Ron Steinhart: First on behalf of us, we want to welcome you, Ralph. We’ve known Chuck since he first put your flag up here in our community, and he’s been a great citizen of Dallas. And your bank has done a great job of building up from what was Grand Bank, but it’s good to welcome you also.
I’m an old banker, been involved around Dallas my whole career. Charlie Pistor, senior executive vice chairman at First Republic and Republic’s predecessor and former president of the American Banker’s Association. So he’s very involved with the banking industry. And Erle Nye has been a leading citizen of the community, CEO of TXU and its predecessor organizations for many years. All of us have been very involved in the community, so from that angle we’re happy to participate [in this roundtable]. And a couple of us have been involved in the banking business, so we feel somewhat of an identity with another banking organization. So it’s good to get together. I thought we’d start out with Erle getting it going with one question, and go free with it from there.
Erle Nye: I need to make it clear in terms of full disclosure that I am also a big community booster—past chairman of the Chamber—so all of my perspectives are from the point of view of Dallas, and why you chose Dallas, and how happy we are to have you here. And let me say, I’ll add my welcome to the one you just received from Ron. We are, to misquote the former Fed Chief, we are “irrationally exuberant.” And I mean that very sincerely. We think and we hope [your move] represents a comment on Dallas, the Dallas business climate, the quality of life here.
And so in that context I’d like to pose my first question. And just also to set the framework here, you know that Texans are known for their modesty, so you will forgive my presumptuous nature. But we’re real proud of the fact that this region is the fourth largest in terms of population now, behind L.A., New York, and Chicago. We think that’s notable. We’ve grown remarkably in terms of population. We’ve got a job force of roughly 3 million, grew 80,000 jobs in this community last year. We’re very proud of the quality of life aspects here in Dallas: education, transportation, and so forth. The size of the community, the growth the community has enjoyed, the fact that we’re in probably the largest construction boom in the last 20 years, something on the art of $3 billion last year in permits issued in the city of Dallas, that’s incredible. And impressive job growth—our job growth rates are among the highest, not only in the country but in the world. We’re the high-tech job center in Texas, and we think that’s pretty significant.
But I know there are many, many factors that are taken into account when you decide to move a corporation as large as yours, and it must pull you and tug you in different directions. But from the point of view of all the factors that you must have considered, to what extent did the quality of life and the economic growth in Dallas and the region attract you here?
Ralph W. Babb Jr.: Well, it was very important. You went through a number of the statistics. Other things we looked at were the number of headquarters that are here, which is outstanding when you look at the number, when you look at the almost trillion-dollar economy being the 8th largest in the world and the growth you went through. We’re in Florida, to a lesser degree, Texas, California, and Arizona—the Arizona and Florida markets are very small for us today—but as you mentioned earlier, we’ve been here 20 years. And Chuck was the leader coming down and building this market, and we’ve been in California a similar amount of time.
When you look at other things besides the great economy here and the great growth, look at the population growth which you mentioned, and I don’t know if you’ve seen the statistics from the Census Bureau but I’m sure you have. Thirty percent of the population is projected to be in three states by 2030, and this happens to be one of those states as are Florida and California. And two-thirds of the population is going to be in the South, east and west across. So it’s our opinion that the population growth is going to dictate the economic growth. Per capita income used to be a bigger dictator than it is today.
You look at that and then you look at the fact that we’ve been here, we understand the markets, we’ve already said that we were going to expand rapidly for us, the opportunity to continue to grow, and today we’re about 46 percent outside of Michigan, and that’s the states that I mentioned, so we’re getting into that balance portion. The growth here has been excellent, growth in California has been excellent. We’re centrally located here, which means we can get to all the markets I mentioned very quickly. We’re in the Central time zone, which Chuck has mentioned before we get him up early—so you can imagine the California folks—when we’re doing meetings.
So when you wrap all that together, it became a natural next step in our expansion because we really want to grow the corporation quickly. We’re committed here, we want to grow it faster than we had originally planned to do here, and we will continue to grow the other markets as well.
Nye: I remember someone quoted many years ago, the Menninger psychiatric clinic, they located in Kansas, and someone said that was immediately between the two markets of New York and L.A., centrally located.
Chuck Gummer: I want you to know, Erle, I thought you did a great job on your Chamber of Commerce speech. You can definitely tell what you’ve been doing the last year, and the board and Jan [Hart Black, president of the Greater Dallas Chamber] would be proud.
Nye: I’ve always been interested in this because this is very significant to us. We work really hard, and it’s one thing to bring in a smaller corporation, but to bring in a Fortune 500 company, a bank of your size, with the growth that you’ve shown, this is a big thing for us. A big thing for the city, a big thing for the region, a big thing for the state.
