Vincent Delie Jr., CEO of First National Bank of Pennsylvania, managed to lead his bank through a time when business-as-usual was anything but usual. Not only did Delie and FNB survive the worst of the recession, but he found ways to grow the bank, especially in its biggest region, Pittsburgh.
“There were quite a few obstacles,” Delie says. “It seemed like every line item on our balance sheet was being challenged one way or another. There was quite a bit of concern not just with our institution but across the country in regard to how we would fund ourselves moving forward.”
Growth during a downturn is a rigorous task and one that takes time and persistence. Delie looked to the talents of the bank’s 2,300 employees to tap into opportunities in the marketplace to take the company into unchartered waters. Those initiatives helped the bank see revenue of $369.9 million in 2010.
“In this market, you can see that the companies in western Pennsylvania seemed to have fared better through the recession, because they’ve had a lot of practice over the years,” he says. “We’ve had some very difficult times here where we’ve been hit harder than the rest of the country during more mild cyclical declines.”
The good fortune he has seen was no accident; it took hard work and strategic planning by Delie and his employees to push through. Here’s how Delie took advantage of new opportunities to get FNB through the downturn.
FNB found itself in a pretty strong position during the toughest period of the economy. Superior credit quality metrics, flexibility and a conservative investment policy helped FNB refocus their attention to areas where growth could be possible.
“Because we were a true plain, vanilla commercial bank, we were able to ride through [the recession] with less disruption in our own balance sheet, and ultimately, that resulted in better earnings throughout the period,” Delie says. “We have a fairly conservative investment policy, so we didn’t get caught up in some of the toxic investments that others got tied up with. That gave us a little more flexibility.”
Delie and his management team had the insight to forecast for a declining loan demand and prepared themselves for what would need to happen to change their approach.
“We had the challenge of growing our balance sheet during a period when outright demand was diminishing,” Delie says. “There were challenges on many, many fronts and they weren’t just challenges for FNB, they were challenges for everybody in the marketplace.
“You need to challenge your employees to think about ways to continue to generate revenue even during a very difficult period. You need to be upfront and honest and communicate very well with your employee base. You need to understand what your clients’ needs are as you move through that cycle.”
Sometimes customer needs will change, so be willing to adapt. This requires a collaborative management team.
“You can’t have silos within your company,” Delie says. “Everybody has to be working together to drive shareholder value and to focus on the bottom line. You can’t have one division just focused on what they do exclusively. They have to be communicating with the other areas.”
During a time when companies see their most important lines of business diminish or even disappear completely, they have to quickly respond. Companies must look at alternative ways to stay in business.
“As commercial clients manage their finances through the cycle, I would stress that cash is king, liquidity is very important,” Delie says. “During periods of time when the economy is contracting, good companies reduce inventory levels, they build their cash position, they delay (capital expenditure) spending and they manage their balance sheet appropriately. I think that if a company is struggling, that should be their focus. Their focus should be to drive liquidity.”
When the economy changes the way you have to do business, it is crucial that you act quickly to implement new ways of gaining business. Communication during that process is also critical in making sure plans don’t fall through.
“We have meetings continuously to talk about the challenges that are going on in the environment and within our own organization,” Delie says. “We focus on those items as often as we have to. Communication within the company is critical, particularly during a period when business isn’t normal — it isn’t business as usual.
“You have to have a system where you can elevate issues or ideas and discuss challenges in the marketplace. We’ve institutionalized that within the company and how we interact with each other. I think you become a little quicker and more nimble when you have that.”
It’s always easy to identify what needs to be done, but actually doing those things takes time, work and people who understand the direction the company needs to move in.
“You need to clearly communicate,” Delie says. “You need to correlate what’s required from a production standpoint from the employees to the ultimate financial plan of the company. They have to understand even though they’re a small piece of the total equation that their contribution is needed and is necessary and we are relying on them to get us home. Making sure they understand how their little piece fits into the total picture is probably one of the most important things. You have to also provide the appropriate incentives to make sure that they achieve or exceed those objectives. Recognizing success within the organization and sharing victories pays dividends.”
Delie quickly realized that the customers they currently had were priority No. 1. Repeat business is vital no matter what state the economy is in and attention to customer satisfaction is what keeps them coming back.
“It’s one thing to build your customer base, but you have to maintain what you have,” Delie says. “Going through a very disruptive period like we just went through, keeping in touch with your customer base, making sure that you’re serving their needs, making sure that you’re listening when they’re bringing up issues or they have concerns about the industry or a particular product is critically important.”
Implementing ways to gain feedback from customers is an important way to find out what they like and don’t like about your company and your service. Retention rates will not rise if you don’t know how or where to address problems.
“You have to put in a way to measure the satisfaction of your customer base,” Delie says. “That has to be built into your incentive comp planning. It has to be built into the culture of the company. You have to have a way to measure it.
