Transcript
All aboard, with a nod to Ozzy Osbourne to get this episode of Plugged In up and running with my man, Steve Williams.
Hey, Al.
And the CEO of Busey Bank, Mike Maddox. Al, Steve, can you give a PSA to the listeners about what’s going on today?
Okay, so guys, it’s very interesting. Al has been to the dentist. He’s got some nice braces in there, and he doesn’t sound himself. So we’re going to have some fun with that. We’re going to ask him to do a ventriloquist thing, drinking water a little bit.
But for now, we’re going to help bring Mike Maddox in and talk about the fun, crazy, entrepreneurial world of regional banking. Why don’t you talk a little bit about our guest, Al?
Oh, geez. Put me on the spot.
Mike’s someone who’s really an interesting guy. He was running CrossFirst, which was about, how many years were you doing that, Mike?
We started in 2008. So, 2008 until just recently.
Well, that was a $7 billion player. A really interesting story about M&A will start us off, if we can.
There have been some deals, right, Steve?
You bet. We’re sitting here in summertime, and we’ve had Huntington Bancshares go down to Texas with an announcement involving Veritex Holdings.
We had a big merger of equals in the Southeast, Synovus and Pinnacle coming together to become a $118 billion bank.
Obviously, CrossFirst was a very innovative Midwestern bank coming into Busey to create a $20 billion regional player, but one that’s got some good diversified businesses.
One of Al’s and my questions, Mike, was, when you look at this M&A activity starting to heat up and the bond-loss math going away fast, what do you think about with Busey in terms of the right size of a regional bank?
Does it matter? You’re kind of in a sweet spot now, well past $10 billion but well below $100 billion. What are your thoughts on where you see the opportunity for Busey, and what does all this M&A mean for you guys?
Thank you guys for having me on today. I don’t know if there’s any exact right size. I do know there are some sizes that aren’t right.
The way I look at it, just below $10 billion and just over $10 billion, in particular, are really difficult places to live.
For us at CrossFirst, we were approaching $10 billion, and it was pretty clear that it was going to take a sizable investment in infrastructure, people and technology to really cross $10 billion and do it well.
The other thing is that we were a de novo franchise in 2007. Most of our growth was organic. One thing I had really desired was some stronger fee-income businesses.
Looking for a partner that would help us build out a wealth platform and more of a technology stack was something that was interesting. Then we needed to figure out, how do we get well past $10 billion?
Getting to know Busey, they had crossed $10 billion, but not far enough to really absorb the cost and infrastructure they had invested in.
That, combined with Van and wanting to find succession, led us to start looking at CrossFirst as maybe more organic growth and more dynamic markets.
Combining that with a 157-year-old, really stable, solid balance sheet with a $14 billion wealth platform, the math kind of came together. The cultures came together, and the business case came together.
Interesting. Al, what’s the song we want to talk about management succession? Do you have a song that sums this up? Because I want to dig into that.
I can say it. It’s “Changes” by Tupac.
That’s a good one. This was an interesting deal because you, as the CEO of CrossFirst, became the successor to Van Dukeman. How did that process work?
To solve $10 billion, get to scale and solve management succession in one transaction, that’s got to feel good. Tell me about how those discussions started and how you guys put a combined management team together.
Van and I first met right after the Acquire or Be Acquired conference in Phoenix. We met, and then a few weeks later we got back together and started talking about more details.
We spent a number of months really focused on, do the cultures work? How do all the social issues work out?
I’m 56 years old, so the age gap between Van and me was good. Obviously, Van had to get comfortable with me and vice versa. We spent a lot of time together.
Then I was in front of the Busey board, and Van was in front of our board. You get the boards together, and at the end of the day, for me, I felt like I was kind of interviewing for that next role as we went through it.
We got to the point where everybody felt good about that, and then that became a part of the overall transaction. All those terms and everything were negotiated into the deal.
That’s great. Van is a client and a legend in our books. Just a great story of leadership and building that very loyal culture. Congrats on obviously getting that role.
I think bringing some of the innovation and some of the new businesses that CrossFirst built is interesting.
The other thing you guys have now is a really interesting footprint. There’s a great footprint slide in your recent Q2 investor deck.
Al, is there a song that kind of goes to markets? Can you give me a song that might touch on market expansion?
A song that has a fiddle in the band? Maybe a little “If You’re Gonna Play in Texas.” You’ve got to bring Alabama into this conversation.
There we go. The band Alabama with the song “If You’re Gonna Play in Texas.”
Do you want to sing it for us, Steve?
Yeah, no. I’m really into country music. I went to the Morgan Wallen concert last weekend, so I’m getting more into country with all these Midwest banks going down into the South and Southeast.
But Mike, with CrossFirst, you now have Illinois roots with Busey, and certainly you grew up in Kansas banking. But now Texas, Oklahoma, Arizona and Colorado, these are new growth markets. They look attractive from a footprint standpoint.
You’ve been in this business a long time. The market model always matters. Who’s had the best regional market model so you don’t become too centralized and too far from the customer?
What’s your vision for the market model in these growth markets, and bluntly, how do you not mess it up like so many banks have done when they’ve reached a farther footprint?
That’s a great point. You want to have the resources of a big bank, but you don’t want to act like a big bank. There’s a real trick to that.
One of the culture things Van and I spent a lot of time talking about as we thought about partnering was how we go to market.
Both companies really leverage a regional operating model. All customer-centric decisions work through the regions, and we want to deliver services as close to the customers as we possibly can.
I’ve seen organizations try to implement more of a line-of-business approach. I believe it tends to lose effectiveness because you get different people with different agendas, and it ultimately ends up impacting the customer.
We take all of our product lines and run them through the regional leadership. That includes wealth, treasury, banking, payments. All of that runs through a regional operating model.
