Robert McCormick, Trustco Bank (NY)

In episode 8 of season 2, Vin, Zach, and DCG Managing Director Steve Boselli are joined by Rob McCormick, Chairman, President, & Chief Executive Officer of Trustco Bank in New York. The four explore a wide range of topics, including the basics of running a 120-year-old institution now worth over $6B in assets, the "Walmart approach," and why it is all about location, location, location.

For more insights and ideas, visit DCG at DarlingConsulting.com or follow us on LinkedIn.

Transcript

[Vin, 0:00]: 

Welcome to On the Balance Sheet: Season 2, Episode 8. Today, we are very happy to be joined by Rob McCormick. He is the chairman, president and chief executive officer at Trustco Bank and Glenville, NY, and this is the first podcast we've had with the New York banker. Really looking forward to this. In this bank, there's a couple unique wrinkles about them, but a longtime client, somebody we're thrilled to be speaking with Zach.

[Zach, 0:30]: 

Yeah, Vin, and we're happy to be joined by our colleague Steve Boselli, who works with those guys. So, we have got a long list of questions to ask Rob, and we're looking forward to it. I think the listeners will really like their story, so, without further ado: Rob McCormick. Welcome back to On the Balance Sheet; we have a very special guest today. We are joined by Rob McCormick, President and Chief Executive Officer at Trustco Bank in Glenville, NY. Rob, how are you doing today?

[Robert McCormick, 1:06]: 

I'm great, Zach. Thank you. How are you?

[Zach, 1:08]: 

We're terrific, we're really pleased to have you. We also have a guy you know pretty well, Steve Boselli, who works with you here.

[Robert McCormick, 1:13]: 

That's great.

[Zach, 1:14]: 

And I'm joined by Ben Clevenger as always as well. And Rob, we usually like to start just for the listener to say: hey, could you give us a little background of your start in banking? How you got into the business, you know, kind of all the way up until you became CEO of Trustco and then we'll ask you a few questions about that. But could you give us kind of your early years in your journey into the industry?

 [Robert McCormick, 1:35]: 

Just let me start by saying we're thrilled to be here today, and we very much value our relationship with Darling. It's been tremendous advice and tremendous advisory services you provided us for many, many years, so I'm thrilled to be here and participating with you on this podcast today. I'm going to joke a little bit, but I was born in 1963 in Queens, but I'm only joking. I was pumping gas at a mobile station in my hometown. I lived in Saratoga County at the time, and a local company by the name of Albany Savings Bank - which was a very well-capitalized mutual Savings Bank - was opening 3 new branches and was hiring. So, I ended up applying and getting a customer service representative job for Albany Savings Bank; I ended up working there about 12 years in total. And they went IPO and they became All Bank, which became Charter One, which became what is now Citizens Bank. At some point, they were clearly going to be acquired and go away when the Charter One acquisition happened, and my father was the CEO of Trustco Bank and made overtures toward putting Citizens Bank or All Bank under the Trustco moniker. So that's when I joined Trustco bank, and I signed up as a Vice President in the commercial loan area, which was a comparable position to what I had in Albany Savings Bank, and slowly moved up the corporate ladder to the position I'm in right now. I've been doing this for roughly 20 years. I've been with the company 27 years in total; I can always remember that cause my oldest child, my son, was born 27 years ago.

[Zach, 3:16]: 

Thanks for that. And, I mean, you presided as CEO in some pretty interesting times. If you think about, well, we had 07-08, certainly had a rising rate cycle. You know, the last decade plus, the COVID years, and now this - whatever we want to call the last year of Fed hiking, how has that been overall in leading a bank like Trustco and also leading the expansion that you guys have done over the past couple of decades?

