By David Magee
This story appears in Birmingham magazine's August 2016 Issue. Subscribe today!
The year: 2006. The place, Birmingham. AmSouth and Regions, both based in the city, had just merged into one bank--and the timing was terrible. National housing prices began to fall almost immediately, and foreclosure rates began to rise. It was the beginning of America's severest financial downfall since The Great Depression.
Though both AmSouth and Regions were based in Birmingham, the list of similarities was short. AmSouth was rooted in First National Bank of Birmingham (1873). Regions was born when First National Bank of Montgomery, Exchange Security Bank of Birmingham, and First National Bank of Huntsville merged in 1971 to form Alabama's first multibank holding company.
The banks had different procedures, different product portfolios, different operating systems, and different employee cultures. The result? One big integration headache. Then, at the very moment Regions was struggling to integrate its brand, system, and employees, the national housing bubble burst.
BOOM.
Billions of dollars on the books evaporated, just like that.
Too many homebuilders and homeowners in cities such as Miami and Atlanta, where Regions had considerable exposure, could not service their loans. Some just walked away from their projects, leaving entire developing neighborhoods untouched for the bank to deal with. Loan defaults at Regions jumped to more than 4 percent, up from 1 percent just three years before.
The bank accepted a $3.5 billion investment from the federal government's Troubled Assets Relief Program (TARP) to shore up capital. This added another layer of trouble: oversight that reduced nimbleness and made doing new business excruciatingly difficult. Then-CEO Dowd Ritter was ridiculed in the national press for taking personal flights with family on the company jet weeks after the bank accepted the TARP money. Meanwhile, post-merger challenges hurt customer service, and Regions was ranked in 2007 and 2008 near the bottom in the banking industry for customer service.
New shares were sold to raise capital, the dividend was cut to a penny to conserve cash, and Regions' stock price tumbled, reaching a low of $2.50 on Feb. 4, 2009--a 90 percent decline. National stock pundit Jim Cramer claimed he wouldn't touch Regions "with a 10-foot pole."
"It was a very difficult time," recalls Charles McCrary, the former CEO of Alabama Power who has served on the bank's board, beginning at AmSouth, since 2001. "Just horrible. The economy was struggling, banks were failing, and the federal government was getting involved. It was not a great time to be in or around banking."
A New Direction
Grayson Hall is a competitor, and has been since growing up on a family potato farm near Fort Payne, Ala. His small high school did not have a baseball team, yet he tried out for the college baseball team at Sewanee one spring and made it. He also was a football player for three seasons at Sewanee, a defensive starter at the linebacker position known for an aggressive pursuit of the ball and team leadership.
But it wasn't just sports he aggressively pursued. Hall graduated from college in three years because he'd spent summers in high school taking courses at a local community college. After Sewanee he went to the University of Alabama for graduate school, earning a master's degree in business. He never considered a banking career--he's a self-described "operational type" who likes problem solving challenges--but First National Bank of Birmingham was recruiting. Hall interviewed for a job in the the 30-story building in the city's downtown that now serves as Regions' headquarters.
He earned his MBA from UA in August 1980 and began his banking career in Birmingham the day after Labor Day that year. In a career that saw the bank become AmSouth and ultimately Regions, he made his mark with the company on the technology and operations side of the business. He became an executive at AmSouth by the 1990s and spent more than a decade as chief information officer.
"I was pretty pragmatic about it from the start," Hall says. "I always thought if I did my job well, no matter what it is, that is success. Every job is important. So I have never focused on what my role would be or could be. I just tried to focus, from that first day at work, on what my job is, and I try to do the best that I can."
He certainly didn't imagine becoming CEO of a Fortune 500 company, and colleagues say he never tried to position himself for such a role internally during his banking career. Hall was even surprised the first time someone mentioned to him that he could become Regions' CEO. It was at a company customer event in Louisiana in 2009, in the midst of the crisis.
"I think you are going to be our next CEO," a fellow Regions executive told Hall.
"I would not tell many people that," he said in response, with a chuckle.
When the Regions board was exploring a leadership succession plan, Hall was asked if he would consider being CEO one day if the opportunity arose.
"He thrived as a chief information officer and said he was happy doing that," McCrary recalls. "But he said he would do what we needed him to do."
