Scaling the Bank: ‘We’re Not Going to Stand Still’ with Maria Tedesco

Coming up, a conversation with the president of the Commonwealth of Virginia’s largest independent bank. That’s right. We’re about to get Plugged In on the business of banking with Atlantic Union’s Maria Tedesco.

Maria, welcome.

Hi. It’s great to be with you.

Well, it’s great to be with you. I realize we’re relative neighbors at the moment. We’re both in the DMV. I’m just up in D.C., while you’re about 100 miles south, I believe, down in Richmond.

When we were getting ready for this, we realized we share more than just the Mid-Atlantic connection. We share something of a Commonwealth connection. I grew up in Hingham, Massachusetts, which I understand you spent a little time in as well.

I love Massachusetts and spent time growing up in many different areas there. I never thought I’d see myself moving to the South, but here I am, and they accept me down here, so it’s good.

Well, as they say, it’s wicked awesome here.

It’s wicked awesome.

Plain talk in Boston comes to Virginia.

You got it.

Steve’s talking the cah out in Scottsdale.

Pahk the cah, Scott.

And he is laughing all the way from our Scottsdale studio.

We’re going to have a little bit of fun today as we share our enthusiasm for this really wonderful industry that we’re all a part of. Like we’ve done in the past, we’re going to reference a handful of famous musicians and their lyrics to get our chat up and running.

Steve, I thought we’d just hop right in. Maybe you could give me a little Simon & Garfunkel reference to get everything with Maria going in the right direction.

You bet. Everybody’s looking into 2024, Al and Maria, and it’s not great. But it’s a time where we say it’s a bridge year. We’re going to get through this, and then there’s going to be great growth and prosperity. So, Simon & Garfunkel, “Bridge Over Troubled Water.”

What’s great for everybody in the audience is Maria’s background. Again, a large, scaling regional community bank, but also, Maria, in your background, small community banks, large national banks and Canadian banks. You’ve seen it all.

I think you’re bringing that perspective to a very entrepreneurial organization.

But 2023 was the year of liquidity, right? Our first question for you is, given the challenges of the year related to liquidity, how has that changed your thoughts on the business model of a regional bank? What do you see as different about the future when it comes to raising deposits and maintaining liquidity to be a solid balance-sheet lender?

Absolutely. The interesting thing is that it has not changed our view. In fact, it’s confirmed the resilience of our model.

We are a bank that just cares deeply about our customers and our communities. Listen, we make loans. We take deposits. We stick to our knitting. Maybe for some that might sound really boring, but we don’t do anything that’s off-brand or off-strategy.

Thank goodness. I feel like that bridge is going to be a little bit easier for us because of that.

It confirmed what we’ve just experienced, that we have a granular and stable depository franchise with primary account holders who see us as their relationship bank.

By the way, there’s nothing complicated about our model, but it’s proven the test of time over our 120-year history. We’ve been around for a long time, and it’s still working. I believe it’ll continue to work.

We provide economically beneficial products and services that help people and help their businesses. It’s that simple, and it just works.

In fact, we’ve seen our deposits grow at an annualized rate of about 7% through the third quarter of 2023, which just proves we have a real deposit base that values us.

People say, “Well, why do you say that?”

Our customers are rational. They do seek higher rates. They come to us because they trust us as their advisor.

Can I ask, in the business world, you probably talked to a lot of your larger business customers, and they’re underwriting your safety and soundness. How are those conversations going? It sounds like they’re saying, “Yeah, I trust you with money above an insured cap these days.”

We had lots of conversations. The good news at AUB is 23% of our deposits are uninsured.

Low number.

That’s less than the average. I think the average is 30%.

When you look at our customers, their accounts average about $19,000. Our business accounts average $100,000, so they’re pretty hefty, good relationships.

I will say, I certainly heard lots of banks beating their chests in this rising-rate environment that they could pay zero to low rates to keep customers. Well, that’s not true.

I would say we did a good job of talking to our customers. We did not see a lot of money fly out. We stayed very focused on it, kept trying to raise rates and stayed in tight communication with our customers, particularly our business customers.