[Robert McCormick, 3:43]: 

I would tell you that first and foremost, we have a very long-tenured executive team here, and I think Steve knows this of us. We do everything as a team approach here and we try and work together toward the common goal. And we believe in maintaining a very decent liquidity position and a very decent capital position. And we try as hard as we possibly can to not change our stripes or not change our knitting. We like to stick to what we know we're good at and not go off that path very often. So things like rate changes and that's almost normal operating procedure here from a variety of terms and in very different capacities. But everything we do, we do together, and I think that's a very effective way to look at things. You have to remember when I say executive team, Mike Ozimek, who's our CFO, is our young newest bulk here and he's got 20 years under his belt. Bob Leonard, excuse me, is the old guy, and he's 37 years. And then Michael Hall is the most recent to join us, and he's got a lot of years under his belt. And Scott Salvador, Kevin Curley, and Eric Shrek are also at least 25 years with us. So I do think that helps. We try and take things as they come, and we try and be prepared for things as they come. You know, we've been around for over 120 years, and we've always tried to do the right thing for the 120 years, and we always try and put our shareholders first, followed quickly by our community and our employees. And I think that's worked for a very long time. And I think it will continue to work.

[Steve Boselli, 5:27]: 

You know, Rob, this is Steve, and we've worked together. I did some research about 10 years now, came on at 4.4 billion with our time together and now over 6 billion, so congrats! You know, someone once told me, surround yourself with good people and good things will happen. I think in a lot of these first podcasts we've looked for unique business models or niches, and I think what's unique about you guys is the core structure, and that there's not anything super unique, it's banking 101 - rock-solid banking since 1900 and strong capital, strong earnings. You haven't had to go crazy with wholesale funding or haven't had to go crazy with the use of derivatives where a lot of the community banking world today is going down those paths, and you know the size of your core funding base and the size of your capital position has allowed you to do that. And so clearly I think as of late we've done some diversification in the commercial lending and wealth management - and clearly the expansion - but the world's changing as you know Rob, and where do you see yourself as a bank in the next few years in terms of having to diversify to a greater degree to maintain the strong earnings you've always had?

[Robert McCormick, 6:36]: 

Well, you know, we've done massive de Novo expansions in the past, Steve. We've always believed we work for our shareholders and we don't work for shareholders of other companies. So some of the premiums that have gone along with acquisitions over the years, we kind of stayed away from, and instead of taking the goodwill and the cost on our balance sheet for an acquisition, we've taken a de Novo approach. Now, we've developed clusters of branches as you know downstate and in Florida, and we're in five states overall. We have a smaller presence in other states, but we're planning on continuing that. We still believe that downstate New York and Florida are relatively untapped markets for us, and there's tremendous opportunity, even throughout the state of New Jersey for expansion. And that's what we would plan on doing, but not at the scale or the scope that we've done in the past. They'd be more on an infill basis at this point in time.

[Vinny, 7:28]: 

Rob, thanks so much for that, Vinny Clevenger, and appreciate your time joining us today. I have a question. You know, one of the things that I think stuck out to me initially is according to the website, I think you have 145 branches. And so to me, not to contradict Steve by any means, but that's somewhat unique for a $6 billion institution. And I was curious, how do you kind of keep your fingers in all of them and understand exactly what's going on? How do you maintain a culture and consistency amongst all of those different spaces and those different markets because I think you're in five different states? So, it's just kind of curious how you kind of keep your finger on the pulse.

[Robert McCormick, 8:07]: 

We do have a very strong branch administration area with regional coordinators, and then there are managers that are in charge of multiple branches as well. So, we kind of break that down slowly but surely into smaller clusters or pods that are managed more directly. And then we have at least 2 to 4 occasions a year that we all gather as a group. Now, we do split it between the northeast and Florida, just because it would be difficult to put everyone together, including Florida. But we do believe in a couple of times a year bringing everyone together to kind of get to know each other and get to know each other a little bit better. So that's really how we do that. And being able to communicate with people through what we call BranchNet, which is essentially intranet and those types of things and send messages out that way has also been very effective. We're certainly not comparing ourselves there, but we kind of take the Walmart approach. If you went into our branch in Beeline in Orlando, FL, it is very similar to the branch in Glenville that's right in front of our offices. So the hours are almost the same. The colors are the same, the products are the same. So that's been a very effective way of handling that as well. We're not trying to recreate the wheel in every location we have. And I'll tell you something, we don't open huge branches. We try and make open cost-effective branches that work for the customers. Our internal polling still shows that a lot of people pick us based on the locations we have and driving by the branch and seeing it frequently, so that's been very effective. Having a lot of smaller branches, I know that's contra to the current state-of-the-art, but we're not building these huge monuments or temples to no one. We don't build 5000 square foot branches. Our average branch is hopefully under 2000 square feet, staffed appropriately with a drive-through and a domestic ATM, which people really like, and that has been a very effective way of maintaining not only efficiency but getting our name out a little bit better than some of our others.