But we’re always curious: We know we’ve got a centrally located airport, a fine airport, you can reach either coast, you can travel to New York and return in a day, you can travel to L.A. and return in a day, we know that the Central time zone is important, we know that the temperate climate is important, but we’d like to know that there was something other than just the geography and the good fortune that we have. We’d like to think it’s also the spirit of entrepreneurialism, the pro-business concept that the governor’s tried to set out. Aside from the markets, to what extent do those subtleties play into the decision?
Babb: It plays a big part when you’re looking at all of the various factors. Whether it’s affordability, it’s the growth side in the business climate that’s here, which is very good, and we just talked about the numbers there. The governor was very pro-Texas business and development moving forward, and it was wonderful to work with, as was [State Representative] Dan Branch, the chamber, the mayor as well. And being embraced is an important part of the overall decision as you’re looking at things.
Steinhart: The last position I had with Bank One was running the commercial banking across the country, and the Central time zone and this airport really made it easier. Literally, from time to time if my schedule required it, I’d make day trips that you could do from here that you couldn’t make from the East Coast or West Coast.
Charles H. Pistor Jr.: To piggyback a little bit on what Ron [is] saying, the economic engine that the DFW Airport has been—we’ve all talked about this so much it probably doesn’t need to be restated, but it just cannot ever be underestimated. The “air is our ocean” kind of moniker we had when we first opened up DFW. It was unbelievable–an airport as large as Manhattan, it just was sort of mind-boggling to people and yet it’s paid off. For those of us who were privileged to be a part of that national sales effort recruiting companies and their branches and so forth in here, that was so exciting. Success begets success, so from the Comerica move, we’ll undoubtedly see some other people start to think more vividly than they did in the past about the advantages of a move.
Let me just flip back if I may. First of all, welcome, as I said when I came in, it’s nice to meet you firsthand. Chuck has been such a dear friend for 20 years. And I think it’s been said many times but just putting it on the record again, Chuck’s leadership—we’re all great believers of the tone at the top of course, and what he’s done here in this community in terms of leadership in the community in addition, of course, to his banking principle role has just been wonderful. That’s why it was very easy when I got called by Cheryl Hall, saying “What do you think? You’ve been around here a long time, what do you think about Comerica’s coming in?” And I said, “Fantastic! What a superb bank, well-managed, profitable, strong, big—it’s great.”
I guess I would pose the question, picking up on Ron’s thought about a banking question: Every time you turn around, there’s another bank coming in, and some statistics of how many banks there are now in Preston Center, I lose track. Sometimes I think people must be making these stories up, there are so many of them.
But the context of my question is within that kind of a mad dash here, this avalanche of new banks in town, what will Comerica see as its hallmarks to differentiate itself? This has got to be so much more difficult now because you’ve just got so many more commercial banks in town in addition to other financial services companies. You’ve been very successful with what you’ve been doing, and the answer may be more of the same, because you’ve been successful in the competitive market. But I’m just sort of overwhelmed with the deluge of all these new units. So if the job that each one of us, or the corporations, have is to differentiate themselves, what’s the magic answer or answers?
Gummer: First of all, as you’ve already pointed out, we have really seen ourselves as not trying to be the mass-retail bank that we see from others. We’ve really identified the crossroads of businesses and mass-affluent. And that’s where we see our niche. And in fact at the very beginning, we started off with a mission wanting to be the business bank of choice for owner-managed businesses, so we even took yet another step and said we really want to be for the entrepreneur and be the best bank there and develop that.
And for a whole host of reasons, but most importantly, because it was our people competing against someone else’s people, [it was important] to be able to be successful. Not how many dollars were spent here or how many locations we may have had, but just our folks against somebody else’s. So we knew if we had the best people that were trained the best and had the best support, we had a chance of winning.
So from that, then we started to grow the bank and develop our niche from there. And now as you may have seen over the last couple of years, coming back to [Charles’] opening comment, is the whole idea that we are seeing more and more banking centers, and we have started to open up more banking centers. But we’re still looking for those crossroads, and we’re not trying to be on every street corner. So I think that’s an important part.
And then the other part of what we do in terms of all that, is the relationship side of banking, which a lot of people talk about, we recognize that, but it’s just like at a football game: The plays aren’t all that much different, it’s the execution of those plays. And that’s really where we look to be able to make sure we execute better. And I think our growth now—since we’ve been in town where we started off with Grand Bank with $280 million worth of loans roughly, today we’re at $6.5 billion worth of loans. That to me is somewhat the proof that we were able to accomplish the overall objective or strategy overall.
Pistor: I might pick up as a customer of the bank, picking up on your emphasis on the people of the bank. It’s really been pleasant to have such a stability of people within the shop. I have appreciated what you’ve done there in keeping your people in tact.