It’s got to be good going into Q3 saying, “Hey, Street, we grew 7%.” So congrats to you and your team on that.

Sure did.

As I listen to the two of you talk, you’ve got to be able to execute. It’s that discipline of being able to show up every day and perform, perform, perform.

You’re talking about providing an exceptional client experience, and I think this is a wonderful time to bring in a little song that says, “It’s more than a feeling.”

Maria, this, of course, is a nod to the city of Boston and the song “More Than a Feeling.”

Boston. Good old Boston.

You guys are going to get tired of hearing us love on the city on a hill.

Where do you really see Atlantic Union differentiating the customer experience? A lot of people talk about it, but clearly something is resonating.

I’m going to say things that you’ve probably heard lots of other bankers say, but we do have a distinct approach to delivering that customer experience that aligns perfectly with our values.

We have core values: caring, courageous and committed. It’s that simple.

We’re not just like any other bank or financial institution. You see it and you feel it everywhere. We deeply care about our customers and our communities.

We have that good old brand promise that reflects our dedication to our customers. I know you’ve heard other banks talk about their brand and relationship banking, but for us, it’s uniquely and deeply embedded in our ecosystem.

I’ve worked at many banks, so I’ve seen it elsewhere, but not to the degree that we have at AUB. There’s something about our 120 years. It’s deeply rooted in the culture.

We believe in being authentically human but digitally forward. Our commitment to authenticity means that we care about our customers. We care about our clients. We try hard to understand their financial needs.

I would say we foster real, meaningful relationships that go beyond what you normally would do.

Let me give you an example. When I think about myself and how we differentiate our service to our clients, I meet customers all the time. I have my whole life working in banks.

But here, I feel that I can personally acquire new-to-bank clients and spend time with our clients. I’m always selling the benefits of AUB.

The first thing I do is give them my personal cell phone number. They’re blown away by that. I’m the president and chief operating officer, and I say, “You can call me anytime.”

They find real value in knowing they can speak directly to the president if they need something. Most customers can’t get to a senior leader or speak to someone in charge.

I’ll give you an example. Recently, I dropped off my car and did a rideshare with a woman. The gentleman was taking us back to our offices, and she was complaining about her 30 years as a customer of a very local, large bank.

She said, “I just don’t know anyone anymore.”

Before the ride was over, I got her an appointment at our branch. I moved her rather substantial relationship. And guess what? I made a new friend. She knows me personally and finds comfort in that.

And you could write off that Uber ride. That sounds like a great trip.

Well, yeah.

But that’s the human side. It’s also a world where digital advancement is crucial, so we combine the best of both.

We offer all the digital banking solutions you can get at a big bank because, guess what? We compete with those big banks every day and win business from them because of the human side.

I think that really differentiates us.

Where would you like to do better in technology in the future, supporting that relationship approach? Where do you aspire to say, “Hey, team, we can do better here with tech as it relates to relationship banking”?

That’s a really good question. We have a three-year technology roadmap. We’re very clear on where we’re going with our roadmap.

I think the next phase for us is knowing our customers better when they are in a digital space, so that we are more active in offering them the next-best product.

But I have to say, we’ve got this roadmap. It’s working very well. We’ve done a lot of work on our core.

What’s interesting, as Steve asks that question, Maria, is we’ve talked in past episodes about the concept of trust in a digital space and how it used to be that you could sit in an office together and have a conversation like we’re having now.

You can be distributed across the U.S. You’ve got to have opportunities to be authentic and, obviously, transparent at times. In other moments, you need to have some privacy.

I think it’s an interesting shift in the way people approach business relationships, not just in the business of banking, but really across industries.

When Steve and I talk to different corporate leaders, there’s a sense that what’s worked in the past will not necessarily take us forward. We’ve got to reexamine where we position ourselves in an industry.

I think this ties into a question that Steve and I both want to talk to you about.

Steve, you were listening to The Cars and had a lyric that you used when you texted me a question you wanted to ask. I’m going to give you the opportunity to float this one to Maria.

Yeah. What day am I not listening to The Cars? It’s a great band from Boston.