[Vinny, 10:18]: 

Rob, that's appreciated. I'm curious, you know, how much autonomy are each one of these? And it sounds like they're broken up into pods, and there's sort of like a regional director who's kind of managing a handful of those branches. But how much autonomy are they given in each specific region? Clearly, you're in some disparate markets.

[Robert McCormick, 10:38]: 

Well, they're given what they need to have from an authority perspective, but in the days of fraud and some of the other things that go along, you do have to have some very strong internal controls and kind of bring it back to the head office for oversight and approval perspective. So they do have a lot of autonomy. They can take mortgage applications, they can open accounts on their own, which people very much like. I can't tell you how our customers tell us that, "I can't apply for a mortgage application at X bank because I have to wait for the specialist to call me back," who never returns their calls. At Trustco, hopefully, the person's walking in the door. We're using their names, and then we're sitting them down and taking that mortgage application right at the desk at that moment, which people definitely appreciate. It's those types of small things that the branch managers are empowered to do, and I think generally the population and the public appreciate that.

[Zach, 11:37]: 

Rob, this is Zach, and kind of as a follow-up to some of those. The theme of the branch network and the geography that you guys' span. What was it like kind of making the decision to go because it wasn't like you went from upstate New York, you know, over to Vermont, right, to go down to Florida is a bigger leap if my geography is up to speed, right? So, you know, what was that like in terms of making that big of a decision and maybe what things have you learned from that, whether it's positive or maybe negative, you know, over the years in having to again manage from the New England tri-state area up here all the way down to the Southeast?

[Robert McCormick, 12:13]: 

That's a great question, Zach, I have to tell you. Because a lot of people think we shot from the hip, and when we decided to go to Florida, we just started opening branches in Florida, and that couldn't be further from the truth. And we started with identifying potential locations, and they narrowed that list and narrowed that list, and we probably got the list down to maybe 10 possible sites or locations. And then we started to subscribe to the newspapers and started to informally look into those ten. And then we narrowed it further down to five. And then we made site visits, multiple site visits to each of the locations. The five were Boston, Austin, Charlotte, Phoenix, and Orlando. They were relatively hot markets at the time, and it was decided to move toward Orlando and Florida for a number of reasons. Boston, I know you guys are Boston guys. Boston was very appealing to us, but Boston is a northeast market, so really what you hit on, Zach, that's what we were looking for. We were looking for economic and geographic diversity. So Boston was still a northeast city plagued with the same problems we would probably have in the Albany area. You just can't get to Austin. We thought the tech bubble was about to burst. Charlotte, at the time, Hugh McColl was in charge of Bank of America, and we figured he wouldn't like us coming in and stepping on his toes. So Orlando, believe it or not, at the time lined up very well with us. It was a service-based economy. Orlando was more than Disney World; it was a service-based economy with a very strong hospital system and a very strong college system, which is very similar to the way Albany is now. Over the years, Orlando has become much more prosperous than the Albany area and upstate New York, but at the time, it lined up pretty well. And the decision for economic and geographic diversity was driven by the fact that we were probably about $1.8 billion in assets, and we had roughly 60 locations within one hour of Albany. But we were stepping on our own toes at that point in time, so it was decided that we would make a natural progression downstate and look for true diversification in the state of Florida, and it's worked out very well. When we first did it, if you remember, we faced '07 or '08, depending on how you define the Great Recession. And sometimes, that economic and geographic diversification that we were looking for wasn't always beneficial to us. But the mistakes we made were our mistakes. We learned from them, and thank God they were not huge mistakes, and we were profitable and prosperous throughout the entire process. So I think it was one of the best things we've ever done, never done.

