This story is part of our Community Bank Tech Projects series. Each day this week we will highlight a technology initiative a community bank pursued in the past year. The aim of the series is to explore where community banks are choosing to invest their limited resources in technology.
In early 2016, when Lynn Carson and his partners went looking for a community bank to acquire, their aim was clear: to create an institution that would use cutting-edge technology to punch above its weight.
It would have been hard to imagine a more unlikely candidate than The Farmers Bank in Woodland Mills, Tenn., a rural community two and a half hours north of Memphis.
As underdogs go, the $12 million-asset Farmers Bank was about as small as it gets. Although more than 100 years old, it had only one branch and four employees, with about $1.6 million in loans on its balance sheet.
"They had no website," said Lynn Carson, the chief operating officer of what is now called Bank3. "They had no online banking, they had no telephone banking. Nothing."
The bank's core system was due to be sunsetted by its vendor, a positive because it meant Bank3 wouldn't be forced to unwind the contract, Carson said. But it also meant that he and his colleagues had only 30 days to find a replacement. They were bringing in new clients already, and leaving them on the existing system was not an option.
That left open the question of what type of system they should install. They envisioned Bank3 as a community bank focusing primarily on commercial and real estate banking as well as private banking, with some retail customers too. Sophisticated cash management and digital banking platforms were their highest priorities.
"We're not in the old age when we would have put a brick-and-mortar branch on every corner," Carson said. "It's not a good use of capital. But in order to compete with those guys who are on every corner, you've got to have technology that is solid."
Bank3 picked Jack Henry Banking's SilverLake system after the incumbent vendor — which Carson declined to name — failed to take the bank's timetable seriously: the bank wanted the new core up and running by early October. Carson began soliciting proposals in June. A "bolt-on" piece from Banno provided an easily navigable digital experience, allowing customers to transfer seamlessly between mobile and online banking.
"I don't want to buy a Yugo, but I don't necessarily want to buy a Porsche either," Carson said of his thought process at the time. "Obviously a $12 million bank doesn't need all this stuff, but we're not going to stay a $12 million bank."
With its new core in place, the bank expanded almost immediately into Memphis and Union City, increasing its headcount to 23 full-time employees and one part-timer, while retaining its original branch in Woodland Mills. Despite the rapid growth, the company isn't planning to "litter the state with a bunch of branches," Carson said.
There are early signs that the approach is paying off. Less than four months after opening for business in Memphis, Bank3 now has $75 million of assets — more than five times as much as The Farmers Bank had when it was acquired — and about $40 million in loans on its balance sheet. An aggressive growth plan calls for the bank to hit at least $100 million in assets by the end of 2017, eventually scaling up to $10 million in assets per employee.
Indeed, Bank3 aspires to be a "mini-regional" competing with First Tennessee, SunTrust, Regions and even with top-five banks such as Bank of America and Wells Fargo. It may even expand beyond Tennessee, says Carson.
While trying to balance the competing demands of technology and tradition, however, Carson hasn't lost sight of reality — or of what makes a community bank like his special.
"Frankly, we'll never be a big player in Memphis, because there are already three or four large banks here. But I think we will hold our own," he said. "I'd rather be small and profitable and servicing our clients than be large, not service my clients and them not have a good experience. That's where we compete well."