Gummer: Well thanks. And in fact, one of the things that’s really fun to see is people grow over time. And when we did Grand Bank, the person who runs our middle market banking here in North Texas was with Grand Bank, and the lady who runs our small business area for the whole state was with Grand Bank 20 years ago now, and the lady who just retired from our operations services was with Grand Bank. So we can go through a whole host of people who give that stability in management that keeps that continuity.
Babb: That’s a very important point throughout our corporation: the longevity of our people. And probably the biggest challenge we have as we grow to the size we are today is to not lose that culture. An example of that, just to reinforce what Chuck’s saying, we hold what we call owner meetings, which is where all of the senior management show up. We were just in Houston, we were just here, and we do that in all the markets, and any of our colleagues can ask any question they want. And the important thing is we want to hear what’s working and what’s not working, so that we kind of break down that bureaucracy.
But the important part of that is making sure everybody feels that they can pick up the phone, or send an e-mail today, to anyone and not have to go up through the hierarchy. And I get those calls for a customer, somebody will call me and say can you call them or can you stop by and see them? Well, sure. Joe [J. Buttigieg III, vice chairman of Comerica’s Business Bank] and Chuck and everybody does. So as we grow, making sure that we continue that culture is one thing that we watch very carefully so that we have people who are happy with what they’re doing. And we give them the right tools so that they can be successful.
Steinhart: If you look at when Chuck came here 20 years ago, talking about stability of employment, he’s now the senior person of one the top ten banks here. Every one of [the other banks] has had probably from two to five different people, so I think that’s helped you a great deal. And having up to six, seven years ago, seeing statistics of when you initially came in and you set your niche and seeing how your market share grew to be right up there with the big ones, I think a lot of things caused that, but one is stability of people.
Nye: That is a distinguishing factor and there was just an article in yesterday’s paper, criticizing the turnover in the banks by a columnist who’s well-read here. And I’m sure the Bank of America folks were struggling, because it said, I couldn’t possibly name you anyone at the B of A. And that’s hard to take.
Gummer: When I first came to town and we started here, I was at Old City Park for the 4th of July. You knew I was a new person in town because I was the only person with a suit on, even though I thought I was clever with a lightweight suit. Before that afternoon was over, I had a stripe down my back.
But after we did the swearing in for the new citizens of the United States, somebody came up that I had not really met before, knew the name, and he introduced himself, and that was Charles Pistor. And then I was working on a campaign for something and called up somebody who’s probably been asked hundreds of times—and that was Ron Steinhart—to help out, and both were very welcoming and very accommodating to being supportive of what we were doing, and it’s really been a lot of those kinds of things. And to see Erle jump in with all the things that he’s been doing and be so active in the community over the many, many years makes it a great place to want to be because it’s the kind of community that cares about itself.
Clearly one of the strengths of Dallas is there’s so many people at such levels within the community that care about making it the best place, not just for themselves but for all of their citizens because you guys know how many people are involved with things that affect so many people at all levels of our community. It’s just been really exciting and fun for me and for my wife.
Babb: That’s another big part of our culture too, in all of the areas where we are and the cities where we are, we encourage our people to give their time and support [the community] like Chuck is talking about.
Nye: [Chuck] is the personification of that.
Gummer: Thank you.
Babb: It’s very important to be a very active member of the community in whatever way is important for you, is the way we put that forward. And that I think you’ve seen, and you will continue to see, that all of us are very committed to the community.
Nye: Well Ralph, I will tell you, having been recent chairman of the Chamber, with all he’s got to do, hardly was there ever a board meeting where Chuck wasn’t there. And not only was he there, he knew what was going on and he contributed to the dialogue, and I’ve always appreciated that, and that’s been pretty consistent through his term here. I don’t know where he gets his time, but he makes good use of it.
Steinhart: And I think today, especially with all of us being with major organizations in the past, we can appreciate that on one side we have an obligation to shareholders. Some people say, “Well in the old times the bankers would spend all afternoon on the community, funding everything.” And we realize that in today’s world, there are pressures—and rightfully so—that shareholders expect returns.
But I think being able to balance that obligation to your shareholders with your obligation to your community—and I certainly have seen in Detroit what you’ve done there, and I’m sure you’ll continue to, and you’ve told the people of Detroit you’ll continue to be supportive—but I’d like to hear your thoughts a bit on that balance between obligation to shareholders and obligation to community.
Babb: Obviously the shareholder is no. 1. And you have to do what’s right for the shareholder going forward. But being involved in the community is also good for the shareholder because that means it’s part of developing the relationships. Members of the community attract business from a selfish standpoint.
At the same time, you’re giving back to the community, which makes the community healthier and stronger. The better the community is, and the faster-growing a community is, the better the institution is. A bank really is a microcosm of the communities that it serves. And so it’s a win-win from that particular perspective.
