Finding the Bank's Purpose: Atlantic Capital Bank

In this episode of the Purposeful Banker, Atlantic Capital Bank CEO Doug Williams shares the story of his bank, a difficult acquisition that spurred Atlantic Capital's search for purpose, and how that led to a better bottom line. 

  

Helpful Links

How An Ill-Fated Deal Helped This Bank Find Its Purpose (American Banker)

Leading With Noble Purpose (Lisa McLeod) 

Selling With Noble Purpose (Lisa McLeod) 

Putting Purpose Into Practice (Lisa McLeod at BankOnPurpose 2016)

Big Picture: What's Your Purpose? (Lisa McLeod at BankOnPurpose 2017)

Transcript:

Maria Abbe: Hi and welcome to The Purposeful Banker, the podcast brought to you by Precision Lender where we discuss the big topics on the minds of today's best bankers. I'm Maria Abbe, Senior Communications Manager at Precision Lender. On today's show, Jim Young will be interviewing Doug Williams. Doug is President and CEO of Atlantic Capital Bank. He'll be speaking at Bank on Purpose 2020 sharing the story of his bank and how defining its purpose helped fuel its impressive growth. We'll have links in the episode notes to relevant articles and information. Now onto the show. Enjoy.
 
Jim Young: Doug, thanks so much for coming on the podcast.
 
Doug Williams: My pleasure, Jim.
 
Jim Young: So before we dive into the questions, can you give us some background both about yourself and about Atlantic Capital?
 
Doug Williams: Sure. I've been in banking for almost 40 years now. I started two weeks after my undergraduate degree and have worked mostly in corporate banking, capital markets and corporate finance. We started Atlantic Capital Bank in 2007. We raised record amount of capital for a de novo institution, $125 million. That record stood until earlier this year as the
largest capital raised in U.S. history.
 
We started Atlantic Capital in 2007 with a view toward creating an Atlanta managed business bank, focusing on commercial clients, commercial real estate developers and investors, and affluent individuals, particularly the principals of those commercial enterprises. We've had a good run now. We navigated through the financial crisis and the ensuing recession, produced consistent growth and grown to about two and a half billion dollars.
 
Jim Young: Great. Well you came across our radar really as the subject of an article in American Banker that was titled "How an ill-fated deal helped this bank find its purpose." Curious about what you can tell us about this deal and I guess first off I'll just say I find it refreshing and a little bit surprising that you were up front basically about that it ended up being not a good thing. So what can you tell us about the deal and where did things go wrong with it?
 
Doug Williams: We started as a privately owned institution with the large capital raise, half of our shareholders for private equity funds who were looking for public market liquidity and value and we felt like the only way to give them that value in a reasonable period of time was to do a large merger transaction. After looking around for a couple of years, we struck a deal with First Security Group in late 2015. First Security Group was a billion dollar institution headquartered in Chattanooga, Tennessee with offices throughout Eastern Tennessee. First Security had been a troubled institution. They had sold problem assets and raised new capital in 2013 and were looking for a partner and it was the deal they could do, it was the deal we could do, but that company was very different from Atlantic Capital.
 
Atlantic Capital had a very focused strategy on the commercial market and a large urban market. First Security was a traditional community bank in second- and third -ier markets in Eastern Tennessee.
 
We knew we had a challenge when we agreed to buy them, but the challenge proved bigger than we thought it would be. The two companies were significantly different, both in terms of business model and in terms of strategy and in terms of culture. Those hurdles proved to be very large and while I think we would have ultimately been successful in turning that business around, we felt like it was going to last too long. The project would last too long. In the meantime, we were doing very well in Atlanta and we felt like we needed to devote our capital and management attention to those significant opportunities in the Atlanta market. So in late 2018 we decided to divest First Security and we did that and completed the transaction in early 2019.
 
