ST. LOUIS — Few people can rival Gene Rainbolt's perspective on banking.
Rainbolt, 87, has seen economic cycles come and go and he has been in the industry long enough — more than 60 years — to witness innumerable technological advances. A longtime Oklahoma banker, he has lived the booms and busts that characterize commodities such as oil and cattle.
Rainbolt bought a $16 million-asset bank in 1966 and, through a series of acquisitions, turned it into what is now the $6.7 billion-asset BancFirst. While he handed the reins over to his son in 1991, Rainbolt remains BancFirst's chairman, and he still finds time to visit the office and mentor younger bankers.
"It is fun for me to sit back and see how things develop," Rainbolt, who also has a passion for working on public policy causes such as health care, education and criminal justice reform, said in a recent interview. "I'll quit when Warren Buffett quits."
Rainbolt is sure to draw from his years of professional experience when he delivers the evening keynote address Wednesday at the annual community banking research conference co-hosted by the Federal Reserve Board and the Conference of State Bank Supervisors.
Here is an edited transcript of an interview with Rainbolt, where he previewed his speech and shared his views on bank consolidation, technology and compliance.
What do you plan to speak about at the conference?
GENE RAINBOLT: I will focus very much on BancFirst, what we are and how we got to this point. Banks matter. One of the things we have to deal with is how we define a community bank. I define it by the business model. It used to be based on market — how far you could go by wagon — but rural markets are diminishing. So the definition is absolutely changing. You can now build multiple communities within one metropolitan area.
Another point I'd like to make is that community banks should not be defined by size in this changing environment. I will talk about BancFirst. We have over 100 locations. We're in 55 communities. But we're as much of a community bank that you can be. When we blast by the $10 billion [asset] mark it won't change anything. In fact, we're very much a community bank. If you look at it from a regulatory view on size, you miss the point.
Is there really any difference between a bank with $9.9 billion of assets and one at $10.1 billion?
Not at all. But I will make the point that there's not much difference between a bank in a rural community, like BancFirst, today compared to what it has been historically, except that it has far more capacity in terms of capital, programs and all the things that size can bring.
The business model should determine the way regulators and politicians look at banking organizations. If we're not very careful, we'll continue to focus on banks with $100 million or less in rural communities. That's just not what it's about.
What are the biggest challenges for the industry?
Fast-moving technology. While we cannot be on the cutting edge, we can keep up with technology. Still, that has to be an ongoing challenge. Others would say regulation. While that's an irritant and a problem, we have the staff to live with regulation, so I don't see it as a major challenge.
Our biggest challenge on a historical basis is the continued migration from rural markets to metropolitan areas. Many of the communities that have endured are in the process of decaying and going away. Identifying those communities … is a major part of our challenge.
It's not just individuals. Financial institutions also tend to focus on urban markets.
And why is that? Because that's where the money and the opportunities exist. There is diminishing opportunity in the traditional community bank towns. That is largely irreversible unless we can identify communities that have something unique like a university, government facility or manufacturing plant that can be developed.
What are the best business opportunities?
Acquisitions, as banks in attractive communities become available. We are particularly adept at merging banks and maintaining the individuality of the community. We also are experiencing substantial organic growth in Tulsa and Oklahoma City.
Some people in the banking industry view mergers as a four-letter word.
I started acquiring banks in 1962 when Oklahoma had some of the most restrictive banking laws in the country. I felt we'd be able to change the laws well before we did. It was the mid-80s before we could even have multibank holding companies. The very people who resisted the change the most energetically are the very ones who have tried to branch into the cities to survive.
I don't think anybody today can challenge that consolidation is inevitable, necessary and healthy.
How much does energy play into BancFirst's lending? How do you view the sector going forward?
We don't have big energy exposure, by the way, but there's no question Oklahoma is in a down cycle. We're a commodity-producing state. Oil has historically been very important, but agriculture is also important. And two-thirds of the agriculture is related to cattle production. It is a challenge, but those of us who have been through enough cycles realize that you cannot finance a cattle operator who does not have substantial equity in his land. You cannot finance an oil operator who is borrowing the money to drill an oil well. You have to have established cash flow that will be sustainable in the worst of times.
We're seeing some real erosion in some of our small communities where there were service companies located, and their revenue has absolutely diminished. Some of them will not survive. We're seeing the strains that come from that. … It's a problem, but a conservative approach is the way to go.
What's your prognosis for the banking industry over the next decade?
Other than technology and the demographic change and the use of technology, I don't see it that different 10 years from now. Consolidation will continue. Regulation will continue. Capital requirements will continue. It hasn't changed that much in my nearly 60 years. It is the same business.
What can get younger folks interested in banking?
We have no problem getting very bright young people in the metropolitan areas. The problem is amplified and compounded in rural markets. You cannot get millennials to go to the small towns where their skills are so needed. How do you address that? We're trying to look at the regional colleges since people decide they want to stay close to them.