Gummer: One of the things that’s exciting for me is that we do have a limited number of people here that can be involved in things. And one of the things I think we are going to benefit out of the community is having some additional leadership coming in from the bank that can get involved in organizations around town that can provide maybe one of the most important things. Obviously money is nice, but leadership is very, very important. And getting people involved in more of what’s going on will be, I think, a great help for the community as well as us.
Steinhart: You’ll be able to spread it to a few other people, eh Chuck?
Babb: Well you mentioned Michigan as well. The team in Michigan is the same that Chuck was describing earlier. The Michigan market team, a lot of people have been there 30, 35 years. Chuck used to work with them many yeas ago, and they’re very committed to the communities. The transition will be seamless to the organization, like you’re talking about for those of us that are making the move, which is important. Because it’s very important that Michigan succeed as it is with Texas and California, and we want to see all the communities succeed, including Florida and Arizona, for the reasons I indicated. That’s a win-win for both the bank and the community. And that’s why we balance that focus. And you just get up a little earlier, and you go to bed a little later.
Nye: Ralph, to stay with the recurring theme, we’re real proud of the vibrance and I guess you’d say the resurgence of the downtown Dallas area. A lot of downtown living, a large increase in the number of living units downtown, more on the prospects, got several new parks on the drawing boards, great plans for the Trinity and those look like they’re going to go through, and probably, we believe, arguably the largest, privately financed arts center in the world being built here. We’re proud of downtown.
There’s a rumor—of course you guys have always been downtown, and you’ve had a presence downtown—there’s a rumor that you might be willing to locate downtown. And I guess I’d ask two questions: Can you tell us where [the new headquarters is] going to be, and number two, to what extent is that rumor right, and if that rumor is right, to what extent do these peripheral kinds of things have to do with your location?
Babb: We have not made a final decision yet. We are actively looking. Top of the list is the city and downtown. We’ve been here for a long time, and we think that’s important. And we’d like to continue that.
Nye: We’d love to have you downtown.
Steinhart: Let’s talk a little bit about Comerica the organization today. A couple of us were in [the industry] for a long period of time, and the business has changed. You’re a much larger organization today. You came here with a really defined niche and did really well in it. But one of the things you find as you get larger is you look for other sources of income and diversification. Tell us a little bit about Comerica going forward, and at the size you are today, all the way from acquisitions to products and services, what do you see?
Babb: Our top strategies were first to expand in our fast-growth markets and we’ve talked about that this morning. Texas certainly is right at the top of the list with California and the other markets that I mentioned.
The other is we were and have been known for a very relationship-focused business bank, which Chuck described very well. We also have a strategy to expand in the retail. I think some of you know Connie Beck, who we brought in to head up our retail organization, and she is doing an excellent job. Dennis Mooradian, we brought in to head up our wealth and institutional management, and we’re looking to balance those businesses. Because the key is with a small- or middle-market company, we want to have the products and services to leverage not only the management, the ownership, but also the employees. Bank At Work is a big product for us.
Today wealth management is easier to go at because it’s a very open architecture. When we’re talking with you, we need to bring you the best products. If we don’t manufacture it, that doesn’t matter to you as long as we go out and get it and bring it to you. That’s oversimplifying it but that’s important.
Retail [is also important] because we need these locations that Chuck was talking about. When we look for locations, it’s more hub-and-spoke of looking for where would you put a small bank today, because as we talked about our culture is really to be a small bank even though we’ve gotten bigger. And if we’re going to be there, then we want to take care of all the opportunities that are there and make sure that we have all the products and services.
Again with the technology today, we can have a location where you come in and we open a retail account for you and we give you an account where you can use ATMs anywhere, and anybody’s ATMs and not charge for them as an example. So technology allows you to get the benefits of being a much larger organization or mass-market retail as Chuck mentioned. So that’s been very advantageous for us and very exciting for us going forward, and we’ve been doing a lot on the products side. I think we’re now getting close to being competitive in wealth management and retail across the board, not that we weren’t competitive before, but where we needed to be with both Connie and Dennis, which is very important.
Nye: When you talk about moving an executive team, as you are, obviously they’ve got deep roots where they are. They’ve served the city of Detroit very well. And to ask those folks to pick up and move south a few miles, there must be some cross current in that. I’d be curious if you could describe for us the typical response of your executive team to moving to Texas and to Dallas.
Babb: The executive team was all part of the decision. That’s the way we do things. We have what we call the management policy committee, which Chuck’s a member of. And everybody was pulled into that circle as we went down that road of really thinking through, Do we move, and if we move where do we move? And is it the right thing to do for all of the reasons we talked about earlier, specifically the shareholder? And so everybody understood that, had time to think about it, the input was given.
