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Personal Appeal

As the economy continues to improve, banks are finding that one key to growth is the human touch

Hometown Relationships: A. Parrish Clark Jr., CEO of Guardian Bank in Valdosta

Hometown Relationships: A. Parrish Clark Jr., CEO of Guardian Bank in Valdosta

Todd Stone

There’s a lot to be said for doing business the old-fashioned way. You know, negotiating in a convivial manner, making decisions based on mutual trust and sealing the deal with a firm handshake and a smile. That’s the way Georgia’s banks aim to keep and attract customers. Every day, they prove that profitability is compatible with a human touch. And they are thriving because of it.

In fact, in 2017, the banks headquartered in Georgia posted gains over the previous year in total earnings, deposits, loans and assets. Total earnings reached $3.4 billion, up 13.7 percent. Deposits hit a record $258.4 billion; loans and leases reached $223.7 billion; and assets were at $312.3 billion, the highest since 2008.

It’s a reflection, says Joe Brannen, president and CEO of the Georgia Bankers Association, of the general state of the economy – good for Georgia businesses and families.


Local Roots

The banking industry in Georgia includes mega national institutions like Wells Fargo and Bank of America, none of which are headquartered here. Of the 176 banks with headquarters in the state today, SunTrust and Synovus are considered large banks, while the other 174 are known as community banks.

Community banks are those institutions with assets under $10 million that generally stick close to their local roots, focusing on services that address the unique needs of nearby depositors and borrowers. For instance, a community bank in an agricultural area may cater to farmers, while one in a college town may emphasize services for teachers.

Walk into a community bank, and you will likely be greeted by your first name. You may enjoy lower overdraft fees, and you may find it easier to get a loan than trying to meet the stricter borrowing rules of mega-banks.

In 2017, 92 percent of the state’s banks – including the community banks – made money, and because local deposits fund local loans, these banks are thoroughly invested in making sure those loans are reasonable and appropriate and assist the community’s well-being. It’s a symbiosis that is made possible by the ability of community banks to make decisions on the spot.

“In a community bank, the decision-maker is sitting across the desk from you, not in a boardroom a thousand miles away,” says A. Parrish Clark Jr., CEO of Guardian Bank, headquartered in Valdosta. “And honestly, particularly in the South, people want bankers to know their names and show appreciation for their business.”

Because banks are intertwined with the communities they serve, the health of the local economy influences the financial stability of the bank.

“Consumer lending’s growth, primarily for autos, mortgages and general consumer loans, is a sign that consumers are confident in the economy,” says Brannen. “Deposits are at an all-time high so we have more money to lend, making it very robust on the consumer side.”

Though interest rates are rising, they remain comparatively low. Yet the increase – and the likelihood of more – has prompted some borrowers, particularly small business owners, to make decisions faster. David Coxon, president and CEO of Georgia Primary Bank in Atlanta, says he meets with staff weekly to discuss rate activity and is seeing a greater number of people leaving large corporations to become entrepreneurs.

“In the last year or two, business owners have become very strategic and optimistic,” he says. “For so many years business was reacting to circumstances; they needed to survive obsolescence and mechanization, whereas today they are making decisions to take on opportunities to expand and extend their markets.”

While higher rates may be getting business owners off the fence, they are also encouraging more deposits. Edward Loomis, president and CEO of Colony Bank, which has customers from Columbus to Savannah, Warner Robbins and Valdosta, has noticed that competition for deposits is getting keener by the day.

“With this last rate increase, we now have a very healthy situation,” he says. “It’s rewarding our depositors better than in the last six or seven years.” In addition, he says, “We are once again seeing good return on equity for our shareholders. And last year we reinstated dividends to our shareholders, doubling that rate in the last quarter.”

“A slow, methodical rise in interest rates allows an opportunity for banks and their customers to adjust gradually, preventing interest rate shock,” says Rob Braswell, president and CEO of the Community Bankers Association of Georgia.

Banks’ net interest margins (the difference between banks’ interest income and interest expense as a percent of average earning assets) have been compressed due to extremely low interest rates in recent years, he says, and he is hopeful that will change.

Paul Bennett, president and CEO of Pineland Bank based in Alma, also sees the rising rate environment as beneficial. “To me it indicates the economy is improving, and we are optimistic that our loan volume will increase by year end,” he says. “I feel the best about the economy than in 10 years.”

Deposits and loans have been particularly robust in larger markets such as Savannah, where the port, the logistics industry, tourism and a steady uptick in population have driven growth. Banks in smaller towns, particularly those that rely on agriculture – where farmers have been challenged recently with hurricanes and cold snaps – still face challenges in bank activity.

“We are in 16 different markets, and we understand each of their unique business environments,” Loomis says. “That is the cornerstone of community banking – knowing your customer one-on-one and understanding their circumstances so you can support their finances.”


