It’s All About Culture: How a Nebraska Agricultural Bank Moved from “Average” to a 4.75 Net Interest Margin, 2.0 ROA, and a 7-plus Cross-Sales Ratio

Q | Roxanne Emmerich

We have a fascinating person with us today. Keith Knudson has created an enviable breakthrough of results that puts his bank among the elite performers. He is the CEO of Security Bank in Laurel, Nebraska, and past Chair of the Colorado Graduate School of Banking. His NIM, ROA, cross-sales, and culture scores have catapulted beyond what he had identified as his utopia. You’re about to find out how he did that. Keith, how did you hear about us?

A | Keith Knudson

We first heard about The Emmerich Group when attending a presentation at the Nebraska Bankers Association Annual Convention. We sent team members to one of The Emmerich Group’s Profit-Growth Banking Summits. After that, there was a new energy and excitement.

Q | Roxanne Emmerich

What was the culture there like before and how did it change after the kick-off?

A | Keith Knudson

I tell people that we had a good culture before starting to work with The Emmerich Group. But at the kick-off, there was a new sense of energy. After that, every day, people would focus on providing wonderful customer service. We’ve transformed the customer experience.

Q | Roxanne Emmerich

I love that. So, tell me what it was that you were trying to accomplish when you came to us?

A | Keith Knudson

The number one problem we wanted to solve was to develop a strong sales culture. This has been in our strategic plan for years, only to be carried on to the next cycle and the next cycle of our strategic planning. We decided we couldn’t do it alone and we needed outside assistance to improve the bank’s culture, strategic planning process, and differentiate our organization. We were doing good…but not great.

Q | Roxanne Emmerich

Tell me about the metrics that mattered to you then and how they moved.

A | Keith Knudson

Regarding the metrics that mattered—one that we really didn’t even know how to measure at the time was cross-sales. That really has been one of our successes. We exceeded seven cross-sales for each new customer to the bank early on, which is amazing when the average bank in America is at 2.2.

Q | Roxanne Emmerich

Congratulations. That’s pretty epic. So how did that impact your earnings?

A | Keith Knudson

Our earnings began to improve as we kept implementing different programs. Cross-sales, for example, takes a little while to show up on the bottom line. But as we continued with that, we started to see deposit growth. We started to see loan growth. We started to see asset growth, of course, but then we started to see the net interest margin move, which obviously impacted our earnings.

Q | Roxanne Emmerich

So, tell me about your shift in earnings.

A | Keith Knudson

If we go back, prior to engaging with The Emmerich Group, we were running 1 to 1.25%, on average. Now, we’ve seen quarters (and even one of the years since we’ve started the program) where our pre-tax ROA was well over 2%.

Q | Roxanne Emmerich

Beautiful, and how about net interest margin? How has that changed for you?

A | Keith Knudson

We improved NIM by around 50 basis points to 4.75. Being up in the 4.7 range for an agriculture bank when you’re against Farm Credit (who basically gives it all away) is pretty epic.

Q | Roxanne Emmerich

What do you think was most important in allowing you to create a miracle like that? Many agricultural banks would think that to be impossible.

A | Keith Knudson

I give full credit to our CLO and lenders. They bought into the whole process you and Terry Slattery showed us.  You taught us how to get premium pricing by providing what everybody talks about, but few can achieve—a true differentiation for our bank.

Q | Roxanne Emmerich

The shift you’ve had in your sales culture, both in the net interest margin, and the growth, and the cross-sales is remarkable. You said that you would put it on your strategic plan every year, revisit it, and put it on the plan again the following year, but it never got done before. What do you think was most important in unlocking that after so many failed attempts?

A | Keith Knudson

I think part of it was confidence. Once our staff knew that we could get premium pricing because of the extra effort, and the things we began providing our customers and prospects—that was very valuable.

Q | Roxanne Emmerich

If you could save somebody who’s listening to this from having to try something that you already know doesn’t work, what would you tell them?

A | Keith Knudson

“Don’t try to implement any programs without first addressing culture,” would be the number one advice that I would give any bank or any organization. Culture trumps strategy every time. Developing that culture and confidence—it really has to start there.

