By Maura Ewing
In a storied New York, before big-box chains dominated the commercial market, neighborly customer service was a given: the local butcher knew your weekly order, the barber asked about your children by name, and the clothing store had an outfit in mind when you walked through the door. Louis J. Cappelli, CEO of Sterling National Bank, believes that this level of service should not be antiquated, and that his clients – primarily small and medium-sized businesses – come to him precisely because this is what he has to offer.
Cappelli’s career dates back to a time when huge national banks were unheard of, and the local banker did indeed know all of his clients’ names. He started as an office boy in 1949 – making him one of the longest running bankers in the industry – and has worked himself up the chain to CEO, a position he has held since 1992. “Most CEOs are specialists either in credit or in marketing, and come in at near the top of an organization and so do not have experience in so many areas of the business. My experience in so many facets of the business makes things easier for me,” he says.
Sterling National Bank, a community-based bank in the heart of Manhattan since 1929, works much like the suit-shop who tailors outfits to its customers’ tastes. But instead of keeping up with fashion trends, Sterling is on top of the market climate that businesses face, and adapts its products accordingly.
“We can take care of virtually all of the needs of any small or mid-sized business,” Cappelli says with confidence, a claim that is particularly salient in today’s tight commercial lending environment. Sterling orients its lending practices against primary current assets, accounts receivable, and inventory, rather than relying on loans against real estate, which got many banks – as well as their clients – into trouble over the past few years. “Our loans are repaid virtually every time. Inventory turns over, we keep relending,” Cappelli says.
He also believes it’s important to offer boutique products to address changing trends in both lending and business modeling. A few particularly creative products which have garnered recent attention are its factoring and trade finance division, which offers a cash advance on accounts receivable, and resource funding which, in response to the growing trend of temporary staffing, provides the back office for a staffing company. “We cut probably 20 to 30,000 checks a week to pay for the temporary employment,” he says. “All it is lending. It’s just lending to a particular industry, and providing them with more support.”
The most important element of a community-based bank is high-touch customer service, according to Cappelli. All of the bank’s clients have his direct line, none of his 525 employees use voicemail so that anyone calling will be sure to get a human voice, and Cappelli eats lunch with a client every day of the workweek. “There are very few institutions where a customer is able to sit with a chairman or president of a bank. That’s how we sell,” he says. “To me community banking is more a state of mind in how you deliver your product. Big banks are not providing in that space.”
Cappelli doesn’t see his bank’s growing size as a barrier to this type of customer service. “When we were a $500 million dollar bank someone asked if we could do this if we became a $1 billion dollar bank. I said we’ll meet people for breakfast, we’ll meet them for lunch, we meet them for dinner, we’ll meet them for drinks. We’ll meet them.” Today Sterling has $2.7 billion in assets, up 15 percent from this time last year, and Cappelli is true to his word.
Like all banks, Sterling’s clients were nervous during the 2008 crash. But not only did Sterling not lose any business, they’ve continued to grow. “We’ve made loans continuously through that period up until the present time,” Cappelli says. Sterling’s loans, $1.46 billion, went up 13 percent this quarter. Further, as of Sept. 30, 2011, the bank’s tangible common equity ratio is 7.43 percent.
Unlike the CEOs of most big banks, Cappelli was not fazed by the tighter banking regulations that followed the ’08 crash. “Banking is a regulated business. Banks shouldn’t fear tighter regulations, but adapt their business model so as not to be affected. We should all be accustomed to it,” he says. “What occurred after the crash was probably more political, and based on the need for politicians to create more laws. And I think that that is an issue. Looking at TARP, for instance – the government has been paid back, in fact the government has made a profit – and people still talk about it negatively. Had they not created TARP, and had not come in to rescue the banks, and had they allowed big banks to fail, you might have 30 or 40 percent unemployment; it certainly would have been higher than it is right now,” he says.
“A common misconception is that banks don’t care about Main Street,” he says. “But banks are just as concerned about Main Street as they are anything else. That’s something our industry has to prove.” By meeting the needs of small and medium business, one client at a time, Cappelli works day in and day out to prove just this.