Oh, yeah.

“Moving in Stereo.” You just texted me, “It’s so easy to blow up your problems. It’s so easy to play up your breakdown.”

You wanted to talk about regional and community banks and what could potentially be coming up.

Absolutely. Maria, it’s been the year of the pundit coming out and saying, “This is the end of regional and community banking in America. It’s a game of scale and safety and soundness. We just really need to consolidate the industry.”

I know that your CEO, John, and you disagree with that, as do I.

What would you say to the pundits who say regional banking is a model whose time has come and gone? What do you think the future holds for regional banking?

That’s not going to happen.

Regional and community banks are just not going to go away. It reminds me of early in my career, many, many years ago, when I was running consumer banking and branch distribution. People said, “Branch banking is going to go away. You really ought to think of some other path in your career because no one’s going to come into a branch,” particularly with the evolution of the ATM and advances in digital banking.

Guess what? That never really came to fruition. Now, 30 or 40 years later, we still have branches.

I do think there will be fewer of us due to the economic pressures that are continuing to drive consolidation. And, by the way, not just economic pressures.

We talked about technology earlier, but there are investment pressures to transform and meet the fast-paced digital experiences that customers are expecting.

Not every bank can do that and is ready for it. We were $7 billion seven years ago. Today, we’re over $20 billion.

We have been transforming and investing. And, by the way, it’s hard work. Not all community banks can do that. They don’t always have the means to do it. They might not have the leadership to do it.

When I consider the banks in our band of asset size, we are well positioned. We’re big enough to do what we need to do. We’re agile enough to meet the needs of our consumers and businesses.

I think that also helps us be able to pivot to meet the changing headwinds.

When you think about some of the big banks and the regulatory impact they have, I’m talking about banks over $100 billion, they have more capital needs and requirements.

As they work to meet those increased capital requirements, they probably need to be looking at an RWA, a risk-weighted asset diet. They’re going to be more motivated to reduce lending, and that could create opportunities for banks like us.

For sure.

We’re always willing to take that business from the large banks.

There’s a lot of talk about big being $100 billion now because of the failures we saw in March. But I think you’re right, Maria. It may open up a sweet spot between $10 billion and $100 billion for a lot of institutions.

On the flip side, what Maria is saying jogs my memory. I was talking with a few bank CEOs a few weeks ago, and they weren’t talking about their institutions, but they were looking broadly at the community bank sector and where they see real challenges.

You have legacy systems, legacy mindsets and legacy teams, and that prohibits you from doing what you need to do to serve your customer base in the way they expect.

Again, I want to give Atlantic Union a real shout-out for saying, “Hey, we were at a spot that a few years ago investors would have prized.”

Five to $10 billion was the sweet spot for bank investors. That’s obviously moved upmarket.

It’s not about moving to satisfy investors. It’s about realizing there’s an opportunity to grow and create without losing the spirit that made you a smart, strong company to start with.

We’re not going to stand still. We’re in a sweet spot right now at $24 billion. We do have a pending merger that will make us $24 billion.

I don’t think we’ll stop growing.

If you’re $10 billion to $15 billion right now, you likely need more scale to recoup the cost of being over that $10 billion threshold. You just have to keep figuring out how to stay ahead of it.

By the way, it doesn’t mean we have it easy. I’m sounding like it’s easy. It is not easy.

No, no. We wouldn’t ask you to come on if it was all simple stuff.

I even think about the banks between $10 billion and $30 billion, and I think there are some 80 or so that fit that category. You’re over that $10 billion hurdle. You’ve got opportunities in front of you, but you still have pressures to perform.

You mentioned something earlier that I wanted to circle back to, and it’s all around technology and relationships and what you need to stay competitive and relevant.

To ask this question, I’m going to move from my Boston roots down to the Commonwealth of Virginia. I spent four years in college in Lexington, Virginia, at Washington and Lee during the time that Dave Matthews was really hitting it out of the park.

If anyone wants to sing along to “The Space Between,” it’s, “We’re strange allies with warring hearts.”

Again, I apologize. We don’t have the musical talent, nor do we have the depths of budget to get these songs streamed.

