Artisan Unfiltered #2 - Forged in Fire: The Artisan Advisors Origin Story

Long time friends and colleagues, Jim Adkins was trying to buy a bank and Jeff  Voss was engaged in a fight for his bank’s life. The Great Recession was taking hold and dramatically changed their plans and their lives. This is the story of Artisan Advisors - how it came to be, the forces that shaped it, the banks it saved and the future its founders are working toward.

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Artisan Unscripted 2

[00:00:00] Cynthia Rohde: Welcome to Artisan Unfiltered, a podcast series featuring frank and insightful conversations about community banking with some of the most interesting people in the business. I'm Cynthia Rohde, your host for today's podcast. And I have the pleasure of talking with Jim Adkins and Jeff Voss, the founders of Artisan Advisors and true community banking veterans. 

Between them, there's not much they haven't seen or been through. Both in their time as community bank presidents, themselves, and as consultants to multiple community banks across the country, since they launched Artisan Advisors in 2009 at the height of the Great Recession. Today, we're going to get their unique points of view on where community banking has been and where it's going as it's navigated the choppy waters of a financial meltdown, the global pandemic, and the escalating pressure to keep up with emerging technologies, and disruptive banking options, among other challenges. Jim and Jeff, [00:01:00] thanks for joining us today and welcome to Artisan Unfiltered. 

So this is a bit of a reversal. Typically you're the ones leading these kinds of conversations, but today we're putting you on the hot seat, so to speak. I'd like to start out by asking you to tell us your origins. How long have you known each other? Where did the idea to start Artisan Advisors come from? And what was your original vision for the business?

[00:01:29] Jim Adkins: Well, I think we've known each other longer than we would like to admit now. I think it's probably well over 30 years. Jeff and I worked in the same bank group many years ago in the eighties, although we were at separate banks. And we would see each other at corporate events and things like that, but we really, really didn't work together that much in terms actually seeing each other every day. 

We were lenders. We didn't want to hang out with the CFO. We wanted to hang out with all the fun people. So we hung out. We didn't see him that much. Although Jeff was one of the more fun CFO types. I'll say that. 

[00:02:08] Jeff Voss: I agree. So background wise, after college, I ended up going to work for public accounting for about three and a half years, and then joined this First Bank group, way back when as a staff person up in there, up in their holding company after which I became CFO of a $300 million community bank at the young age of 25 years old.

Which for me was a real challenge. And so I'd never really worked in a bank before. So I cut my teeth in an executive function, not having had the experience of working my way up through the organization, [00:03:00] after which I ended up participating in the management buyout of this same institution back in the late eighties from the Lane family, ran that bank with a group of managers for six years and sold it to Banco Popular.

That's where Jim and I caught back up with each other again, after we acquired his bank, stayed with Banco popular for a couple of years and then left to go to work for a publicly traded bank. Again, as the CFO of that institution and stayed with that group for just a little over a year.

We sold the institution and then I joined First DuPage bank, which was a startup institution at its inception and raised capital. We had an idea on a piece of paper [00:04:00] and, you know, three guys - two guys out of a sale and myself -started the bank and ran it for 10 years…eight years of which were great.

The last two years were not necessarily the time of my life, but were definitely the time in my life that I wish to forget at times. Ultimately the bank didn't make it through the recession. And, you know, that was the genesis of my propulsion into consulting after the bank failed. I also, during that last two-year period, became the CEO of that bank.

Attempting to resolve the problems of the great recession on a community bank. That really…it was going to be a struggle to fix that institution. I wasn't able to get it done. But I learned so much about management under stress and I learned a lot about credit. [00:05:00] And a lot about problems with banks and learned, probably more than anything, that we never had been through these uncharted waters, you know, in our lifetime. And most management people at that time really did not have a clue what they were doing to try to manage their way through these machinations.

When I started doing some consulting work before Jim and I joined up, my goal was to see that whoever I worked with never had to go through the same situation that I went through, which was probably the toughest situation that you can go through as a bank executive.

Right. And realizing that there is another side to everything. And if you can learn from your [00:06:00] mistakes, learn from the things that have happened, hopefully you can help others with that knowledge. So that's a very quick synopsis in my 30-some years since I got out of college.

[00:06:16] Cynthia Rohde: You were able to put yourselves together and Jim, what brought you to your point? 

[00:06:21] Jim Adkins: Well, wasn't an epiphany or anything like that. It seemed like an interesting career. I got into it and worked in Alabama for few years and came up here to work for LaSalle.