Jim Young: Okay. So you realize this acquisition is not working out, and I got to imagine that's a tricky sort of decision to make because I don't know that there's ever been an acquisition that's felt smooth and orderly at any point in the early going. So at some point you had to sort of decide when is this normal growing pains versus this isn't working out, but I'm really curious about how during all of this and all this sort of typical tactical and strategic things that banks worry about during these acquisitions, when did you start to decide that culture was an issue and something that you needed to focus on?
 
Doug Williams: It became apparent that our people were confused as we moved into late 2016 and then through 2017. Our people were confused, they didn't know who we were, they didn't know what we were trying to accomplish and certainly we were significantly distracted in our efforts to turn around the First Security acquisition and that contributed to that sense of confusion and lack of focus. And that was occurring at a time when the Atlanta market was growing at a very nice pace and we had significant opportunities in that market that we were not taking advantage of. So it became apparent to me that we had lost our bearings and we needed to regain a sense of purpose and direction and really rebuild our culture and build it into a competitive weapon that it's become.
 
Jim Young: So you make this decision that this purpose and culture is something you need to focus on. Tell me then about Lisa McLeod and the decision to reach out to her. Obviously full disclosure, she's a two time keynote speaker at BankOnPurpose, our conference. So we obviously think very highly of her at Precision Lender, but what made you feel she could have an impact at Atlantic Capital?
 
Doug Williams: I read her book and it really expressed what I had been trying to accomplish from the start at Atlantic Capital in terms of culture building. It really resonated with me and I felt like she could help us get back on track and better articulate what our purpose was and what we were trying to accomplish and that would really be foundational in rebuilding our culture.
 
Jim Young: I'm curious though, did you get any pushback? Was there, for other people, other leaders, maybe Atlantic Capital who said, "Look, we got some nuts and bolts, bottom line issues to deal with, P and L statement sort of stuff. Should we be spending our time on sort of this touchy feely aspect of things that is hard to measure from an ROI standpoint?"
 
Doug Williams: Well sure. We're financial people and we focus on financial objectives and metrics and the prospect of spending money on an outside consultant to help us with what you suggest is the touchy feely sort of thing was a bit challenging to us. But we quickly I think realized the significance of what we could accomplish with Lisa in rebuilding our culture and realized that if we got the culture right, the other things were likely to follow in the right direction.
 
Jim Young: So tell me kind of some of the new metrics you measured and how you landed on those as good indications that this was working.
 
Doug Williams: Yeah. Well we of course use a number of financial metrics in managing our business, but they are largely lagging indicators of performance. The metrics that we have begun to use are more leading indicators and they are indicative of the organization moving in the right direction and being focused on the right things. And they are how many new relationships that we added? How many of our customers have referred new customers to us? And how many customers have we lost?
 
In the period of time that we've been tracking those numbers, we've added a tremendous amount of new relationships, we're probably growing our relationship count at a in excess of a 10% clip per annum. Probably significantly higher than that. We're only losing the handful of relationships and we're also seeing our customers refer us to new opportunities. So that I think captures our progress in building our business by focusing on fueling customer prosperity.
 
Jim Young: I don't want to get you to dive too deep in this because I imagine this will be some of the deep dive you do when you speak at BankOnPurpose coming up this Spring 2020 in Austin. But is there an example you can give of sort of how you, it's one thing again to have someone like Lisa come in and talk, but then it's another thing to implement that and then get results and you've obviously gotten results, but what's maybe one of the things that you did that sort of took that culture message and purpose message and made it a reality for your bankers?
 
Doug Williams: Well in terms of the process of talking about culture, we engaged people throughout the company. And I think as we did that it resonated this notion of purpose. Being purpose driven really resonated with them and they said, "That's why we are here and that's what we want to do." And so it really became a focal point for us.
 
In a day to day sense, I find that our bankers are very engaged and thinking about what we can do to improve our customer's performance, improved ... We talk about fueling prosperity, so what can we do to help them meet their aspirations, meet their challenges, solve their problems. And I think we're much more customer focused now as a result as opposed to being focused on achieving certain financial objectives or improving certain financial metrics.
 