Regulatory Hurdles

Regulation in the banking industry is a double-edged sword. On the one hand, it helps protect consumers from fraud. And in a cyberworld plagued by ever more sophisticated hackers, tightened controls to protect banks from security breaches are necessary. But community banks, in particular, often find regulatory and compliance burdens a strain on tight budgets. It keeps them from being nimble, a quality that gives them a competitive advantage over larger banks.

U.S. Senate Bill 2155 sailed through to the House (where, at press time, it remains), on the promise, in part, of easing regulatory burdens on community banks. For example, the bipartisan bill would allow qualified home mortgages to be made with fewer restraints, ease restrictions on appraisal guidelines and exempt appraisals of real estate located in rural markets – all designed to increase lending. For banks under $5 billion in total assets, the bill reduces data reporting requirements from four quarters to two, which means a potential reduction in the number of pages of data collected and generated to meet federal mandates.

While this is great news to community bankers, many of them feel it is just a start. “You have the Washington elite getting together with their peers to make community banks comply with the rules made for big banks,” Clark says. “Their version of regulatory relief is not the same as ours. We don’t have teams of lawyers or lobbyists like big banks do, and we can’t afford to hire all the employees necessary to create and produce those extensive reports.”

Consolidation is one answer to higher regulatory costs, and it was the driving force in the 2016 merger of Alma Exchange Bank, Pineland State Bank, Peoples State Bank and Citizens State Bank to become Pineland Bank, held by South Banking Co. Prior to the merger, each bank was paying an average of $175,000 annually for compliance.

“Everyone agreed community banks needed some of that regulatory relief because the bureaucratic paperwork was out of hand and took time and energy away from serving customers,” Braswell says. “[Senate Bill 2155 is] a great first step; you take what you can get. But it’s not a cure-all by any means. Our regulatory burden is death by a thousand cuts, so it is removing some of the cuts and we feel positive about its passage.”

Brannen is more upbeat about regulatory reform. “For a while it was all about catching you doing something wrong, but that attitude has changed. They are still examining the banks but are not focused on ‘gotcha’ anymore. They are more focused on growing the economy now.”

Even the larger banks feel the burden of regulation. “All banks are in the same boat regarding the regulatory environment, which has become a little more arduous in terms of the amount of work we have to do to meet compliance,” says Kevin Blair, executive vice president and chief financial officer at Synovus Bank. “Regulations are like putting too many ornaments on a Christmas tree: You keep adding more ornaments until the tree cannot take any more ornaments. And for all banks, with every new regulatory oversight, every new task that comes afoot, it makes it harder to continue to operate in an efficient and effective manner.”


Tech Talk

Mobile, person-to-person digital payments via Zelle, an app that facilitates money transfers on smartphones and other platforms, are growing in popularity among banking customers. And interactive teller machines, where a live person appears on the screen from early morning until nightfall, is convenient for those who would rather not spend their lunch hour waiting in line at a bank. As these technologies become ubiquitous, community banks are finding the playing field has leveled with larger financial institutions.

“We have a local call center in operation that coincides with our video feed from 7 a.m. to 9 p.m. six days a week,” says Clark. “It’s so you don’t have to wait until the next business day to do business. We can help you reset a password or locate a deposit or answer any questions about your online banking.”

Yet some surveys show that even the younger generation brought up with mobile connections prefers to have a physical location where they can go for financial advice or acquire their first car or home loan. And community banks are dedicated to that end.

“Community banks are becoming more holistic; not only do they provide products and services, but also advice,” says Clark. “Financial mentoring and counseling has become more prevalent across the board.”

The larger banks have also upped their commitment to customer service. “Obviously banks make money by taking money in and lending it out,” Blair says. “Prior to the financial crisis, smaller institutions were getting more than their fair share of deposit growth. Part of the reason for this was that bigger banks lost their way, weren’t delivering an adequate customer experience. So people were moving their business back into smaller banks. But since then, bigger banks have gotten better and focused more time and attention on the customer-service side.”

Uncertainties plague the ability of bankers to forecast the direction of growth. Mobile banking may give way to smaller physical branches as customers forego personal interaction in favor of convenience, and technology will continue to task banks to keep up with advancements. In addition, there is some speculation that Amazon, Walmart or financial technology companies may jump into the banking arena. So greater competition is an ongoing concern.

Marketing approaches are also in transition. Whereas in the past a bank could advertise in newspapers and on radio and TV, today there are a variety of other channels, particularly in the social media arena.

Loomis, however, still prefers the old-fashioned face-to-face marketing, as do many other bankers. “We love going out to see our customers. Whether we do that or a customer comes to the bank, it gives us a chance to differentiate ourselves from the ad they saw on screen. It’s at the heart of what distinguishes us from bigger competitors.”

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