And that's where Jeff and I first hooked up actually at the Lane Group, which then became LaSalle. I was in the lending side and the customer relationship side and it was a lot of fun. I enjoyed that part of it early on in my career. Like Jeff, I was fortunate enough to get some management experience in my twenties.

And I took advantage of that - went to a bank that for some reason thought I would be a good senior lender for them. And I probably didn't know what I didn't know. But I got [00:07:00] there and I realized that I needed to learn some things. So it's a great learning experience. Eventually I got involved with some ownership of that bank and eventually we sold that bank to Banco popular, where he had been at that point in time.

And that's how we connected back up. And I stayed with them for a while and then got into some other things, became president of  a fairly good sized bank. And then in 2008, as Jeff was alluding to, the crash came and it was a game changer. At that point in time, I was actually trying to buy a bank and I had left the bank there that I was at as president, trying to raise capital and things like that.

And the crash came in and put a stop on our plans to buy a bank. And so, you know, Jeff and I were at a point where we were both looking for something interesting to do. What we didn't know was would it be a long situation…the recession, we were waiting for it to blow over. And so we decided to start doing some things together, helping out [00:08:00] some friends, while we were trying to figure out what we wanted to do when we grew up.

And that's really how the business started. I think the business – Artisan -  became a business before we knew it. We had a consulting firm before we actually realized it. And then at some point we kind of looked at each other and say, “We should take this seriously because we have a lot of clients and people are counting on us.” And so that's how we really launched it at that point in time. 

[00:08:27] Cynthia Rohde: So talk a little bit about those early days of Artisan Advisors. Once you came to understand that it was more than just a couple of smart guys, helping out friends in a difficult situation.

What was the state of the industry then and what kind of work did you find yourselves doing to help people out? 

[00:08:48] Jim Adkins: Well, you know what, the state of the industry was just horrendous. I mean, banks were failing left and right. The Chicago area led the nation in failures, [00:09:00] Illinois and in Chicago. And so community bankers were in panic mode. And, we were helping our friends and then, of course. officially started Artisan and a lot of our assignments dealt with consent orders and the memos of memorandums of understanding. And so we went through and we would work through all these technical issues and things like that.

But one of the real things that we really did was calm management teams down and ownership down because, here we are in the midst of this, what was the financial pandemic, I guess - instead of a physical pandemic like we have now -the financial pandemic was such that people just didn't know what to do.

And so what Jeff and I, and then eventually other consultants that we brought into the group…we were the calm in the storm. We wanted to make sure that they knew we could get this done. Trust us, we'll get this done. It will be a hard work, we'll have success on the other side of this. And so that's really, I think, besides the [00:10:00] technical expertise, what we're very proud of.

I think what Jeff and I did in that situation was just making sure that people didn't go off the deep end and that there was another day. 

[00:10:10] Jeff Voss: We were part consultant, part psychiatrist, with bankers. Many of them came to us.

They were like the deer looking at a headlight, you know, just unable to see what was really going on. Almost disbelieving that they found themselves in this situation. And as Jim said, we would, we would talk to them and we'd say, listen, we're going to get through this with you. And we're going to take kind of the lead role in this thing and you follow us and you listen to what we tell you you need to do in order to comply with all these regulatory requirements.

And at the end of the day, you're going to have your opportunity to turn [00:11:00] back into a bank again. Because I would say in Chicago, we had 50 and 60 failures of institutions in Chicago. Yeah, we were getting phone calls every week. And to the point where we couldn't take all the clients that were coming to us, asking for our assistance.

Just two of us weren't enough to be able to go through that. So we selectively picked the clients that were important to us, that we felt we could make an impact on. And, those that would listen. If we found any clients that wouldn't listen, or boards that wouldn't listen to us, who were still caught in this disbelief, we would walk away and just say, we can't help you.

You're not listening to what [00:12:00] we're telling you. And you know, I would tell them: if you want me to pull my shirt down on my back, you're going to see a bunch of stripes back there. I've been through it and you don't want to end up where I've been. So you need to listen to the things that we're talking to you about and take it serious.

And fortunately for, I'd say 99% of our clients, they did listen. And most of them survived to, not just live another day, but many of them survived to prosper. And a few of them have since sold. There's a few that are still around. And we'll talk about banks today and challenges that have, but yeah, it was an interesting time for sure.

