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Without a niche, 'you're not going to survive'

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Without a niche, 'you're not going to survive'

Few community banks boast the breadth needed to be all things to all customers. Now, in an era when the biggest competitors are bigger than ever before, it is vital for small players to carve out niches and dispatch precious resources to fully develop them.

Such was the message from community lenders at American Banker's Retail Banking 2017 conference in Miami last week.

"You've got to be a niche player or you're not going to survive," Jay Pelham, president of Miami-based TotalBank, said at the event.

For his bank, the niche is a geographic one. TotalBank focuses its nearly $3 billion in assets almost exclusively on Miami-Dade County in southern Florida, presenting itself as the expert on local risks and opportunities, one that can make smart lending decisions quickly and offer services tailored to commercial customers' unique needs.

Megabanks such as Wells Fargo & Co. and Bank of America Corp. bulked up substantially following the 2008 financial crisis and dwarf TotalBank in terms of market share in Miami-Dade. But the biggest lenders tend to focus on volume and make data-driven credit decisions at a national or regional level. That leaves an opening for the likes of TotalBank to win customers and grow loans by making decisions based more on an understanding of local economic dynamics and how specific customers fit within them, Pelham said.

"I think you have to play to your strengths," he said.

Scott Goodman, president of Enterprise Bank & Trust, agreed. His Clayton, Mo.-based bank, with about $4 billion in assets, specializes in serving privately held businesses, the families that own them and the executives who run them in select cities such as St. Louis and Kansas City. It strives to develop "deep ties" to these clients, Goodman said at the conference, enabling it to provide fast and well-informed credit decisions and advice that competitors often cannot.

Community lenders, he emphasized, need that kind of well-defined value proposition to attract and retain customers.

Peter Soraparu, head of the relationship banking division at American Trust & Savings Bank, echoed that sentiment and put it this way at the conference: "What you want to create is an experience culture." He said customers of Dubuque, Iowa-based American Trust, which has about $1 billion in assets, typically have multiple accounts with the bank and view it as not just a lender but also a key source of market-specific information needed to make financial decisions.

Deborah Cole, president and CEO of Citizens Savings Bank and Trust Co. in Nashville, said her small bank, which has only about $100 million in assets, has thrived for decades because it caters to minority communities and religious-based organizations, niches in need of a local bank. Community banking, she said at the conference, is "the best game in town" as long as such lenders have established specialties that are in demand.

All these executives agreed that ongoing investments in new and better technology are crucial for community banks to keep pace with their larger brethren. But they also all said that proven bankers make up the essential element of their success. Looking ahead, as banks work to capitalize on advances in technology, they increasingly will need bankers who are both tech-savvy and adept at customer service.

"It's going to be all about the talent," Pelham said.