“We came up with a methodology for measuring satisfaction across a bunch of customer areas so we could benchmark ourselves against a baseline result. You have to be able to measure that and ingrain it into the culture. Making it an important factor is critical to gaining success.”
Having a system in place that can tell you exactly where improvement needs to happen will greatly increase your customer satisfaction. If customers are not satisfied, change needs to occur.
“You have to get to the root of what’s causing that dissatisfaction,” Delie says. “That requires reaching out to customers. You should also sensitize your employees and incent them to bring forward process change that creates a better environment for providing the service. Those are the things you need to do to drive change.”
Take advantage of opportunities
Once Delie addressed the issues that would help stabilize the bank, he started looking for other avenues to grow and expand their reach. During a tough economic time, it’s important to not be one-dimensional.
“We are not in a high-growth market,” Delie says. “For us to grow in a market that isn’t a high-growth market like other areas of the country, we had to focus on niches within the marketplace that we compete in where the growth is growing at a faster clip than the overall market.
“You have to study the market that you’re competing in. If you see a particular niche where you feel there’s going to be more robust activity, where there’s growth that outperforms the overall market, then you can benefit from that if you focus on it. That’s what good companies and good management teams do.”
Relying on what got you growth in the past will not help your company grow to new heights. You have to constantly reinvent yourself and be thinking of ways to refocus and re-engineer.
“I think a lot of companies during a period of economic turmoil or downturn, they tend to become paralyzed,” Delie says. “They just cut expense and cut expense and they really don’t think about how they are going to continue to manage the top line through that process. That is something that needs to be focused on.”
Delie focused on areas where he saw room for growth and revenue and reallocated resources to go after those areas. Companies must commit to their growth strategies completely in order for them to work.
“We beefed up,” Delie says. “We didn’t pull back like other institutions. We actually added people and developed certain departments. The other thing we had done was focused our people on cross selling. We didn’t want to just push products to clients. We coached them to be more holistic in their approach to providing financial solutions. If a company has a particular need or is looking to mitigate a risk, maybe the insurance company can provide a product or service that helps the company accomplish their objective, and we win by getting that business opportunity.”
Along with finding niches that can help you grow during tough times, new markets can also offer unchartered growth opportunities.
“We are always evaluating our plans,” Delie says. “You have to look at the opportunities that exist in the marketplace. We had to focus on new client acquisition going into the downturn. Our incentive compensation, our strategies were all geared toward going after market share during a period when many other banks were hunkering down or evaporating. That’s what’s led to our growth and our success during a period when outright demand diminished.
“If we are looking to open a new branch, there’s two ways to look at it. One is to try to anticipate what the opportunities are within that micro-market and the other is evaluate whether or not it will be supplemental to your overall delivery channel. You have to look at the market itself that you’re looking to move into and whether or not that move provides support to the rest of the infrastructure. You start with where the customers are and who you are trying to reach and why. Those are the questions you ask yourself.”
Once you identify niches and new market opportunities you need to plan and staff accordingly for growth in those areas to be successful.
“We focused on where the best opportunities were in a particular segment and we staffed that area appropriately to go after the opportunities,” Delie says. “We are in a people business. Even during a cyclical decline, particularly one as severe as what we just went through, where other financial institutions were falling by the wayside, there was a lot of disruption in the marketplace. We were able to capitalize on that, because we had staffed up with good commercial bankers from much larger financial institutions. We upgraded our talent during that time; we didn’t just cut bodies. We looked for ways to become more efficient in the company, but we also hired at the same time to continue to drive growth. Bringing those people in and retaining them was key to our success. Everybody needs to pull their weight to make the overall company successful.”
HOW TO REACH: First National Bank of Pennsylvania, (800) 555-5455 or www.fnb-online.com
Vincent Delie Jr, CEO, First National Bank of Pennsylvania
Born: Philadelphia, but grew up in Pittsburgh
Education: Penn State University, degree in business administration and finance
What was the very first job you ever had and what did you take away from that experience?
The first real job I ever had was stocking shelves at a drugstore on the north side of Pittsburgh. It taught me quite a bit about business. I was able to get involved in a variety of tasks.
What is something that you enjoy the most about your job?
I enjoy interacting with people — that’s the most fun. I also enjoy celebrating success and being a part of the celebration.
What is your favorite piece of U.S. currency?
I would say a $100 bill.
If you could have a conversation with one person from the past and one person from the present, who would they be and why?
I would want to talk with George Washington. I would want to know what his thoughts were about the country back then and where we are today and compare and contrast. Today, I think it would be interesting to have a conversation with Hugh McColl from Nations Bank. He had great success and I would like to talk to him about how he constructed what he constructed and what he was thinking along the way.