| QCR Holdings: Relationship Banking |
| Financial | |
| Written by Liz Jones | |
| Monday, 01 October 2007 | |
 Doug Hultquist explains how this company created a community banking enterprise in the face of industry consolidation. Originally, Hultquist and Bauer intended to grow in the Quad Cities and potentially acquire small, community banks in rural communities in eastern Iowa and western Illinois. “But as we grew, we realized that our expertise was in the commercial side of banking, and that owner-managed companies would better support commercial activities,” said Hultquist. As a result, QCR turned its sights toward building banks from the ground up in larger markets with strong commercial and industrial activity.  Doug Hultquist Although reaching a state of profitability takes longer when starting from scratch, QCR has avoided many of the pitfalls associated with bank acquisitions. “Most banks have a high expectation of what their bank is worth upon sale, but not all key employees and clients can be retained, and you run the risk of inheriting unpleasant surprises,” he said. “Our model allows us to put systems and structures in place according to our own standards, and more importantly, we can hand-pick our staff, which gives us an incredible advantage.” Going public right out of the box gave QCR another advantage. Hultquist explained that most start-up banks gather capital from their respective communities to get started and raise capital as needed thereafter. “We predicted the opportunity for growth would be significant and we should be careful not to start off undercapitalized,” he said. Being a public company enabled the QCR to reach $200 million without seeking additional capital. “Going public comes with a fairly significant cost—there are SEC and NASDAQ requirements to meet and so forth, but it has given us access to capital we needed to grow.” Community focused According to Hultquist, each QCR bank was created under a separate charter and given a community-centric name to illustrate the company’s commitment to relationship-based banking. In addition, each bank has its own board of directors. “A lot of consultants advise financial institutions on how to collapse charters, but that is not our model. Our game plan would not work if we didn’t present ourselves as a local bank focused on the community,” he said. Nearly 85% of QCR’s loan portfolio is made up of commercial loans and leases, meaning the company has to target a wide array of businesses and industries. The company is selectively involved in real estate development, manufacturing, and the professional arena, including doctors, lawyers, and accountants. “We don’t want to be overly concentrated in one industry in case it takes a downturn,” said Hultquist. But there is one exception. QCR serves a high concentration of hospitals and other healthcare-related organizations. “The healthcare industry is an increasingly larger percentage of our GDP, and it appears to be immune to volatile highs and lows.” At present, QCR is not interested in pursuing geographic growth. Instead, it is looking to increase marketshare in its existing footprint. Hultquist noted that QCR will not open a branch unless it is expected to reach $100 million within five years. “Typically, when banks open a branch, they hope to hit $35 million because that is when they believe profitability starts. We set our mark a little higher,” he said. As QCR looks to grow marketshare, it is limiting its reliance on bricks and mortar, as well as labor, with the use of technology, such as remote deposit capture. Strong online capabilities are also helping satisfy customer desire to do business at all hours of the day or night. But no matter how large of a role technology plays in QCR’s business, it will never replace face-to-face interactions. “Customers prefer to do some banking online, but they also enjoy working with people, so I don’t think the branch delivery system will ever go away,” Hultquist said. People business Of course, the foundation of relationship-based business is people. At QCR, the relationship between clients and bank employees goes far beyond a momentary transaction. “We view our people as consultants, rather than people who deliver financial products, and for that reason, our recruiting process ensures we hire the most talented people in our markets,” said Hultquist, adding that all candidates need to be involved in the community. Hultquist explained that one of his favorite business books is Emotional Intelligence by Daniel Goldman, which discusses the value of being aware of others’ emotions in the workplace in addition to having technical skills. “It’s about understanding people and communicating, showing empathy, and motivating yourself and others. I think those are the keys to leadership,” he said. The concept of emotional intelligence has made its way into the QCR University’s most influential class, Learning to Lead. Each year, 15 middle managers and supervisors participate in the six-week inhouse training program taught by QCR’s own executive officers, as well as outside professors and consultants. QCR has also initiated an incentive-based compensation program that helps employees feel more entrepreneurial. “We’re figuring out how to take care of the majority of customers’ needs through technology, and we’re motivating our staff to create desired revenues and control costs in the branches.” As a result of its emotionally intelligent, entrepreneurial culture, QCR’s retention rate is high, meaning customers are guaranteed a sense of continuity. “Customers know they can get a quick response because they are talking to decisionmakers, and they know we are looking for solutions as opposed to just selling them a product,” Hultquist said. |
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American Executive is a RedCoat Publishing publication.
American Executive is a RedCoat Publishing publication.
