Even with reg relief, community bankers worried about future

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LAS VEGAS — While most community bankers are heading home with comfort about the regulatory environment, a large number of leaders are pondering how their institutions can remain relevant in a fast-changing industry.

Attendees at this year's Independent Community Bankers of America convention expressed optimism about the economy and business climate. At the same time, concerns linger about credit unions and other nonbanks, the future role of technology in their business, weakness in the agricultural sector and succession planning.

“I think community banking will be strong and vibrant for the foreseeable future — but it will change,” said Scott Mabrey, president of the $988 million-asset Mabrey Bank in Bixby, Okla.

“It will be important for banks like us to grow and get big, but still keep that community bank feel because people still like that personal touch and personal service combined with technology,” Mabrey added. "We're trying to make sure that every interaction anyone has with any of our [branches] is a good experience."

While most bankers struck a positive tone, some industry observers expressed concerns about complacency, noting that it is tempting to stay the course when times are good. The banks that will thrive in coming years will be those that embrace technology and think outside of the box.

“Three out of four bankers tell the marketplace that they provide excellent customer service and that they are a relationship bank,” said Ray Adler, CEO of BTI Growth Advisors, a Carlsbad, Calif., consulting firm.

Many of BTI's community bank clients are concerned about losing customers to competitors, Adler said. While most of those institutions pride themselves on quality customer service, that alone may not be enough to keep clients.

“I think that as the industry has been saying the same thing over and over again for decades [that smaller banks] are no longer differentiating themselves," Adler said. "There is a real need to look in the mirror and strive to think differently.”

Mabrey Bank is among the small institutions looking to make changes. The bank is in the process of replacing traditional teller lines with an open-office design that includes universal bankers. Mabrey has focused on innovating in its branches to enhance the customer experience because handling transactions is no longer enough, said Katie Mabrey, the bank’s director of marketing.

Mabrey also plans to adopt the peer-to-peer payments tool Zelle by the end of this year.

Cybersecurity and keeping up with technology are the top priorities at First Union Bank & Trust in Oakland, Md., said Tonya Sturm, the $1.3 billion-asset bank's chief financial officer. Still, she was upbeat about the future.

“New things come up all the time, but we have been moving in a more positive direction over the last year to 18 months," Sturm added. "We're looking forward to a very bright 2018.”

Some banks in rural communities are more concerned with the state of the agriculture, noting that regulatory relief could help business and alleviate some pressure.

It has been hard for the nine employees at the $46 million-asset Farmers State Bank of Watkins in Minnesota to keep up with changing regulatory requirements, said Alex Neisen, the bank's loan officer.

“The challenge for us is having the manpower to keep up with everything,” Neisen said.

Most attendees were hopeful about the recent legislative push for seeping regulatory reform.

Mickey Thomas, president of the $462 million-asset South Louisiana Bank, said he thinks about regulatory relief every day.

“We want to return to making the living we were making before all this regulation came in and cost us about 30 basis points on our return on assets," Thomas said. "We want that back. ... Some of our customers can’t get credit on the terms that we could provide otherwise.”

Cam Fine, the ICBA's president and CEO, encouraged bankers to reach out to legislators to make sure the relief bill that recently passed the Senate becomes law. He said in a recent interview that most small banks feel better about the business environment than they did a year ago.

Fine noted that the ICBA's members are proud to identify as community bankers. “They self- identify because community banks are highly regarded in this nation among the general public,” he added.

“It’s an exciting time for community banking,” Adler said. “I think the industry has a really bright future, but it’s going to look a little different than it has in the past and is going to require different thinking.”

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