We have people who have been in Michigan for basically all their lives, Joe is an example, Dale Green [executive vice president for Comerica’s corporate banking] I think has been there certainly most of his career. And others have been new to the organization like Dennis, even though Dennis was originally in Michigan he had been in California, and then Connie is from here. So as it evolved, everybody understood the reasoning and the why and so that didn’t become in my opinion that difficult of a decision for most people.
Nye: I recall when JC Penney came here, they described the—and of course they moved a lot more people, but nonetheless they described the trauma that some of the employees went through, that some of the officers went through to make this decision. But their story was, a year after they arrived here, everyone was delighted with the move. We’d like your colleagues to have the same experience and to the extent that we can facilitate that, we want to make sure that they’re happy in the move and happy in their new location and they fit into their new community, and we want to welcome them every way we can. So for whatever it’s worth, I hope you’ll pass that along.
Babb: We have. We actually had a short meeting, the days are running together, but it was on a Sunday night a few weeks ago, when a number of our people were down and folks from the chamber and the company we’re using as a relocation company did a little presentation and were talking people through. We’ve got our people coming down and looking around.
And I don’t want to understate it at all. For those people who’ve been in Michigan, grown up in Michigan, it is a tough decision personally, but you do understand business-wise. But you have family, you have roots, and all of that. And each person works through that their own way and that is a tough choice.
We’ve got quite a close team and I think they understand it. What helps is the distance, too. And the welcome has been excellent as well.
Pistor: One of the things, and Erle speaks to your point, I think a little bit, that we learned in our relocation efforts all through the ’70s and ’80s when we were doing an awful lot of relocating of companies and major divisions, is that there often is an accidental oversight of not paying enough attention to the spouses’ needs and the trauma that they go through.
The business exec goes from one ladder to the other ladder. The spouse, on the other hand, moves into a new community and suddenly she’s kind of at the bottom of the seniority list in the garden club or whatever else. And it’s much more of a transition difficulty for them often times. And we felt so strongly about this in our shop that we often asked if we could just get in a closed cafeteria with the wives and just talk a little bit about what was going on and how we could possibly help.
Steinhart: Some may be husbands today.
Gummer: I think that’s an excellent point. One of the things we’re trying to do with the initial group here is set up a little buddy system for the folks that we have here already to be in contact and welcome them and make sure that they get together with them and try to answer some questions that they may not ask other people.
We have some benefit of having a few people come ahead so to speak, and they know the coast is clear, they’re going to have a good time, and it’s treated others well, so I think there’s a great expectation of that. And as Ralph pointed out, everybody could easily understand the decision as they went through the process there. So there’s a lot of excitement now and a lot of optimism.
Pistor: And you’ve got colleagues in place here and that’s a lot different than when you’re just coming in raw.
Steinhart: Like Exxon did.
Pistor: Like CalTex or the others.
Steinhart: Kimberly-Clark.
Babb: When we did the announcement—one of the things when you’re thinking about what I was saying earlier about being a small bank and being a community bank in the way we work and live and deal with things—a lot of our colleagues here called and for the very reason you’re talking about, the understanding of the type of change, the understanding of going through the thought process and offering help and asking, “Can I do this for you? Let me tell you about things.” And that’s part of being a real team and being a family, not just a team. That’s true in each of our markets.
Nye: I hope and I believe that this is a very welcoming community and there will be a place here for everybody, everybody’s interests can be accommodated. I do think it’s a very open and welcoming community, that’s been my experience over the years. Certainly we want that to be the case here.
Pistor: I’m going to roll into another business question. A long time ago in a different context, I used to make the comment that we bankers were pretty good bankers, but we weren’t very good businessmen. What I was meaning about that was—things have dramatically changed since then—but we tended to look internally to our competition being our same commercial banking folks too much and not about either the other financial service vendors or individual banks and what they were planning to do.
I got my awareness of this, to share with you a personal story that always impacted my personal thinking: I was privileged to be on the board of AMR American for 18 years, and I would come out of that board meeting and felt I probably knew more about Delta and United than their own directors did. Why? Because the management of the company was always focused on the competition.
The competition now takes so many different forms. Because banks are now better-equipped as has already been said with powers, positions, places, prices, so we’re not nearly as narrow as we used to be. But within that context I guess my question is who do you see as the competition today, and maybe more importantly, who do you see as the competition to Comerica tomorrow? Because change is all about us constantly and I would just be so curious as to whether you’re saying, OK we’re dealing right now with this plethora of new banking centers, but then again every industry is also looking at all sorts of things happening abroad from the foreign banks and new type of institutions. I was just wondering if you were going to use your crystal ball and say, ten years from now, public enemy number one from our point of view is going to be so and so. Is there any sense of tomorrow’s competition?
