By Karen Kroll
Since its founding in 2002, Leader Bank has grown from $6.5 million to about $1.5 billion in assets. What’s more, the Arlington, Massachusetts-based institution accomplished this without mergers or acquisitions—and with only seven branch locations—says Jay Tuli, EVP of residential lending, retail banking and product development and marketing.If Leader Bank were a person, it wouldn’t yet be old enough to vote. Yet it’s grown to more than 230 times its initial size. Tuli credits three attributes: an entrepreneurial culture, an excitement about problem-solving and an insistence on moving quickly. He explains how the bank puts each principle into action.
Entrepreneurial culture
An entrepreneurial culture requires “looking for opportunities all the time,” Tuli says. That includes considering opportunities that other banks may—sometimes mistakenly—be avoiding.
In 2009, for example, many banks were shying away from residential lending because of the housing crisis. Leader Bank decided to examine it more closely. “We said, ‘let’s look under the hood a bit and really see if this is risky or just out of favor,’” Tuli says.
He and his colleagues found the negative media attention obscured how most troubled mortgages were concentrated in sub-prime loans. “If you were doing clean loans, those folks were fine,” Tuli says.
Moreover, the large mortgage companies that exited the business left experienced loan and mortgage officers scrambling for jobs. Leader Bank picked them up. Over about eighteen months, the bank’s mortgage department jumped from one salesperson to several dozen. Annual volume grew from about $100 million to $1 billion.
“That changed the direction of the bank,” Tuli says. The capital the mortgage business generates is one reason Leader has been able to grow organically. It’s also helped Leader Bank add technology to boost efficiency and develop new products and services.
The same willingness to counter conventional wisdom came into play when Leader had to consider whether to build out a branch network. While that strategy has worked for banks for decades, Tuli’s observations told him branch locations aren’t as critical. Customers increasingly were accessing and depositing their money digitally. While banks used to need their own ATMs to attract customers with free services, they now can rebate any fees charged when their customers use other banks’ ATM machines.
And rather than build branches for business customers, it’s often more cost-effective to develop teams of business bankers who call on customers where they work, and/or to build technology that provide the services business customers need, Tuli notes.
To be sure, revising the playbook doesn’t mean simply following whatever’s trendy, Tuli says. Instead, it’s looking at the business need and identifying the most effective ways to meet it.
Excitement to solve problems
Another key to Leader’s success is its excitement for solving problems, Tuli says. A prime example: once Leader began generating volumes of mortgage loans, it needed to also grow its deposit base.
Tuli saw landlords and property managers coming into Leader’s branches, carrying stacks of rent payment checks. The metaphorical lightbulb clicked. “If we could build something that automates rent collection, and we gave that away for free—so long as these people banked with us— that would be a great opportunity for growth,” Tuli says. In 2015, Leader Bank launched a rent payment platform called ZRent, which automates the transfer of rent payments from each tenant’s account into the landlord’s account.
Conversations with landlords revealed even bigger challenges in managing security deposits. Landlords must comply with numerous regulations governing the security deposit activities, such as record keeping and the interest to be paid to tenants. In 2018, Leader launched ZDeposit, which digitizes the opening of security deposit accounts and automates compliance. It was so successful other banks asked if they could license the technology. Leader said yes.
This move also proved successful. Indeed, in August of 2019, Leader divested ZRent and ZDeposit into a separate company, ZSuite Technologies. “We saw an opportunity in the marketplace and we were excited to solve the problem,” Tuli says, adding that Leader Bank will continue to develop technical solutions for specific verticals and to automate back office operations. (Tuli is founder and chair of ZSuite Technologies.)
To be sure, more traditional marketing programs still have a place at Leader Bank. Its Zeugma Reward Checking is an example. The word “zeugma” refers to one word that can convey two different meanings within the same sentence. An example: “he opened the door and his heart to her.”
Similarly, a Zeugma Reward account at Leader Bank can be either a free checking account or a high-powered rewards account, depending on how the owner uses it, Tuli says. The service helped bring in about $100 million in deposits, he adds.
Move quickly
The third leg of Leader’s success is its ability to move quickly. “Good opportunities don’t last long. You’re either going to grab them or somebody else will,” Tuli says. A case in point is a talented candidate. He or she isn’t going to sit around waiting while a company decides whether to hire them, he notes.
Or, say a home buyer needs to close on the purchase three weeks. Leader Bank will make it happen. Moving quickly “ends up becoming a culture,” Tuli says.
Karen M. Kroll is a business and financial services writer and content marketer based in Minneapolis-St. Paul. Email: karen@karenkroll.com.