You know, the discussions in the company around our objectives, our discussions about what we're doing day to day and week to week are much more about customers and what we're doing for them as opposed to you can we improve this particular metric or meet that particular objective in that time frame.
 
Jim Young: Right. I think probably part of the feel good story here is that those end up as a byproduct of this improving as well that follows.
 
Doug Williams: We think all these objectives are aligned in the long run, but the prioritization is very important. If we're focused on our purpose, our reason to exist and we do a good job with that, then the financial results are going to follow and that's been our experience. We've seen a significant improvement in performance since we divested First Security and since we've been focused more sharply on our purpose.
 
Jim Young: Knowing what you know now, if you had a chance to go back in time to the First Security Group acquisition, let me ask you in two parts, one would you do it or not do it and then two, if you did do it, what would you do differently?
 
Doug Williams: Well, I think it's important to note that we sold it for more than we bought it so it was successful. We did add value in that process. We did become a public company and give our shareholders public market liquidity and value. So a number of key objectives were accomplished in that process.
 
But having said that, we were distracted and we probably would have done better in Atlanta and had better financial results overall if we had not done that acquisition. So I think in retrospect, I probably wouldn't have done it. I would've seen it as a significant dilution of our culture, a significant distraction of our management time and our capital and we wouldn't have done it. But you know, all's well that ends well. We learned a lot.
 
We did book a significant gain when we closed the transaction. We're a stronger organization culturally and financially today because we did that sometimes difficulty produces strength.
That was certainly the case here. So I can't say I regret it.
 
If I look back, I would say that I probably wouldn't have done it knowing what I know now, but we're better for it. We came through a difficult time and again, we're stronger financially, we're stronger culturally today because of that experience.
 
Jim Young: Well, finally, how applicable is your story to other banks? I mean, how much of this is sort of a unique occurrence that's meant to be appreciated? Or how much of this is a story that could really act as a guide for other banks?
 
Doug Williams: Well, I think it could certainly act as a guide for others and I think there are a number of lessons to be learned.
 
First would be the premise of culture. Any organization has to have a strong cultural foundation to excel and succeed and that was underscored in a very dramatic fashion in our case.
 
Secondly, it highlights the importance of when you're considering a merger considering cultural and business model and strategy factors above financial factors. As you suggested earlier in our conversation, any merger transaction is difficult. They frequently fail to meet the objectives that the principles set out with, but it is much harder. They're much bigger hurdles when you have different cultures, when you have different business models and you have different strategies.
 
So I think there's some very important lessons to be learned there for any organization that's considering a merger.
 
Jim Young: Well, I look forward to hearing you share some of those lessons and share even more about Atlantic Capital Bank's journey when you speak at Bank on Purpose again in 2020 in Austin. But Doug, thanks so much for coming on The Purposeful Banker.
 
Doug Williams: Well, thank you Jim. We look forward to seeing you in Austin.
 
Maria Abbe: And that'll do it for this weeks show. Now for a few friendly reminders. If you want to listen to more podcasts or check out more of our content, you can visit our resource page at precisionlender.com or you can just head over to our homepage to learn more about the company behind this content. Finally, if you like what you've been hearing, make sure to subscribe to the feed in iTunes, Google Play, or Stitcher and we would love to get ratings and feedback on any of those platforms. Until next time, this is Maria Abbe for Jim Young and Doug Williams and you've been listening to The Purposeful Banker.

About the Author

Jim Young

Jim Young, Director of Content at PrecisionLender, is an award-winning writer with experience in a range of positions in media and marketing, from reporter to website editor to content marketer. Throughout his career Jim has focused on the story – how to find it, how to understand it, and how best to share it with others. At PrecisionLender, he manages the many ways in which the company shares its philosophy on banking and the power of relationships Jim graduated Phi Beta Kappa from Duke University and holds a masters degree in journalism from Columbia University.

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