Babb: I think things are changing very rapidly as you mentioned. As long as I can remember, it’s always been that way. It’s been that the new competitor is out there. It’s not just banks. There is a liquidity today that is probably as high as I’ve ever seen it and it comes from a number of different places. You mentioned foreign banks but there’s also funds and there’s investment banks, and I think that just continues.
I think the key and the focus as you look at all of the various competitors as they develop gets back to what Chuck said earlier, and that is the relationship. And I believe that will always differentiate us. Because when you really want your bank, you want to pick up the phone and call Chuck or you want to call Pat or you want to call Susan.
Today if you look at the surveys, location is still 50 percent of the decision for the retail customer to open their account. But they still want to know a person even though they may not come back in for a while because they use Web banking or they use Comerica Central or whatever. But when they want to do banking in business, they want to call someone they know. And that means a trusted person. I think that’s the thing we will keep our eye on going forward.
As I mentioned, the biggest challenge for us is making sure we keep the colleagues, give them the tools they need to compete with all of these new entities that are coming in and [teach them] how to compete with it. But I think we can do that. Today we have the products and services so that’s not the issue. I think you differentiate yourself by the people.
Pistor: I think the pendulum is actually swinging back into the relationship priority. I think we got away from it maybe too far, and it was just all about ATMs and 800-numbers and a lot of other things. Now it seems to me that people are so dismayed by that.
There’s an article in the paper today about people being on the phone for two hours with their cable company. And we’ve all had that experience. And so now you’re pricing more this relationship personal equation.
Babb: And having the biggest share of wallet of an individual or a company is very important. Not only from the standpoint of being able to provide you all the products and services you want, which I think we can do, but two when you have that with us, you’re very loyal to us, too, as long as we treat you the way we should. And my son would be a perfect example. He’s in technology in California and so everything’s on the computer, does all his banking and everything. But he bought a house and now he’s about to have his first daughter, and all of a sudden he needs to get things fixed. So he needs to have a home equity line, and all of a sudden it’s, I really need somebody I can go talk to because that’s not been my experience. So I obviously had one that I recommended him to go talk to.
And that’s the kind of thing that I think differentiates us over time. We have what we call a bank without borders because we are spread out as we are, and we don’t want to lose our talent. So if a spouse gets transferred or somebody is moving to a different location, and we have had a number of these, we will assist and make sure we transition them into those markets and that we keep those people in our club because that maintains that culture.
Nye: Ralph, as the only non-banker in the crowd, I guess I need to probably settle to the side here someplace. All of my friends who are not in the business are fascinated, and maybe this is only in Texas but I suspect it’s in other places, at the proliferation of start-up banks. The story has said that every time a service station closes in Dallas, a bank opens. And if you watch the corners around town, particularly in North Dallas, it is truly incredible. And somebody mentioned Preston Center, I don’t know if there are 41 banks in Preston Center or not, but that’s what I heard. And it’s hard for me to believe.
But that trend can’t go on forever. Those banks must face a serious challenge of providing the breadth of services that so many people want. But there is this phenomenon going on. What do you predict in that respect? How long will that trend continue?
Babb: That’s been going on ever since I’ve been banking. If I remember the numbers right, in the United States we’re net down a little bit from where we used to be at one time actually, but not a lot.
And it’s not unusual to see that. Some grow and survive and turn into larger, stronger banks. Others are acquired at some point in the future, but that’s been going on ever since I can remember and I don’t see it changing.
I think you see more in Texas. If I remember the numbers right, I think Texas has twice as many banks as California. I read that in an article the other day. And it’s because of what you were talking about.
Steinhart: A lot of that goes back to that we didn’t get branch banking until ’86. So you had unit banks formed everywhere.
Gummer: But I think it does speak to the entrepreneurial flare of the folks here in Texas, and lots of people like to say they own a bank or own part of a bank. They may be less concerned about how much they’re making on it as much as they’re able to say they own part of a bank.
Steinhart: Like a racehorse.
Babb: That is competition but it’s also a customer. We do a lot of correspondent banking. And that’s an important product/service that we provide and we very much like to provide that.
Gummer: You’re right. When you take a look at that, that’s a group of the independents and you have a group of others where our strategy varies because of what they have or what they don’t have in terms of competitive advantage. So in a sense, it makes even more opportunity for us. The other thing is that if you went back and looked over time, and I think we’ve probably about closed this gap now, but if you went back several years ago, the number of banking centers per million people in Texas was significantly less than in other states.
So now we’re filling that gap and I haven’t looked at this lately so I don’t know if we’ve closed the gap completely, but I don’t think so. I think there’s still plenty of opportunity there. But what you also see is the new banks as well as the branches of the existing banks, which has actually taken on a new life of its own as well.