[Vinny, 15:11]: 

Rob, thanks for that, Vinny here. I'm going to just sort of transition if you don't mind quick question because one of the foundational components of your balance sheet is obviously what I see is a very strong core deposit base, and that obviously gives you a lot of flexibility to do a lot of different things, probably some of the expansion that you have done. And I'm wondering how the core deposit base has reacted in your newer markets, but also how it's reacted in your legacy markets. What that core deposit base has done through this pretty rampant rate environment we just went through, how has it held up and how is it growing in those other markets?

[Robert McCormick, 15:50]: 

I mean, we're certainly paying more for deposits, and we have lost some deposits because of the changes in the markets and things like that. But overall, our true core customers are very happy with us and have been very happy with us for many years. You know, we're kind of a bank that if you get used to us and you get comfortable with us, people are very, very happy with us, and I think that's shown through not only in our legacy markets but in our new markets. I also think the staff that handles or helps the customers on a daily basis contributes to that stability both with new customers and long-term customers.

[Steve Boselli, 16:31]: 

You know, Rob, one thing I've noticed over the last few years is you guys give back a lot to the community, which is a phenomenal thing. And I think you guys get a lot of value within your funding base for that. A lot of folks look for value other than just rate, and that's something we've talked about for a long time and the people and the flexibility and obviously where those branch networks are. But I've got a question for you. I mean, we're sitting here today in probably one of the most challenging community banking environments we've ever seen, maybe in the history of U.S. banking, given everything that's gone on. What would you say, Rob, your biggest challenge will be as you continue to grow this balance sheet over the next three to four years, three to five years?

[Robert McCormick, 17:10]: 

Maintaining the liquidity and staying on top of the rates that are offered not only by competitors but Fed changes as well, that is no question the biggest challenge we have. And if I could give you a secondary challenge that pales in comparison to the rate scenario that we're facing in this country, it is the employment market. The employment market is so tight right now, and you have difficulty hiring at all levels of the company, and I'm sure you guys probably experienced that at some levels as well. That seems to be a national difficulty, a national epidemic, not just a Trustco problem, but across a lot of industries. And I do think that's improving where people are coming back to work and making some changes, but that is certainly a secondary difficulty.

[Steve Boselli, 18:00]: 

The one thing we've noticed, I think, across this country and probably in your markets as well, is just the aging population and trying to keep up with technology and banking with the 25 to 35 and 40-year-olds. And so I think you've done a lot of nice stuff recently from a technology perspective to be able to keep up with that. But when you look across your deposit base, Rob, is there a fear there of just aging and having to keep up with a new generation?

[Robert McCormick, 18:29]: 

I mean, that's a concern all over, Steve. You have to walk the balance between the legacy customers, if you will, and the people who like passbooks and statements savings and traditional checking accounts, and the newer people who want more and more technology. So, you have yourself to cater to your legacy customers and the people who like the way you do things. But you still have to develop and adapt to the changing world. So that's kind of the fine line you walk every single day. We've just launched a new website that's part of that. Our online banking expands every single year. Our online account opening expands every single year. So we feel as though we're keeping up with what people are looking for down the road.

[Vinny, 19:12]: 

Rob, Vinny here, again asking a sort of transitioning away from that. But one of the things that we've asked a handful of our guests on this podcast over time is you know the value of mentoring other employees. My gosh, I don't want to kick you folks out the door, but it does sound like you do have a very experienced management team. So, I'm curious how that mentoring process is working internally and sort of getting the next crop of leaders ready for Trustco. If you could talk a little bit about important mentors to you and your career, and then what your organization is kind of doing in that in that context to basically groom the next round of leaders for Trustco.

[Robert McCormick, 19:52]: 