Hall was announced as Regions CEO in late 2009, officially assuming the role April 1, 2010. With a folksy tenor reflective of his North Alabama roots and a path forged from the technology side of the business, Hall wasn't the prototypical Fortune 500 financial company leader.
But Hall's competitive nature and problem-solving thirst was needed at Regions Financial, the board believed. Along with his strong personal interest in customer service, some might say obsessive down to the individual details, Hall seemed the perfect fit.
Shared Value
Early in his tenure as CEO, Hall attended a leadership program at Harvard for new CEO's where he met Harvard business professor Michael Porter. Porter had just co-authored a popular article for the Harvard Business Review about the benefits of creating "shared value" in business, a kind of post-financial crisis morality guide for companies.
Hall was trying to define Regions' foundational principles, something post-mergers, post-financial crisis that would make sense to the company's more than 20,000 employees spread across the South, Midwest, and Texas. He wanted employees across the board to know why they serve customers and how they should conduct business.
Known by friends for his faith and values system, Hall was drawn to the principles of shared value. He describes it as being akin to the "old-fashioned banking business that focused on building value for customers, communities, and shareholders."
"In business, and especially the banking business, our focus has to be on the long-term interest of our customers," Hall said this year, when accepting Samford University's Mann Medal in Ethics and Leadership. "To sustain our business, we have to make a decent profit, but we have to achieve that in a decent way. If we focus on doing little things well, big things will take care of themselves."
So Hall installed shared value as the backbone of Regions' business. Now, when the bank considers new products or services, the criteria is not simply, "Is this profitable for the bank?" Rather, three questions that serve as a sort of internal stress test are applied, guiding the decision:
- Does it meet our customers' needs--and do so in the best way for these customers?
- Does it deliver long-term sustainable value to Regions?
- Does it create value for our communities?
"The focus was pretty simple," Hall says. "We had to focus on what we could control. So we revisited our mission, core values, who we are, and who we want to be. We focused on our customers more deeply--the shared values with individuals and communities we serve."
Hall personally connects the dots of shared value by visiting one to two Regions branches a week throughout the 15-state region. In the early days, he frequently just showed up for a surprise visit. Now he gives at least a bit of advance notice so routines are not disturbed.
"It's not respectful to just show up," he says, smiling.
The benefit from being in the field, notes Hall, is learning from stakeholders, particularly associates and customers, since he has "never had anything but a good meeting" visiting company branches. Regions, like its peers, utilizes technology, including mobile banking, but finds locations provide a home for the holistic experience--something he doesn't see changing.
"80 percent of new accounts are still opened in a physical office," Hall says. "Physical points of presence are important for life decisions where a customer wants to talk to a banker."
Listen to the Customer
Hall didn't change his email address despite the ascension to CEO. And, despite a busier schedule with more travel, he continued to read and personally responded to every customer complaint or issue that reached him. Eventually as one year turned into another, he realized there literally are not enough hours in the day for him to respond to every customer complaint. So he gathered a team and empowered them to act.
But he still reads every customer complaint that reaches his desk, and has been known to send a directive from the top because one customer message made so much sense.
"We have 4 million customers," he says. "That's a lot of people to support, and I can't respond to them all. But what they have to say is important. And how you respond to the mistake is often more important than the impact of the mistake itself. So I try to make sure it is heard and responded to."
Active customer listening goes far beyond leadership offices, of course. So Hall and Regions changed the culture by changing the message, and sometimes even changing the language. For instance, the bank changed a question on its customer surveys from "the employee was knowledgeable about products and services" to "the employee asked about my needs."
And rather than simply targeting customers in order to sell more products, Regions shifted the focus to listening to customers and guiding them to solutions with trained associates. Regions 360 is the banks' holistic approach to a customer's financial needs and ambitions, and its 1,600 branch locations serve effectively as listening posts.
It is about "helping our customers be financially successful," Hall says.
By better understanding customer situations and goals, Regions can offer more informed and personalized guidance. As a result, more Regions mortgage customers now also open a checking account, and the number of Regions customers with more than four products is on the rise.
"When you talk about selling financial products, you have to have a passion for helping people, for helping communities," Hall says. "It is all about meeting needs."
Regions has expanded the financial services offered at its branches, including checking, cashing, prepaid cards, and Western Union. So while Regions still serves large commercial customers, making multi-million dollar loans in New Orleans or Miami, it also serves customers who need more transactional services in physical locations--and many ultimately become traditional checking account customers.