And for two guys that were really focused on our own institution, what was very [00:13:00] interesting for me, was to see all the different business models of these institutions, to see the quality of management that was going through the problems. Having known that I went through the problems with a group of management team that I felt were strong and highly qualified.

You know, I realized that we could make a difference in these people's lives, if they just let us do it. 

[00:13:34] Jim Adkins: You know, real quick, just to add a little bit. I think it was such a draining time. And when we were doing this in 2008, 9, 10, 11, as Jeff said, we couldn't keep up with the demand. A lot of other advisors - the banks had accounting firms, law firms - they couldn't do what we had to do…which is: we were bankers.

We [00:14:00] got in there and did it. Of course, a lot of accounting firms couldn't because they had conflicts and the lawyers just didn't know how to do some of these things. 

I remember sitting with a bank president who was, at the time, a very well-liked person in his community. His bank was in tremendous financial pressure. And I remember him being in his office and putting his head down on his desk and crying, because it was overwhelming to him.

And so, part of this was our thing was: Hey, we'll get all the work done. And we'll be here to support you and, be an emotional kind of a pillar that you can lean on. So it was a real intense time. It was really intense up until probably 2012. Then Jeff and I figured out things were changing.

Because we could see the results of the exams starting to change with our clients, their examiner were backing off a little bit. 

And so that's [00:15:00] when we started to kind of reposition the firm. From the “bad bank doctors” or the M.A.S.H unit to…let's improve your bank no matter what the economy is like.

[00:15:12] Cynthia Rohde: So that's coming out of the great recession. That's sort of in the rear view mirror. How did your work change in that period of time? 

[00:15:22] Jim Adkins: I think the work, a lot of the work is the same when you have a bank under extreme regulatory pressure, like a consent order. They want you to do all the basics real well. They want you to plan and they want you to be organized and they want you to have the right risk management situations and the right asset liability management.

And so all of those things that are in a heavily criticized bank applied to healthy banks. What's changed is that now you're not under pressure from the regulators. Now it's up to management to say: we're going to get better and we're going to get better in these same [00:16:00] areas, like management and credit and all of those things.

So a lot of the work was the same but it was how now we had to go out and tell banks and convince banks. You need to do this. You need to hire us to help you get better. Whereas when the regulators are saying you've got 90 days to find somebody to help…that's a different marketing thing. You know we had to turn around and market ourselves more and convince people, this is the way to go. We can help you become better. And, we’ve followed that mantra ever since - we want to help you get better. That's our whole goal. And Artisan Advisors is about making banks better. 

[00:16:40] Jeff Voss: The other thing I'd mention, Jim is the focus of our work kind of shifted from solving problems to helping banks figure out where they were going to go in the future.

Instead of looking in the rear view mirror - what happened and what [00:17:00] went wrong-  now it’s: we're healthy now, what are we going to do? Are we going to stay doing what we did before? How are we going to change what we did? Are we going to sell the bank? So it went from just a complete focus on dealing with problems to helping them refocus themselves on strategy so that they can move forward in life and decide on what they wanted to be, now that they've survived the Great Recession.

Right. I think, and as we got more and more clients, it was a kind of a self-fulfilling situation where we could see what was working at other banks - we would see, and we would bring it…we would take all this information and bring it to our clients. And we just got more and more insight into how banks were [00:18:00] doing well, the banks that were doing well, and how they were doing better.

We would take information and use that information with our clients and continue to grow. And as we got more and more clients, you've got more and more data, more and more information, and it just gave us a better ability to help clients get better and see down the road. Right. And we still do it now.

I mean we've been in over probably a hundred plus banks in our tenure and, we see what works and what doesn't work, and we try to communicate that to our clientele. 

[00:18:36] Cynthia Rohde: So it sounds as though, in this period of time, after the great recession, you were able to help your clients and the banking industry was able to move forward, and rebuild and solidify itself, which seems a very good positive thing, particularly in light of what was waiting around the corner, in 2020 [00:19:00] and the onset of COVID crisis and global pandemic and all that it brought with it.

Can you talk a little bit about how this other kind of crisis - not fiscal, as in the great recession but now physical and globally affecting literally every part of our lives - how it affected community banking then, and what your role morphed into. Did the fact that a lot of the work that you've done leading up to this, put banks in a better position to be able to sustain what was coming at them in 2020?

[00:19:43] Jeff Voss: Banks came out of the last downturn, the great recession doing the right things.. And many of those things were required of them during the consent order periods, MOU periods, but they [00:20:00] learned ways to protect themselves with risk management systems as Jim calls itand how to prepare themselves properly for an upcoming crisis.