I was lucky with mentors. I had two very strong mentors. Obviously, my dad was #1. We were very close friends. We did everything together. He was a tremendous mentor, and I learned so much from him. As a matter of fact, he's been dead for three years, but I learned something from him every single day to this day, I think, which is kind of an interesting perspective. Some of the things people say to you, and you kind of put them in the back of your mind, and all of a sudden, it's coming true again, and you say, "Boy, you know that's a change," and that's a very interesting perspective. I was also lucky to have a hard-nosed boss years ago who ran the loan division of Albany Savings Bank, and I learned a tremendous amount from him as well. His name was Bob Moonshower. So I was lucky. I had two very strong mentors who were difficult on me, and I think I learned a lot from both of them. And my dad, I learned obviously more than just banking from. I learned a lot of life skills from him, and I miss him every day. But here, I am a big believer in that. I call every new employee that's hired. Lauren and I get on the phone and we call every new employee, welcome them to the company. I hope they appreciate that. I think most do. If they don't, there's probably something wrong with them. But I do like to do that. I like to talk to people, and I do have to say to you, we run a mentorship program for assistant managers that we feel are targeted. We kind of watch their training. I meet with them on a periodic basis, and then we have a graduation that goes on from there. We have semi-annual sales dinners, both in Orlando and the Northeast, where we get together and discuss things, and they have a little bit of a party attitude and a party atmosphere, which I think people genuinely appreciate. And finally, we still do a traditional Family Day, which I do think people appreciate because they can see opportunity within the ranks of the company when they see others coming with their families that have moved up the ladder. The other thing I would say to you that a long-standing tradition here, we've been doing it for years. I always ask Scott Salvador how many times we've done it because he tracks it, but we do what we call "Coffee with Rob," which once a month, well, now it's essentially twice a month, right? We bring an assortment of managers in, and they can ask me anything they want to ask. Sometimes it's very formal and they ask one question, and they can't wait to get out of here, but others, it'll be a couple of hours, and we'll go round and round and round - which those are the ones I enjoy the most. So, I do try to maintain contact with the managers and as many of the assistant managers as I possibly can. I don't think there's any greater asset a community bank can have than the people who are greeting the community every day. And I do think sometimes as a CEO or a senior manager of a company, you can lose touch. It's very easy for us to dictate policy and to tell people to do things, but when they're actually face to face with the customer, that's a little bit harder to execute on. So, I think nothing makes people more comfortable than knowing that you know the situation they're in and that you are truly behind them and backing them.

[Zach, 23:17]: 

Rob, thanks for that answer. You know, you got me thinking too here at DCG as we record this. We lost George Darling about a year ago, and I can't tell you there are so many days that go by where you can just hear him and how he would be reacting to some of the stuff that's going on in the marketplace and how things that seemed like they couldn't have happened happened. And you know, the reality is they did happen 20, 30, 40 years ago. So it's amazing when you just have that as a foundation in your psyche, and I know exactly what you mean about your father and him not being there anymore and but you're still just learning and so yeah totally. 

[Robert McCormick, 23:58]: 

That's right.

[Zach, 24:00]: 

I appreciate your answer there. I think Steve has one last question for you.

[Steve Boselli, 24:01]: 

It's pretty tough to follow up mentors and fathers and George, but I don't know how you pivot to wealth management, but I'll do it. You know, we talk a lot about diversification of products, and although you've had that core business forever, I think you've done a lot on the wealth management side just too. There's ways to offset margin pressure, to get into new business lines. And I know that has grown dramatically in the last few years. Rob, I don't know if you could speak a bit about the financial services and wealth management piece of Trustco for a bit.

[Robert McCormick, 24:35]: 

I have to tell you, Steve, I'm glad you asked that question because we're in the process of rebranding our Financial Services department into a Wealth Management area, and we're looking at a variety of opportunities and some consolidation, and if there more opportunity in the state of Florida. We're looking at having more dedicated salespeople in that area, kind of moving away from a traditional trust model to more of a wealth management model, and I think it's probably long overdue, Steve, and it's a great opportunity. You know, our balance sheet and our income statement very, very well. We are really a customer-driven bank, so that we don't have a lot of fee income. We don't really like to pound people on fees. I think people appreciate not getting nickel-and-dimed to death by Trustco Bank. So our largest, by far, opportunity for fee income is wealth management. So, I do think there's additional opportunity, and as you like it might not be a direct offset to margin pressure, but it certainly would help. You know what I'm saying? And there is certainly benefit in wealth management. We do have an advantage in our wealth management area. We do have a very strong manager there. His name is Pat LaPorte. He's an attorney. He has a lot of experience under his belt, and he's very much looking for new challenges and greater opportunities. Well, I do think that reports to Scott. Scott has a great head on his shoulders and has been able to really expand a number of opportunities within our company. That is a positive. If I could mention one more thing, Steve, along the same lines, something we have never done, we now have a secondary market department. So we do see opportunity and possibly selling loans. Now we're not altering the mothership, the main bank, but there might be opportunities to take advantage of loans that we otherwise wouldn't do and put on our balance sheet and maybe sell it for some fee income. So that would be our second offset to margin pressure.

