Betting on People: 25 Years of Winning Bank Investments - Tom Brown, CEO of Second Curve Capital

2025-10-30

In this episode of the Operate Podcast, we dive deep into the world of banking investment strategy with Tom Brown, CEO and founder of Second Curve Capital. Tom brings an incredible 40-plus year perspective on the banking industry, starting as a top-rated Wall Street analyst before founding his equity investment firm exclusively focused on financial services about 25 years ago. What makes Tom's approach truly unique is his commitment to understanding banks at the execution level, not just through financial...

What makes Tom's approach truly unique is his commitment to understanding banks at the execution level, not just through financial statements and management presentations. We explore how early in his career he realized that bank executives often believed they were implementing cutting-edge strategies, but the reality on the front lines told a different story. This led him to develop his now-famous practice of visiting bank branches, applying for credit cards, and even showing up unannounced on a teller floor to test whether what management said matched what actually happened there.

Our conversation covers the evolving competitive landscape facing community and regional banks, particularly the threat from neobanks like Chime that are profitably serving market segments traditional banks have struggled with. Tom shares his perspective on why the relationship banking model still matters for banks under $10B in assets, but emphasizes that success requires increasingly sophisticated use of data, technology, and marketing. We discuss why many publicly-traded banks have become too risk-averse, how bringing executives from larger institutions to smaller banks can create tremendous value, and why JP Morgan Chase's Jamie Dimon religiously reads Tom's banking newsletter to understand what his bank cannot do.

Tom offers candid insights on where banks are over-investing and under-investing, from data lake projects that are becoming obsolete thanks to AI, to marketing budgets that remain stuck at 2% of expenses when they should be climbing higher. We explore the talent challenge facing community banks and how they can better attract digital-native young professionals by emphasizing the unique opportunity to work with diverse data and businesses. Throughout the conversation, Tom's philosophy remains clear: as an investor, he is ultimately making bets on people, and the ability to evaluate execution separates winning investments from losing ones.

Chapter Markers:

00:00 Preview

00:37 Intro

00:53 Sponsor

01:28 Tom Brown's Journey from Analyst to Fund Manager

06:19 The Turning Point: Going to the Branch Floor

07:43 The Customer Profitability Story

09:16 The Challenge of Executive Branch Visits

11:43 Investment Framework: Screening with Metrics, Deciding on People

13:14 The Power of Turnaround Executives

13:57 Bringing Big Bank Experience to Smaller Banks

16:45 50 Years of Change, Same Solutions