Bailey says if I sing, there’s no way it gets watermarked because it’s so bad.

We’re not bringing out any guitars. I can’t sing.

But if we’re channeling our inner Dave, he’s a very creative guy. He leaned into relationships and partnerships early on, and I think Atlantic Union has done the same on the fintech front.

Where do you see this model of banks and tech companies really helping each other in their pursuit of growth? Obviously, both sides need to figure that out together. You can’t do it independently.

One hundred percent. I think we selectively choose our fintech partners.

We like to say it’s the intersection of the needs of AUB and the sweet spot of the fintech. It’s absolutely a critical part of our technology roadmap.

I mentioned that about two years ago, we built a three-year plan. We considered what we needed to do to remain competitive in this ever-evolving technological landscape, and we knew we couldn’t stand in place.

At the center of that plan was the modernization of our core and substantial transformation of critical areas of the bank. Not just technology, by the way.

That meant expanding our commercial bank products. It meant improving our teammate experience and deploying an agile work environment. Our brand had to change, and on and on.

Taking the core modernization work, it drove us to ask, “Who’s our core provider? And how do we build that plug-and-play, adaptable environment that would allow us to grab fintech solutions and easily plug them into our environment?”

Of course, we had fintechs prior to this, but they don’t always ideally work directly through our APIs. Where they don’t, we had to create this layer, and we’re absolutely there now.

In terms of the future, we’re going to continue to leverage fintechs. We’re too small to build those capabilities ourselves. We’re not one of those big banks with lots of software engineers.

We have to leverage providers case by case that we believe can play that role. There are likely a few of them, so we’re going to need to be ready to integrate them all together.

In the end, it’s all about leveraging the fintech that’s going to provide the right services, all under our brand, directly to our customers.

It’s not going to be the fintech’s brand and their customers. We can talk about banks that like to use their charter and give it to other people, but that is definitely not a strategy for us.

With that layer, Maria, I think what’s so cool is that what we hear from fintechs is that going up to the top 10, they might sit there forever waiting on a decision. Down below, at an unsophisticated community bank, they may struggle with handholding them through the technology.

With that integration layer you have, you might become an ideal customer or partner for the fintech because you’re big enough to make the revenue substantial, but you also know how to execute and can make a decision entrepreneurially versus getting stuck in bureaucracy.

Yep. It’s that whole idea of being at a place that you and I call the sweet spot, where we can still be agile and entrepreneurial.

I remember a big-bank CEO saying, “We have 10 different departments to say no to a fintech.”

How do we embrace them, but have the right integration approach and, of course, regulatory compliance approach?

We always say the decisions are right here. We make all the decisions. We’re not calling another state for someone to make a decision or another organization. That’s the beauty of being the size that we’re at.

Being the size that you’re at, you’re able to model leadership behavior that I think a lot of people value and respect.

I know in talking to John Asbury, who you’ve worked with for a while, John’s the CEO of the bank, he holds you in such high regard.

I think John has done a magnificent job of building a team that respects each other and gives each other opportunities to do some really amazing work on behalf of the organization and, by extension, your customers, your investors and the communities that you serve.

We’ve got one more question. I want to give the floor to the only man I know who has been to both a Taylor Swift and Katy Perry concert.

At least that will acknowledge it on a podcast like this.

The only man of my age who possibly has been to both and actually loved them both, having stepdaughters who are big fans of both.

We’re going to Katy Perry’s “Roar.” What a great inspirational song.

It really goes to something very important about Atlantic Union, which is a commitment to diversity. And I think, Maria, diversity in the broadest sense: diverse thoughts, diverse backgrounds and, of course, gender, ethnicity and so on.

You’ve been a great model of rising female leadership in banking, and candidly, we need more.

How do you see making DEI authentic and real at Atlantic Union? It certainly seems that way as we talk to folks on your team and some of your executives. I sense from John a real commitment, and from you, obviously, modeling that.

How have you guys made it real?

First of all, it always starts at the top. Thank you for mentioning John Asbury because he may be a fan of mine, but I’m a superfan of his.

