As a former Marine and a veteran of three decades in the banking industry, Ed McKeon had faced more than his share of challenges. He’d seen combat duty in Vietnam, and once managed dozens of saucy, high-powered New York saleswomen.
More recently, he’d been tapped to turn around a small bank that was losing $75,000 a month.
But now, at 53, an age when most bankers are thinking more about their golf attire than finding a new pinstriped hill to climb, McKeon faced perhaps his toughest hurdle yet. He was just three days away from a self-imposed deadline for assembling the start-up capital for a new bank in Medina, and his group was several hundred thousand dollars short of raising the total it needed.
There was plenty of initial excitement when his group filed its public offering of stock with the Securities and Exchange Commission in February 1998 for Western Reserve Bank, a start-up, or “de novo” bank.
“And then it’s dead,” he says, as potential investors waited till the last possible moment to climb aboard. Finally, on July 1 of last year, with the clock ticking down the final few days on a three-month start-up window, McKeon gathered his board members and asked them to bring their checkbooks. The board was suggesting that he leave the door open to extending the seed-capital phase for yet another three months, but McKeon knew that “We couldn’t go through this three-month process of waiting again.”
For him, at least, it was now or never.
So while his secretary began accepting additional checks from board members, he and the staff hopped in their cars and drove around Medina for one last push, actually picking up checks from fence-sitting investors. One was for more than the $320,000 maximum the group was accepting from any one investor.
In the end, it worked. In a three-day push, the group raised another $1.8 million from about 90 investors, and the bank, which had won final approval from banking regulators only days earlier, was ready to open its doors in October, with $6.4 million in seed capital from more than 400 individuals.
It’s been mostly uphill ever since. The bank — which focuses its efforts on Medina and contiguous townships, but which does about 30 percent of its lending in Summit and Cuyahoga counties — projected to the Federal Reserve that it would hit $17 million in total assets after 12 months. Instead, Western Reserve found itself at $27 million after just eight months.
Now, he says, “We have a list of 35 people who want to invest and can’t get in.”
For the native New Yorker, a 31-year veteran of the banking industry, this was a long way from his roots in the world of large banks, where his clients were once the likes of ITT, General Motors and Xerox, and his competitors institutions such as Chase Manhattan and Bankers Trust.
Still, things both large and small seem to be breaking his way these days: He did eventually lose that rash.
Western Reserve Bank, says chairman and CEO P.M. Jones, “really started as a fantasy of mine.”
The president of a Medina-based leasing company — a man so creative he once leased a herd of dairy cattle — Jones had watched in growing frustration as industrywide consolidation was leaving the area without any locally controlled banking institutions. Old Phoenix Bank, a Medina institution since the Civil War, had been purchased by First National Bank in the mid-’80s, but that institution largely left it alone.
Now, more than a decade later, another banking merger, this time involving FirstMerit, meant that all operations would be centralized in Akron. It caused a severe disruption in Jones’ leasing business. But for the Medina community, it was more a matter of local pride: Tiny Farmers Bank of Spencer, headquartered in a town with a single traffic light, was the last bank in the county that was locally owned and controlled.
Jones wasn’t alone in his complaints: Other business people and pillars of the Medina establishment were also upset. “And all of a sudden, I had 10 guys who wanted to start a bank,” Jones recalls.
Because he had banking in his genes — his grandfather, father and brother had all been bank presidents — Jones was first among equals. He did his homework, driving to North Carolina to pick the brain of a banker he’d read about who’d done a start-up.
And he hired former Ohio banking regulator Hal Nichols, now a Toledo-based banking consultant, to begin designing a plan. A veteran of perhaps a dozen de novos, Nichols’ track record was enviable: In his first deal, Capital Bank of Toledo, $13 million of start-up capital has been transformed in about a decade into a $900 million bank.
But the group needed an industry veteran to operate the bank day-to-day. Jones heard about a banker named Ed McKeon from Cleveland business man George Klein. McKeon, who moved to Ohio in 1973 to join The Huntington Bank in Columbus, was making a name for himself by turning around a troubled bank with a rogue board, Enterprise Bank in Solon, that had been losing $75,000 a month before he came on the scene.
In that assignment, McKeon had to contend with low internal morale, as well as problems arising from the bank’s mixed reputation. “Ed came out on top from the 40 resumes we got,” Jones recalls.