This was a physical crisis in the sense that it created problems for health and everything else - and not just the customers, but the employees – and throughout the world. The banks were well-prepared going into this because technology had advanced so far that for many of them, when the pandemic hit and they needed to stay quarantined for a period of time or go remote with their business activities, bankers actually [00:21:00] didn't struggle much with that. And it was a little surprising to me. I thought they would have a few more problems in what they did, but banks should be very proud of the fact that they were able to adapt very quickly to a whole new environment, a whole new work methodology.

I know banks that were looking to expand their footprint geographically with bricks and mortar that have stopped that whole concept now and just said, listen, there was no need to go deeper into brick and mortar. We just proved to ourselves that we can do work from home. We can be profitable working from our homes and that pendelum  swung all the way to the left and then to the right.

It will come back somewhere in the middle again. I'm sure where there'll be some people working from home. Maybe, [00:22:00] not full time working from home, but there'll be a hybrid type of an approach. Banks have done a good job, I think. And were well prepared from that perspective. I also think Jim, you may want to comment on this, on the credit side.

I think initially we thought there would be a significant credit hiccup that occurred during this time. Now the government has stepped in a huge way and provided not just incentives and stimulus money to consumers, but also to businesses through the PPP program. They've given them all kinds of ways now to defer problems, allowing these clients time to fix themselves rather than forcing banks to recognize problems on their income statement and [00:23:00] balance sheets and through their capital immediately, as they were required to do back during the great recession. I think that's a huge difference in what's happened out there. 

[00:23:13] Jim Adkins: I think coming out of the financial pandemic, as I call it, and then we had a period of time where we were back to banking and regulators were, as they have a tendency to do, looking for the next issues.

Of course during this period between the two events, the two black Swan events, if you will…the big issue especially in community banking was concentrations with real estate. And the regulators really focusing on that. And, and that was kind of the extent of the pressure. When recession came in in 2020, I think it's surprised the regulators how well community banks handled that. I think they were [00:24:00] expecting banks to really struggle. I think they were expecting failures. I think it was something that they thought was just going to be catastrophic. But banks, in most cases, actually performed well with their disaster recovery plans - they actually put them in place.

And I think the industry surprised a lot of people. So, one of the reasons they could have done it was they were in good shape. You know, that interim period between the two recessions, capital was at its all-time highest in the industry, asset quality was very strong and, if we were going to have some kind of major black Swan events, the banks were in shape for it…we were ready for it. And so when it happened, I think the regulators were expecting a lot worse, but were pleasantly surprised in that regard as far the last 18 months. I think banks [00:25:00] have learned how to use their systems a lot better. A lot of banks would buy the Cadillac operating system and drive it like a Volkswagen bug or something…they wouldn't fully use the features of what they bought. Now, this pandemic had them use a lot more of the technology that they had embedded in their own organizations.

And I think, Jeff and I, and all our other consultants, have been very happy with how banks have caught on in terms of making full use of what they have, from a technology perspective. And so I'm very proud of the industry. As Jeff said, I think the PPP was a savior. It really helped not onlythe clients of the banks, the banks themselves  were able to make some money off of a very legitimate program. And a lot of banks used that money to put in the loan loss reserves for what could be another rainy [00:26:00] day, or at least an extension of this present rainy day, which seems to still have drizzling going on. So it seems like the scope of things doesn't end, but I'm very proud of the industry, how they did it and how they reacted.

So that's where I see it at this point.

[00:26:19] Cynthia Rohde: I've heard you both talk about how you understand what your client's needs are because you've been them. You've literally sat in their chair. Each of you has experience as bank executives at multiple levels, as presidents, CEOs and CFOs. I want you to think about if you were running a bank today, what would you be doing to ensure your bank’s continued success coming out of COVID-19? What's keeping you up at night and what are you excited about? 

[00:26:52] Jeff Voss: What would I ask or do differently? Or what would I do today to ensure success? I [00:27:00] would have continuous planning going on, always looking to the future. And then monitoring the execution of that plan very carefully to understand whether the plans that we created are still good plans that could lead us to the expected results or whether we needed to change and pivot.

But it would be guided by data, not just intuition. I'm a big data person. I like customer information, whatever that might be. Anything that I can do to drive performance by using information, by using data, is something that I would focus on.

