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The community bank dual mandate — Have new technology, have great service

The nation's smallest banks have proved their resilience in adifficult economy, but in an increasingly competitive environment, creativity maybe key.

For the regulators and bank executives gathered at the FDIC'scommunity banking conference April 6, the consensus was that the community bankingmodel is alive and well, post-crisis. Yet, stakeholders in the small-bank realmgrappled with the way that technological innovation coincides with their traditionalcompetitive advantage, relationship banking.

"Community banks do relationship banking, which exploitssoft information, which I think is gathered face-to-face many times," ScottHein, the Robert C. Brown Chair of Finance at Texas Tech University, said duringa panel. "I'm not sure how that's going to translate in a new environment wheretechnology is the communication vehicle."

Hein said he had faith in community banking's ability to masterthis balancing act.

"I don't think you're ever going to eliminate the relationshipaspect of community banking," said Dennis Bedley, chairman and CEO of BocaRaton, Fla.-based Legacy Bank of Florida,in an interview after the event. "That's ingrained in what we do from a servicestandpoint. What we are trying to do is to use technology to help us become moreefficient at reaching the customer and being competitive with new products."

Bedley explained that implementing new technology is necessaryto stay competitive and meet the demands of younger customers.

During a panel discussion, New Orleans-based president andCEO Alden McDonald Jr., pointed out that obstacles also mean new opportunities.McDonald elaborated on his bank's efforts to develop creative solutions for growth.First, Liberty Bank and Trust established a school tuition program in conjunctionwith local catholic and private schools, which garnered between 300 to 400 new customers.Additionally, the small institution positioned itself as a more "robust"mortgage lender after realizing that larger banks left a void in that market.

After being devastated by Hurricane Katrina, McDonald said thathis bank "had to become very creative again." He explained that LibertyBank and Trust lost all of its customers, employees and records in the storm.

"That put us on the road to internet banking," he said.Aside from allowing him to enter the virtual banking space, the event also droveMcDonald to hire a group of young employees and re-evaluate his customer base. "Itshowed me that I had to begin thinking out of the box," he said. "Thekey to our success over the years we've been in business is our ability to changewhen we see change."

While few banks have experienced an obstacle as transformativeas Hurricane Katrina, Hein pointed out that the theme of resilience flowed throughmany anecdotes shared by bankers at the event. He praised their ability to managechallenges like a weak economy and dynamic competition in the industry.

"This speaks to the uniqueness of community banks in a lotof ways," Hein said. "They are adaptable and do adopt creative responsesto very difficult challenges."