But for us, coming back from what we do in terms of thinking of our strategy where we really focus on things a little bit different. We’re not trying to be on every street corner. And some folks who are the mass retail banks, that’s what they want to be. And we want to be in those right locations, the crossroads of mass affluent and businesses, and particularly owner-managed businesses.
Steinhart: You’ve done a great job over this 20-year period of building up a bank with a lot of expertise in size and market reputation. With your move of corporate headquarters here, would you see any more increased appetite for a little more rapid expansion of banking centers or would you see an increased appetite that you might be a little more interested in acquisition here or there to accelerate your growth?
Babb: Let me talk about the banking centers first. We will accelerate the expansion. One of the big reasons for moving, or the big reason for moving, was to accelerate growth–to team up with Chuck and the team here, and to expand quicker here than we had originally laid down in our plans. So the answer to that is yes.
We’re always interested in looking for potential acquisitions. The key for us is we have been ramping up this internal model, and as you all know, when you start that, it takes a while for things to pay back. And even when they begin to pay back, we’re not letting that fall down at the moment because we’ve been ramping up the number of locations that we’re doing, which means more people and more investment each year. That’s what I refer to as the “grit your teeth” period of investment for the future. And an acquisition has to get us there quicker in the locations that we want to be, as Chuck mentioned, but not take us off that internal engine, which, for the future, is the most important one in my opinion.
So it will be a combination, if we find those that fit that and of course the price and everything that you go through, then we’re always very interested in acquisitions in the markets where we are that move us out there that much faster.
Pistor: I want to flip around, Ralph, and pick you up on a point that you mentioned: You referred to your son, who is in California, and it caused me to think about this. If a young person approached you today about a possible interest in banking as a career and was seeking your advice, do you have any differentiating thoughts on what he or she might ought to be thinking about if they’re talking about a career in commercial banking?
Babb: I think one of the things that differentiates us, which didn’t years ago but I think does today, is the credit college that we have. We’re likewise putting together the same kind of training for new banking center managers in the markets and we’re expanding that—right now we bring people to Michigan to go through the college but now we’re going to begin to do that in the markets. I think that’s very important. It gets you—this is not a word, but it’s one I use inside within the organization all the time—it gets you “inculturated” very quickly into the kind of culture that we have, the understanding of the way we want to do business. And it also shows you that we want to grow our people. We like having people that have been with us 25, 30, 35 years.
And as we grow, there’s going to be opportunities, and those are available to you, and not only in the markets you’re in, but any of the markets we’re in. We really encourage you to think through those opportunities because banks used to be one place and they used to think a lot that way. Today, even in our case in the early years, when Chuck came down, that was a big jump back then. But today not only is it being reinforced by the fact that we’re moving the senior team, but also they’re seeing people now who fairly readily, very senior people, move market to market. And that makes a culture that is very attractive to a lot of people. Gives you a chance to see a lot of different businesses, too.
Gummer: I think it’s probably a more exciting time maybe than ever to go into banking. One is, it still has a value system that everybody really appreciates, I think. And we hear that from our folks all the time when we ask them, What do you like about it here, the environment that we have, the values than we have?
But today more than ever before, compared to the days that we all started, today you can actually get rewarded for your performance in a more direct manner than you ever could before. And the career opportunities that you have that Ralph talked about, whether it’s within the company or whether it’s around the country. The opportunity is a whole lot greater and more exciting than maybe ever.
Pistor: I think Comerica is different though from an awful lot of the other major banks in terms of this relationship. I think if I were asked the same question, I would want to probe that person a little bit to make sure this person is not just a people person and wants to be in a tender loving care kind of situation. Be careful, don’t do that with certain banks because it’s not going to work like that. If you want that, you have to go to a community bank or to Comerica where you’ve got the culture established as different.
But I see some differentiating things with the big systems, a couple of whom—and this gets back to what Erle’s comment was earlier—where the columnist said I don’t know who could be and who is in charge of X Bank and X Bank. So you are different, and you touch a good nerve with those of us who came up that other route.
Babb: And that’s one of the reasons the community banks are successful. Because that’s what they provide. The same kind of thing that we’re talking about. The fastest-growing banks are the smallest banks because of that, I think.
Steinhart: And because of the tremendous consolidation that has occurred in the industry, where banks that used to be community banks and offered that service are now part of a uniform system, and the smaller banks are the people that still operate like the banks and profit from that.
Babb: It’s back to one of the stories I was telling earlier about getting a call from one of our people to call a customer. That makes my day. Number one, that they picked up the phone and called, and number two, because there’s nothing that makes me happier than to talk to the customer during the day. We all know we have to do everything else but that’s the fun part.
Nye: That’s where the rubber meets the road.
