growth strategy?
"It's truly uncharted territory," says Robert Rout, S&T's CFO. "You can't look to history to define how you're going to act in this current economic environment."
Nonetheless, the basics, says Rout, haven't changed that much. S&T retains a strong balance sheet and consistently performs above its peer group average in a several categories, including return on equity, return on assets, and earnings and dividend growth. The $2.8 billion asset bank stays well below its regulatory loan limit of $36 million, imposing an in-house "comfort level" of $15 million.
And while it does a fair business in residential mortgages, it sells most off to the secondary market to avoid the risk.
Banks have entered other business segments as regulatory reforms have opened the door to their ownership of brokerages, insurance companies and other financial service providers. Banks are taking advantage of the opportunities by expanding their capabilities to service the growing class of more affluent consumers with investment management needs.
Research firm the TowerGroup estimates the number of investors with more than $1 million to invest will grow nationally from 7.5 million in 2001 to 13.2 million in 2005. That growth, it predicts, will drive future growth for retail financial services institutions.
S&T Wealth Management Group bolstered its visibility by opening an office in downtown Pittsburgh in 2002. S&T, says Miller, is looking to acquire additional investment/asset managers.
Last year, S&T expanded into the property and casualty insurance business with the $2.4 million acquisition of Evergreen Insurance Associates, an agency with a client base of approximately 2,000 in Pennsylvania, West Virginia and Maryland. Miller says S&T is looking for other insurance companies it can fold into its existing insurance business.
Miller says one of S&T's real advantages has been its ability to assimilate acquisitions into the corporate culture and retain the service and banking relationships in the markets where it has expanded.
Says Miller: "The concern I have is, can we keep expanding like this and still maintain the same quality? That's the challenge." How to reach: S&T Bank, www.stbank.com; National City Bank, www.nationalcity.com; Sky Financial Group, www.skyfi.com ; Northwest Bancorp, www.northwestsavingsbank.com