All the success that we have here is about his leadership. And then, of course, it’s about the people. He’ll say it’s all about the people. It’s always about the people.

We’re super lucky to have John leading Atlantic Union Bank.

And can I just say, gosh, I wish I wasn’t a model and that female presidents and CEOs were much more prevalent. Unless they are, it just guts me sometimes that we continue to have a challenge for women in the industry.

When I first got to the bank, I was very conscious of my role as the first woman president and chief operating officer. I took it very seriously, and I still do.

I still have a responsibility to be vocal about the importance of DEI because I do believe that we all benefit when we consider broader perspectives.

My career has been fueled by two things: first, what brings me joy, and second, how can I impact people in a positive way? I get to do both of those every day in this role.

When it comes to DEI, you can’t just execute DEI strategies in a vacuum. You have to understand what’s going on in the world around you.

I believe strongly that leaders today need to examine, and we do this all the time, what is the makeup of our teams? Are they diverse? If not, why not?

Are we getting the most out of who we should be as a company? If we hire the same people with the same backgrounds, the answer is absolutely not.

We are not achieving the best version of ourselves without diverse talent.

We talk about this, and we don’t just talk. We have plans and actions.

I believe having more and more varied voices helps us reach better decisions and stronger results. I personally find I’m more enriched when I have a broader perspective.

One thing that was very personal to me was creating a new program called WIN, the Women’s Inclusion Network.

This was about bringing together women in the company for the advancement of women in the company, so their voices can be heard.

It’s a whole program. I don’t have to go into the details about it, but we also welcome men, by the way, because change doesn’t happen without their awareness, their action and their understanding of how to have a more inclusive environment.

That really could fuel our success. At the very heart of it, both John and I believe that tremendously.

A resource network, congrats on that. I think it’s a big win for organizations.

I have daughters who participated in their corporate resource networks and have really found them valuable. That’s an awesome best practice that should come to every bank, I think.

I’ll tell a really quick story. I did a long cycle on a Saturday. I was sweaty and hot, and I dropped into a CVS.

This woman saw me and said, “Oh, you’re my president.”

I’m looking around like, “What does she mean?”

It took me a second, and she said, “You’re the president of my bank.”

I said, “Oh, yeah.”

She said, “I love AUB. Can I give you a hug?”

I said, “Sure, but I’m not sure you want to give me a hug right now.”

Big sweaty hug.

She said, “I am so proud of the fact that you’re a female running the bank that I bank at. I’ve told my daughter, ‘See, you can do anything.’”

That’s the day I said I need to take this role even more seriously because I do have to be able to share that story with people and say that you can do it if you want, even if you’re a woman.

I think we’ve got to continue to amplify that message because, if you want to be a strong, vibrant business, you have to be able to bring different perspectives, mindsets, personalities and ages. You’ve got to have a big melting pot of ideas.

I really appreciate, Maria, you being one of the examples that we can hold up.

I know Steve and I spent some time with Jill Castilla on a recent podcast. We’ve got April Clobes from Michigan State Federal Credit Union coming up.

We’re trying to cast a wide net ourselves because it’s one at a time. You’ve got to tell the story, and you’ve got to be consistent.

Al, I think that’s what a regional bank is in the future. Think about diversity of everything: diversity of community, diversity of skill set and diversity of age.

We need more digital natives in regional banks. I think that’s where the regional bank melting pot can be really powerful.

This is a huge step in how you create a vibrant, leaning-in kind of melting pot.

Yep. And reflecting the customers that we serve, right? And the communities that we serve. That’s why I love banking.

Which is why we love talking about it.

Exactly.

We’ll geek out on this all the time, and we certainly will in upcoming episodes, but we’ll take a pause here to thank Maria.

She suffered through my Boston accent. She suffered through some, or maybe didn’t suffer through, the music.

It actually made me feel great. Are you kidding me?

Well, if we could bring a smile to somebody’s face, then Steve Williams and I have done our job.

On behalf of the entire team, we just want to say thanks to Maria for joining us on this episode of Plugged In.

It’s been my pleasure and my honor. Steve, Al, thank you so much.