Certainly, Medina County’s pleasing demographics made it an ideal place to establish a new bank. The booming area, once largely a farming community, was becoming a favorite destination for suburbanites from Greater Cleveland and Akron looking for less crowding and more land. And the new arrivals were often of the upscale variety: Countywide, the average household income nearly doubled between 1979 and 1989, from $24,000 to $43,000.
Other banks from outside the area, noticing those same demographics, are in varying stages of expansion to Medina. But Western Reserve has an edge that other competitors can’t easily match: Its broad ownership base of local movers and shakers.
The bank has been able to call upon a wide assortment of pillars of the community to open doors, make contacts and turn up leads. To begin scrubbing up business, says McKeon, “We started out calling our owners, starting with A’s.”
And they’ve helped stimulate so much, he says, that “We haven’t gotten past the Cs,” he says. “Instead of having 10 or 20 owners, we have 418 owners, who open doors for us. And we’re almost reacting to their door-opening, rather than trying to kick the door down ourselves.”
Community banking is really a pretty simple proposition, McKeon says. In this era of ever-lower-service banking, Western Reserve is simply returning service to the customer equation.
“None of this is rocket science. We’re just operating the bank as you [customers] would want to see. Firing everybody and trying to get computers to answer the phone may not be the way to go.”
As he leads a visitor on a tour of the bank, outfitted throughout in rich cherry wood, well-plumped Queen Anne chairs and plush carpeting, he boasts about the bank’s unusual design features. There are no ropes herding customers here and there, and tellers are seated at desks near the front door.
“People ask whether we’re going to get into private banking. Well, private banking is just the big banks’ attempt to be like community banks.” This may be upscale, he says, but it’s upscale for the masses.
But there are also drawbacks to life at smaller banks, beginning with fewer internal resources. These days, when he designs a new “sweep” account, a cash-management product offering clients a vehicle for getting the highest return on their accounts, he has to take the lowest-tech approach. Years ago, he recalls, when he oversaw such a project, he simply called upon a group of computer programmers for help.
It’s all served to
keep him humble. For years, McKeon has maintained a friendly rivalry with a former colleague as they moved up the ladder in the banking industry. Now, with his friend heading a $4 billion bank in Minnesota, McKeon recently conceded defeat.
“You finally won,” he told his pal, “because you have $4 billion, and I have zero.” His friend’s response? “Yeah, but you’re having more fun.”
How to reach: Western Reserve Bank, (330) 764-3131
It’s all in the details
In the coming battle for banking supremacy in demographically attractive Medina County, Western Reserve Bank’s Ed McKeon, a veteran of three decades in the banking industry, leaves little to chance. Here’s a sampling of some of his tactics.
Every employee is an evangelist. Most banks employ a courier to pick up sacks of money from customers. Western Reserve employs someone who doubles as an evangelist.
“I don’t just want a guy picking up bags. He’s out talking to people about the bank, like a customer service rep,” says McKeon.
Toward that end, the bank’s part-time courier is a veteran teacher, blessed with the gift of gab. “He’s got to be the best-educated courier in the history of the banking industry,” says McKeon.
Similarly, McKeon insists that his tellers are the highest-paid in the county, “Because we want the best. They touch more people in a day than I’ll touch in a month. And in banking, nobody takes care of the tellers.”
Even in banking, a sense of humor has a place. Banking and bankers are famous for being pretty dry. But a sense of humor pervades Western Reserve. On the day SBN visited, a life-sized poster of actor Humphrey Bogart was propped up in a back room.
Asked about its meaning, McKeon says; “Bogart has shown up all over the bank; he gets around. He’s shown up in drag in the men’s room. He’s shown up in the vault in the morning.”
Bend over backwards for customers. While the sign on the door says the bank is closed at 4 p.m., McKeon says his staff has been known to unlock the doors to facilitate customers as much as an hour and a half after the ostensible closing time.
Similarly, there’s plenty of give in the bank’s overdraft policy: On the first occurrence, the bank will make a courtesy call, and waive the $17 overdraft fee. The second time, the bank goes Dutch, splitting the charge with the customer. After that, the full charge will be applied. “You can’t do that when you have a million customers,” says McKeon.
Build in the personal touch. McKeon makes a point of writing personal thank-you notes to every customer. Thus far, that’s meant more than 1,500 notes, which he writes at home in the evenings.
While he admits to having his staff address the envelopes, he writes all the notes himself, in long hand, and includes his direct phone number. That can lead to some surprises: When customers use that number for routine inquiries, “They’re a little bit startled, because they just called to get their balance,” he says.