Spotlight On: Keith Costello, CEO, Locality Bank
January 2025 — Keith Costello, CEO of Locality Bank, spoke with Invest: about the bank’s focus on entrepreneurs and small businesses, and how the entrepreneurial spirit is a vital part of the bank’s identity. He also touched on the importance of innovation, and embracing new technologies to enhance the services the bank provides.
What were some significant achievements for Locality Bank over the last 12 to 18 months?
Our bank is expanding rapidly. We’ve experienced growth at 70% year-over-year. We’ve focused on product market fit. It’s how we gauge if a business is meeting the demands of the market. It’s measured by growth and acquiring new customers. What we’ve found is an overwhelming reception by local businesses that were looking for an alternative to larger financial institutions. We believe we are optimized to help smaller, local businesses.
What is the “secret sauce” that sets you apart from other banks in the area?
I like to tell people that I’m not just a banker, I’m an entrepreneur. I have a deeper understanding of what it’s like to start and run a business. Many bankers haven’t gone through the difficulties of starting a business. The people who come work for us are also entrepreneurs at heart. Our employees are inspired that we’re creating something special, new, and exciting. They chose us because they believe in doing things differently.
How has Locality Bank’s mission of serving local residents and businesses shaped your strategic priorities?
We try to be very focused despite the many different ideas, people, and vendors in our circle, while trying to make money and grow. The hardest thing is to say no to something. Small Business Administration (SBA) lending is one of our top priorities, and we’re expecting growth in that area to double year-over-year. The other area that we focus on is what we call “concierge banking,” which is how we describe the customer experience. Banking is a competitive and commodity-driven marketplace, and it’s important to make every customer happy. The banking business is similar to the restaurant business in that there are many restaurants to choose from, and a new restaurant needs to create a new experience and high level of service that attracts customers. We’re not quite there yet, but we strive to make every interaction with a client an opportunity to get them excited and help grow our business through word of mouth.
How have interest rates impacted lending and borrowing, and what strategies has Locality Bank implemented to navigate any potential challenges?
On the SBA lending side, we saw interest rates on floating rate loans as high as 11%. It’s hard for many smaller businesses to service that level of debt. We observed a slowdown on the SBA lending, but that’s beginning to come back up. Part of that pickup is also a result of some of the people who we’ve brought on in that area.
Looking forward, it seems like rates will come down, and the stock market has responded well now that the election is over. There’s talk of pulling back on some regulation. Banking is a highly regulated industry, and each regulation means spending more on compliance, and spending less on serving our customers.
Could you share with us some of the advancements and features you have in place that are beneficial to your customers?
One of our core values is innovation. It’s difficult to really grow and build your business without finding ways to innovate. We are using a core provider that is not one of the major bank core providers. It is helping us access better technology to be able to differentiate ourselves. Many of our customers say that, for a bank our size, our technology is as good, if not better than some of the larger banks. Our cloud-based, open API architecture enables us to find and partner with some of the top technology providers. While we aren’t purely focused on fintech, when we started the bank it was important to combine the best of community banking with the best of fintech.
What are some of the primary trends you see shaping the future of community banking, and how is Locality Bank positioned to leverage those trends?
The number of community banks has been steadily decreasing. More and more banks have been consolidated, purchased, or lost to failure. When we opened in January 2022, there were only three community banks in Broward County, down from 11 in 2015. Competing on a technology basis is very difficult for small banks. The future of banking is going to be technology-driven, particularly with AI. Banks that don’t embrace technology and are not innovative in their approach will struggle. As we grow bigger, it’s vital to partner with technology companies as well as develop our own proprietary technologies. We’re dedicated to finding new, innovative solutions to help solve the problems of the local business customers that we serve.
What are the top priorities and goals for Locality Bank in the next two to three years?
Jan. 12, 2025 marks our third anniversary. We’ll be transitioning from a new bank to a regular bank with standard regulations. That will allow us to focus less on regulation, and more on building our business with our customers. In 2021, we raised just under $40 million from our shareholders. We’re looking to raise another $10-$20 million to continue our growth, which will allow us to double our size over the next three years and expand to $700 million. We’re also looking at opening some additional branches. People value being able to visit a physical location and build social connections, and we want to support that by establishing more branches.
Expanding on that last point, how important is it to create a social environment at a physical branch location?
I like to use Starbucks as an example of a business that has declined because they lost their appeal as a community space. People used to go to Starbucks to work, to use it as their office. That’s what we want our locations to be. It’s not just about selling a loan or opening a deposit account. We want folks to come in and have coffee, to feel comfortable and welcome. We want to provide resources to those local businesses and to our customers, to help them financially.
What types of online resources do you provide for entrepreneurs?
We have a lot of resources on our website. Everything from helping create a business plan to mortgage calculators. We also have a podcast designed for entrepreneurs, where we host and interview entrepreneurs.
Is there anything we haven’t touched on that you would like to add?
Our mission is to empower local companies to maximize their potential. We love getting the word out and we appreciate organizations like Invest: that are helping to attract business to the Greater Fort Lauderdale area, and helping facilitate financial success for local businesses.
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