I think in terms of things that keep me up at night, [00:28:00] there were some of the same things that I see as real opportunities. The whole idea of technology. That's an area where we, as bankers, have some level of knowledge, but not enough knowledge to combat the nefarious people out there that are always attempting to hack into our systems.

So I'm always concerned about cyber threats and securities against information and customer information and non-public information. In the same vein, I look at it as an opportunity to provide services, taking away geographic boundaries for companies. Being able to compete at a national scale, by using technology in marketing to be able to target market your products and services, the things that you feel you do really, really, really well.

Those are the things that I see and then probably the other comment would be people. I've realized that the success of these institutions is dependent upon high quality staff and high-quality people. And I would do everything in my power to retain and hold accountable those members of my team that desire to perform right and focus on the performance. In the same vein, I'm concerned about getting good talent. 

I just don't see towns coming in for the youth. I don't see the industry right now making a concerted effort to attract young people. [00:30:00] We lost 10 years right after the great recession.

Banks didn't have training programs, didn't go out and actively recruit to increase their numbers. And then, as a result of that, I think we're seeing gaps in terms of talent and the low end to the high end. And we don't have that pool of talent moving up as quickly as it once as we once did. 

[00:30:32] Cynthia Rohde: Jim. What about you? 

[00:30:33] Jim Adkins: What would president Jim have to say? I think certainly I agree with everything that Jeff said. And my own personal take on it is, I would probably find running a bank again, the two areas that I'm probably focused on are talent and technology has as Jeff referred to.

To me, I think that where I would put all my [00:31:00] effort – recruiting smart people, recruiting young, talented people that are motivated. And I think that goes hand in hand with recruiting the right people to employ and figure out what technologies will you need to go forward.

So I think the talent and the technology are very linked together. One of the things I often tell our clients - who ask me this question a lot – is what would you do? And I somewhat jokingly, but I'm not joking, I say I’d find three or four, very talented, young technology-oriented people, and I'd put them in a room and I'd come back in three or four months and see how they're doing. Because I think that's the type of research and development that community banks, and regional banks for that matter, need to do - challenge and maybe step away from some of the tried and true things that banks have done [00:32:00] for years. So talent and technology are where I would put my focus quite a bit. 

So, what keeps me up at night…in regard to the banking business, I think the aging of the community bank space, which again, kind of ties in with talent. We have a lot of people that started banks in the nineties. Generally when you start a community bank, there's a lot of people in their mid-forties and fifties that are involved.

We've had 20, 25 years go by and we have a lot of community banks out there that have people running the bank who are older and there's nothing wrong with that. I mean, that's great, but you run a risk of not having fresh ideas sometimes with that you get lost in a repetitive type thinking.

That keeps me up at night. I think it's the grind of community banking. And that keeps me up quite a bit. The other thing I think about [00:33:00] is legislation. I think Washington and the regulatory level are, I don't think, conducive. It could be more conducive to a healthy community banking environment.

I think that a lot of the regulations that are coming out are forcing banks to make decisions, you know…it's forcing them to get into areas that they're not real strong in. And that bothers me. I think Washington could do a better job with regulators, having legislation that helps banks.

It protects the depositor, which is their ultimate goal. But it also promotes a healthier industry. And I think that's a big problem. I think a lot of times the big regulations, especially now as we're kind of entering in a different period of time, where there might be a lot more regulation coming to the bankers and coming through the banking industry. [00:34:00] I think the regulators could do a lot better job understanding the differences between a Bank of America and the Bank of Poughkeepsie or something like that…a smaller bank. So that bothers me quite a bit, I think. 

And then finally, you know, FinTech is something that I think community banks have to do a better job understanding how fintechs can and will take their business.

As we tell our clients all the time, you've got to have a technology strategy. And if you don't, your commercial and industrial business is going to be chipped away at with the fintechs. And of course the same thing with on the consumer side.

[00:34:42] Cynthia Rohde: Well, Jeff and Jim, thank you very much for sharing your thoughts and your wisdom, honed over many years, both behind the bank president's desk and sitting in front of it, helping, banks continue to move forward and succeed. 

That's [00:35:00] going to wrap it up for us today. I hope everyone enjoyed our conversation with Jim Adkins and Jeff Voss. If you have any questions for Jeff or Jim or any comments about, Artisan Unfiltered, please email them to info@artisan-advisors.com or check out our website at www.artistsan-advisors.com.

Need to make sure you include that hyphen. Thanks for joining us. And we hope that you will come back for more.