"Most people still want to sit down," Hall says. "So we still serve 200 different communities in 15 states by being a physical if not active part of the community. Metro areas, small communities--giving customers a choice of services with people who can serve them."
Strong at the Core
Grayson Hall is an active student, constantly seeking information and spending more time with people asking questions than answering. His days start early--he wakes up around 3:30 a.m. daily to read the Wall Street Journal on his iPad--and he actively seeks out technology companies to visit and learn from when traveling. Hall is fascinated with emerging business models and how existing companies can shift to meet changing needs.
Despite change, however, Hall understands the one thing that consistently makes a difference for companies is strong employees--no matter the model, no matter the technology. Strength, after all, starts from within, and Hall recognized that after Regions was shaken by mergers and the financial crisis. He discerned the bank needed to get stronger at the core. He quickly expanded Regions' executive leadership committee from seven members to 16 to improve internal communication and transparency.
By 2012, the bank's 20,000-plus associates became the center of attention. And while the natural move in moments of financial stress within a corporation is cutting back on human resources rather than investing in human resources, Hall and Regions took the more unusual path--doubling down on its people.
The focus was on employee engagement--measuring it and managing it. Employees were encouraged to have conversations about what it is like to work at Regions, and the company listened. Regions also found that its number of engaged associates exceeded industry benchmarks, a key factor in the successful launch of Regions 360, since, if associates are disengaged, customers can't be served. Managers have been encouraged to become better coaches through processes and employees are celebrated regularly on
regionsbanknews.com and through other channels.
"Regions is the culmination of how a great bank came together over 100 years," Hall says, "and our associates today represent a strong culture, one that has strengthened over time."
Dealing with challenges
Progress doesn't mitigate problems, of course. And the challenge Regions faced in 2015 when it was fined $7.5 million by a federal agency for unauthorized overdraft fees was its biggest since the financial crisis. But dealing from a stronger position, the bank was able to navigate the hurdle while limiting damage.
The bank realized it was charging what it termed a small set of customers overdraft fees that shouldn't have been charged. A small set of customers at a large bank can add up to a lot, however; in this instance, some $49 million in overdraft fees was involved, and Regions had to refund.
The violation was self-reported by the bank to the Consumer Financial Protection Bureau and refunds made to customers on the bank's own volition.
"There were mistakes made," Hall told a business group in New Orleans last year, "but we self-identified them, self-corrected."
Similarly, when energy prices fell sharply this year, Regions, like other banks in the Gulf region with oil loans, bolstered its reserves for potential losses. But the event fell more in the natural cycle of shifting economic factors that lenders deal with than a cataclysmic concern.
That's why, even after provisions for energy loans in the first quarter this year, Regions Financial saw its profits grow again, continuing a consistent pattern since profitability was restored in 2012. In fact, the bank has earned more than $1 billion in each of the past two years.
"We have built a solid foundation for growth and we have a strong culture that allows us to succeed the right way," Hall says.
Rewards of Recovery
With profits approaching pre-crisis levels despite the low interest rate environment, Regions is seeing its efforts pay off. Loans and deposits are growing, consistently, at more than 4 percent and 2 percent. Two analysts have upgraded the bank's stock in the past couple of months, and American Banker ranked Regions' at the top of its annual reputation ranking last year--a ranking based on customer experience.
For those keeping score, that's a from-near-worst to first turnaround in customer reputation ranking from 2006-2007 to 2015. And Regions won 2015 and 2016 Gallup Great Workplace Awards, one of 40 companies recognized worldwide each year for creating an engaged workplace culture across team and departments--further evidence that the once-struggling bank is now standing tall.
"I feel blessed and honored to have such a good team and a great franchise at such a difficult time," Hall says, reflecting on how far the bank has come since the crisis. "You knew it would not be easy. The challenges were great. But we had a good team. In tough times, teams either come together or fracture. Ours came together."
About the Writer:
David Magee is the author of a dozen books, including "Turnaround: How Carlos Ghosn Rescued Nissan" (HarperCollins, 2003); "Jeff Immelt and the New GE Way" (McGraw-Hill; 2008); and "The John Deere Way" (Wiley; 2005).