Babb: That’s exactly right. That’s what makes it all worthwhile.
Pistor: Erle made a comment earlier that caused me to think about one thing and I’m sure you have heard from Chuck as he’s been involved right in the core of the community—Dallas is unusual in that it does not take lightly dealing with five layers down, so to speak, in an organization if you wanted to have participation. It tends to be right up at the peer level with the CEOs. And I think the companies that have been somewhat disappointing to me, of course they’re few in number, but [they are] when the CEO just detaches himself, doesn’t want to be a part of this community and puts it down to the vice president of community affairs or something like that.
Dallas itself has this culture of dealing right at the top of their citizens council where these guys have been, and Chuck’s been, and so forth. But we used the word earlier, the “tone at the top” continues to be a hallmark of our business community. This community wants to see that tone at the top and that’s what Chuck’s done so well for us.
Steinhart: Another big thing about this community that will be real positive with your move–and Chuck’s a good example, as I am. Chuck came here 20 years ago. I came to this community 40-some odd years ago, never lived here before. It’s a very accepting people. It’s not one in which you’ve got to earn your spurs and you can’t do anything of importance until you’ve been there 10 or 15 years. It’s very accepting of business people. It’s got a very pro-business attitude. Chuck’s got more opportunities to play a leadership role than he’s got time, and that was from day one. “New kid on the block” doesn’t mean anything. And I think that’s always good to an executive team and new people in town, whether it’s a spouse that wants to get involved in something or the employee who has an interest in certain areas. That person’s going to have a meaningful opportunity very quickly and that’s much different than a lot of communities. So I think that will be a big plus for your move here.
Gummer: As we worked on this for the few months leading up to it, I was already getting and providing a list of the organizations in town that [people] can get involved in, what [we’re] already involved in, and where [people can] start once [they] start landing on the ground.
Babb: You’ll find that’s a big part of our culture and that’s like I said earlier, it’s very important that we’re involved in the community and throughout the community. And it’s important not just because it’s the right thing to do, number one, but it’s good because as I mentioned earlier, we want all the communities we’re in to be as good and grow as fast as they can and anything we can give to help that happen just comes right back to us.
Steinhart: It helps you in the long run if you’ve got vibrant communities. The banking business is a lot better in a vibrant community than one that’s not.
Babb: And we have all been very active in the Michigan community and one of the things that’s very important to us is that we transition all of those so none of those get lost in the transition. Because Michigan is a very important market, it’s half our company, we’ve got a great team there, and all of our community aspects will be transitioned very appropriately so we don’t lose momentum in any of those and the commitments to the community. And we’re looking forward to being involved with the right places here.
Pistor: I want to share with you a real fast, but I think funny, personal, true story that illustrates Ron’s point so well. Years ago we were fortunate in Dallas to have the relocation of the National Gypsum out of Buffalo headquarters down here, and I remember talking to the CEO and saying, “You know this culture in Dallas of wanting to know [what’s happening] both in the city and business. I want you to come over and I want to set up a cup of coffee with the city manager, George Schrader.” And George was a fantastically good city manager for Dallas. And we went in and he just put his arms us, and said, “We’re so excited to have you here, and I want to know anything I can do from the city’s point of view.” Anyway, it was a great visit and we came out and the CEO said to me, “Hell, in Buffalo they don’t even know we exist, and here I’m meeting with the city manager the first day!”
Babb: I have to say, when I met with the governor, the same thing–the excitement, the pride of what was going on here in Texas and the desire to attract to Texas. I talked to the mayor on the phone and the same thing, very excited about the opportunity, very supportive, and then of course Dan Branch and others, Mike Rosa at the [Greater Dallas Chamber] and all were very much involved as we were going through the decision process. I can’t say enough good things about them all from the standpoint of the support and the excitement and the enthusiasm that they all showed.
Nye: Well I’m pleased that the chamber was a positive part of this. We certainly try to be.
Gummer: Mike represented the team very well.
Nye: The main thing was to keep a lid on it.
Gummer: That’s probably the thing we could add, everybody could keep it to themselves because they understood the importance of the confidentiality of something like this for a publicly traded company.
Steinhart: I was really disappointed in myself. I didn’t know about it until I read it in the paper!
Pistor: I called Chuck’s wife, and I said I know he’s not going to take my call, but I thought we were good friends!
Steinhart: Well our time is about up, so let me just ask, is there anything as far as your move or your company that you’d want to point out that we haven’t asked? It’s been an enjoyable exchange here.
Babb: We certainly appreciate the reception. And we’re looking forward to the future and being here, and we look forward to working with you all.
Steinhart: It’s a privilege. It’s great for our community. And we’re pleased to be a part of it.
Nye: We’re irrationally exuberant.