[Zach, 26:35]:

Now, Rob, thanks so much for that, for the answer. And really all the answers, all of your time, I think it gave me a better feeling about the past at Trustco and definitely the foundation you guys have set for future success. And I'm really looking forward to that. So I mean, with that, we really appreciate your time today. And thank you so much.

[Robert McCormick, 26:57]: 

I thank the three of you for taking the time here too, and if I could do an advertisement for Darling, as I said in the beginning, it has been a tremendous relationship for us and a lot of great advice has come from you guys, and we're thrilled with our affiliation.

[Vinny, 27:12]: 

Rob, that's saying a lot considering that you work most closely with Steve Bocelli, but we'll leave it at that.

[Steve Boselli, 27:16]: 

Regardless, we've got all the respect in the world for you, and you mentioned your father, but believe it or not, Rob, you remind me a lot about my father.

[Robert McCormick, 27:20]: 

That's great, guys.

[Steve Boselli, 27:16]: 

And I have a lot of respect for you professionally and personally. So thank you for taking the time.

[Zach, 27:32]: 

So that's a wrap on the Rob McCormick interview. We want to thank Rob and Steve Boselli for joining us, and I thought that was a really interesting conversation we had with Rob. One of the things that I thought was kind of fascinating was the whole thing about how they moved or had the branch opening up in Florida and moved that location down there. And kind of got the sense that, you know, some people thought maybe it was willy-nilly or they just kind of liked Florida because they like to vacation down there. And it was an incredibly strategic decision, right? With the five different cities they looked at and the feasibility studies they were doing, I thought that was a fascinating way to go about it. And his reasons for why they didn't pick Boston or Austin or Phoenix or Charlotte and how they landed on Orlando was something I didn't know, and I learned. I just thought it was really cool to hear their thought process as they were looking at growing really way outside of their tangential market, right from the New York area down to Florida. How about you then?

[Vinny, 28:29]: 

Yeah, Zach, that's a great takeaway. Something I just think was a common theme was basically how the bank, as Rob alluded to, they stay in their lane, so to speak. They kind of stick to what they're really good at, and they work hard at what they're doing. And I thought, you know, that's quite interesting because more recently, if banks in this country looking for different business lines, looking to get into maybe a fintech-oriented venture, that hasn't really, for some banks, worked out. We recently had completed our conference, and I remember somebody made a remark in one of the presentations about how banking as a service was such a key thing 12/14/18 months ago, and everyone was thinking about getting into it and you had to do it. Now it's kind of an afterthought or it could be viewed in that lens to a degree. But this is maybe not the best example, but doing what you do well is super important. And, there's no better validation of that than the core deposit base that they have, and it sounds like, yeah, they're running into the same trouble as others are with money running out the door. But that is the foundation for their institution, so that was really good. I really enjoyed that discussion with Rob. He seems like a really nice guy, and I hope one day to get to meet him. Great episode, and thank you for listening, and please stay tuned for future episodes of "On the Balance Sheet."

[Outro, 29:56]: 

On the Balance Sheet is a podcast produced by Darling Consulting Group, DCG. All views and opinions expressed by hosts and guests are solely their own and may not represent those of DCG. All third parties are independent entities and are not affiliated with DCG. This podcast is intended for informational and educational purposes only and is not considered as advice. All views and opinions expressed are based on the information available at the time, it may have changed on current market and other conditions. For more information about DCG; please visit www.darlingconsulting.com or email us at info@darlingconsulting.com. Today’s background music is provided by John Sib at Como Media and can be found on pixabay.com.

The text of this transcript was generated by an artificial intelligence (AI) model, and its organization, grammar, and presentation enhanced by AI, and as such may contain errors or inaccuracies. DCG is not liable for any damages, however caused, that may result from any use of this content.