Q | Roxanne Emmerich

Peter Drucker was the one who originally said that culture eats strategy for breakfast. Inc. Magazine just published a BambooHR study that revealed that 79% of employees said they experience burnout at least monthly, 53% say they experience burnout weekly. And, a third are actively seeking new employment! With statistics like this, what would you tell a bank is vital about keeping their culture alive even though there’s too much to do and too few people to get it done?

A | Keith Knudson

Yes, I think the first thing that we need to do is recognize that the last 17 months have been really extraordinary. Now, as we seem to be coming out of the COVID pandemic, we really need to make sure that everybody knows that we see and recognize their efforts.

Q | Roxanne Emmerich

Most banks don’t know about the concept of cultural systems. I’ve walked into many train wrecks after they brought in a “culture-expert” firm. Running a great culture is having a series of systems that keep things advancing and keeps people tied to values and profit on a daily, weekly, and quarterly basis regardless of what else is going on. How important are your cultural systems to keeping that culture alive during good times and bad?

A | Keith Knudson

Our ongoing work with culture is the one thing I still believe is the glue that keeps everybody together. That’s been an exciting thing for us to handily measure our culture through anonymous surveys online that our employees fill out. We have 100% participation in our culture surveys every year and consistently score well over 9 out of 10.

Q | Roxanne Emmerich

So, before you started with us, you probably explored other options. Tell me about how you decided to work with us.

A | Keith Knudson

Security Bank explored three different companies. But after I attended the Profit-Growth Banking Summit and had a chance to meet with The Emmerich Group team, the decision was easy. And it was one of the best decisions we’ve ever made as an organization. 

Q | Roxanne Emmerich

So glad to hear that. Before making any decision as a bank CEO, there’s always a fear factor. Are you going to look silly for having done this? Will your team support this? Will some team members not make it? What kind of fears did you have as you decided to move ahead with us?

A | Keith Knudson

Before we committed to The Emmerich Group, my biggest fear was whether our whole team, including our board of directors and executive team, would be 100% committed to the program.

Q | Roxanne Emmerich

And how’d that work out for you?

A | Keith Knudson

It actually worked out fantastically. Our board was fully on board and engaged, our ownership was on board, and our executive team, too—there was no looking back. So I overcame my biggest fear. It’s been absolutely fantastic since then.

Q | Roxanne Emmerich

I can’t imagine a time when culture is more important than right now, post-pandemic, when people are burned out. I think many banks will lose a third of their employees per the BambooHR study’s findings, which will create a significant downward pull on earnings.

You’ve accomplished something very notable in the banking industry to be in the top 10% of culture scores in a university-validated Breakthrough Banking™ Culture Survey with a 15-year history of statistics to compare to peers which are community banks that are high achievers such as yours. What did you think, out of all the things that you’ve done to create a great culture, was most important?

A | Keith Knudson

It’s having fun and not taking each other too seriously, even when it’s a tough situation. The second thing I would say is the confidence piece. The level of confidence in our people not only at work but at home has just improved considerably.

Q | Roxanne Emmerich

Love to hear that. So many banks start in the wrong place. You can’t just come in with sales training and expect it to work. Why do you suppose sales training by itself would not have worked for you?

A | Keith Knudson

I think the main reason is we first need the buy-in of the employees. And we’re able to get that buy-in through this whole program. It’s not just a separate sales training program, it’s about culture. It’s about the customer’s needs—not about what we’re trying to sell them. We need to ask the questions, ask the right questions, and then do what’s best for the customer every time. You’ve got to be on their side. It’s all about helping them.

Q | Roxanne Emmerich

Thank you, Keith. Sometimes we hear from banks, “We should be able to do this ourselves.” or “We just hired a new person to do this.”  or, “Hey, we have a new incentive program. That should fix it.” And then, ten years later, these banks have come to us after all these false attempts didn’t work. Why do you think banks don’t get started sooner?

A | Keith Knudson

I think banks try to go it alone on these programs for sales training as well as culture. They think it’s part of their job that they should be able to handle it on their own. The Emmerich Group has really been able to basically put a franchise system into our bank. And yes, it’s helping the bank, but really, in the end, it’s primarily helping our customers.

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