That way everybody’s on the same team, rowing in the same direction, and you hopefully bring a total solution to the client where we can help them with all their needs.
What preserves that culture, have you found, as a leader? I’ve seen folks say the same thing you said, and then five years later they’re into a line-of-business approach. Maybe they reach a certain size.
What do you do to protect that power in the regions when it’s natural for business leaders and corporate folks to want to build standards and efficiency?
It’s everything you do. It’s processes, procedures and incentives.
It’s making sure that you centralize what you can centralize that doesn’t impact the customer experience. There are some things that are more tailored toward a line-of-business approach, and we have some of that.
But the overall go-to-market strategy for us is really driven by a regional approach. You have to empower those regional leaders. They have to control their own destiny and their own markets.
When we started CrossFirst, I came from a law firm background. I was an attorney. One perspective I had was, why is banking not more like a professional services firm?
If you think about a law firm, you have a partner, and that partner has associates who work for them. They have their own business within a business.
That’s really how I view banking. If we have a regional leader, that’s their bank.
We provide them the capital, technology, back-office support and resources. But they’re responsible for their balance sheet. They’re responsible for their P&L. They’re responsible for profitability, marketing and all those kinds of things.
Banking is local, and that’s where people screw it up. You can’t forget that.
If I’m trying to dictate from Kansas City what our bank is doing in Phoenix, I just can’t do it. I’ve got great people on the ground there who know way better than I do what the best strategy is.
We have to hire great people and empower them.
Love it. I think with technology there could be a new chance to do this even more efficiently and not have to take so much central control, but do it in a standard way with tech.
Just think about what we’re doing right now. We’re in three different cities having a conversation, and it feels like we’re in the same room.
It really does allow us to manage remotely better than we ever have before.
That’s right. It brings everybody together.
You mentioned Busey’s $14 billion wealth-management platform. Al, do you have a song? This is an interesting topic, but I need a song.
I don’t even know why I can say it. I can sing it. It’s “Hey Jealousy” by the Gin Blossoms.
“Hey Jealousy,” I guess, because I think most banks would be jealous of a $14 billion wealth business.
I’m jealous of it, Steve. That’s crazy.
Mike, here are some of our thoughts. It’s interesting when you think about the old classic bank trust business or fiduciary business.
But we live in a world now where, whatever everybody says about all the problems of the world, there’s been tremendous wealth creation over the last 20 years.
You also have more companies owned by private equity than public market cap these days. You’re seeing that facilitate a lot of liquidity and succession in the kinds of businesses that Busey or CrossFirst would bank.
I have to think you’re seeing opportunities across your footprint for people who have this newfound wealth or liquidity and don’t have active management.
In a nutshell, what’s your strategy there? Where do you see opportunity? Because that could be a real differentiator for franchise value.
Massive opportunity. One of the main things that really attracted me to partnering with Busey was that wealth business.
At CrossFirst, we had really built a private bank and commercial bank with high-net-worth individuals. It would kill me when we would have a successful commercial customer exit their business, put the money in the bank, and then two or three weeks later it was gone to a wealth shop.
To have the ability to really take the customer from soup to nuts and help them all the way through their journey, from building their business to liquidation of the business, to making sure they have their estate-tax planning right and business-tax planning right, is a huge opportunity.
Van says something a lot, and it’s really wise. We can make a customer more money by making sure they have a tax-efficient plan to transfer their business and their estate than we ever can picking stocks or making investment decisions.
There are so many wonderful business operators out there who are just head down running their business and don’t think about what happens when we transition it and making sure it’s structured right to do that.
Having the investment capabilities, but also the estate planning, tax planning and all that stuff that really goes around the client, is huge.
We’re already seeing a lot of success in what I’ll call the legacy CrossFirst markets with wealth. We’ve already hired four individuals. In the first 45 days, we’ve almost brought over $100 million worth of new assets under management in those new markets.
Really, we couldn’t be more excited about that.
One thing I’m seeing for traditional folks in trust is what used to be the average-size account, in this new world with this liquidity, is getting bigger. There are bigger accounts out there from all that entrepreneurial business activity.
It goes so nicely with commercial banking.
It really does. It’s such a great fit.
If you can offer a family-office suite of services to a customer who maybe isn’t big enough to have their own 10-person team, it really cements that relationship.
Well, it’ll be great watching that and seeing how you bring technology and other things to that business.
Speaking of tech, there’s been a lot of activity out there. I think this little thing in Congress bouncing around called the GENIUS Act.
I’ve heard of it. Do you have a song that would touch on all the new things going on with coin, blockchain and the collision with traditional banking?
Sure. Elton John, “I’m Still Standing.”
That’s a great song. One of the best MTV videos of all time, by the way.
But yeah, we think about May of 2022 when FTX failed, and at that time I think Tether was the number-one stablecoin. It went from a valuation of 100 to 10. I would not call that very stable as a coin.
But now we’ve really got the banking system and Congress engaged in a blockchain use case around stablecoin.
What listeners may not know is CrossFirst was very innovative in payments and banking as a service. You’ve been down this road. You probably see opportunity for the new environment, Mike, better than most regional banks at this time.
So you’ve got a business called FirsTech that you were instrumental in building. How do you see technology innovation, Congress getting involved in stablecoin and connecting it to the regulated banking system with your FirsTech business, which you highlight quite a bit to investors?
FirsTech is a payments company. It’s really a legacy Busey company that they’ve had for about 20 years. It focuses on online payments, merchant services and, believe it or not, the traditional lockbox, e-lockbox and integrated payable solutions.
How you move money and collect money for clients is a big deal. The GENIUS Act is going to bring stablecoin into that process.
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