Banking on Service: Heritage Builds on Customer-Based Business
Twenty-one years ago, towns and cities across
Northern Kentucky saw their neighborhood banks being gobbled up by much
larger competitors. Old-fashioned customer service from bankers who knew
their customers’ names looked like it was going the way of a free
toaster with every new account.
But a group of investors, led by Arnold Caddell,
took a look at what appeared to be a dying business model and instead
saw a market.
“There had not been a new bank charter in Northern
Kentucky since 1945,” Caddell says. “But I just felt there was a great
opportunity for a community bank.”
Caddell gathered a group of like-minded investors and raised $4.16 million to found Heritage Bank in Burlington, where he lives.
How did that initial investment do?
“The shareholders have had dividends in excess of
what they paid plus (share price) appreciation of 1,000 percent,” says
H. Lytle Thomas, president and CEO. “I would say the shareholders are very, very happy.”
The Burlington branch, which opened in 1991, has
been joined by nine more Heritage branches sprinkled throughout Northern
Kentucky, the most recent addition in Dry Ridge. The bank has nearly
$400 million in assets and employs about 90 people.
That size puts Heritage in a comfortable place,
Thomas says. It is large enough to fund a compliance officer to address
tighter regulations implemented by the Dodd Frank law and small enough
to be unaffected by particular regulations aimed at the national giants.
This group of entrepreneurs entered what is probably
the most mature industry in the country, but Heritage found a niche
that had been neglected.
“I think our starting niche, which continues today,
is we wanted to provide great services, quick response and to know our
customers,” Caddell says.
“We have the same respect for a person who has $100 on deposit with us as a person who has $1 million.”
Thomas seconds Caddell’s assertion: “The direction
from the board is to provide a great experience for customers, a great
place for employees to work and a return on investment, third.”
It’s a model that drew Thomas away from Fifth Third
Bank, where he worked for 19 years, most recently as senior vice
president and head of commercial lending in Northern Kentucky.
“I wanted to be able to have more impact in the
organization and more face time with the customer, to truly be able to
talk at the table and shake on a deal,” Thomas says. At big banks, there
is necessarily a hierarchy to make a decision, he says. But at a bank
the size of Heritage, you can be both decision maker and meet the
customer face to face.
Instead of a customer jetting through one of dozens
or hundreds of branches anonymously, “When a customer comes into one of
our offices, typically a teller will know their first name, their
children’s names, where they work,” he said. “It’s really like an old
friend coming into the office.”
Two of Heritage’s biggest challenges going forward
are to maintain that hometown bank feel as it grows and to tailor
services to younger clients who prefer less personal interaction and
zippier technology.
Thomas says banking applications for smart phones
and laptops have become a great equalizer for the little guy, with
affordable technology that allows them to compete. A new app is
scheduled to roll out in January. Caddell says he looks forward to
steady growth to maintain the bank’s mission.
“We work continually with our staff that we don’t lose sight of what we’re all about,” he says. ■