BankNotes: Life after The Great Recession
It’s hard to believe that it has been nearly six years since The Great Recession ripped through the U.S. Nevertheless, the sweeping reforms, shrunken budgets and countless bankruptcies it engendered continue to make headlines. Community banks have not been immune. A headcount in this state is proof enough: Five years ago, there were approximately 80 banks. Today, there are 60.
With our industry under greater scrutiny than ever, regulatory and compliance costs have increased, forcing community banks to reassess their strategic options. Because these costs escalated so considerably and so quickly, it has become significantly harder for smaller banks to generate the same level of earnings they did just a few years ago. In turn, reduced earnings have caused investors to shy away, making it all the more difficult to raise capital. If a community bank is able to raise new capital, it often comes at the expense of current shareholders — whose shares become diluted — stifling the bank’s ability to grow.
If this weren’t enough, advances in technology have altered community banking at the branch level. In an effort to keep up with the cutting-edge conveniences larger institutions offer, many community banks have commoditized the banking experience in a niche that was previously best known for customized solutions. By giving customers the online- and mobile-banking options they demand, community banks have essentially increased the distance between themselves and their customers, diminishing the close relationships and personal interactions that have historically set community bankers apart.
However, the forecast is encouraging. While analysts continue to debate the degree to which the U.S. economy has recovered, the signs of recovery are unmistakable. Now it’s up to every industry to learn to grow, thrive and innovate in spite of perceived hardships. If the best ideas are born during the most difficult of times, imagine the possibilities that lie ahead. With fewer banks in North Carolina, there is greater opportunity — and greater responsibility — for those still standing. I’ll explore both in subsequent posts.
Custer has been director and chief executive officer of Yadkin Bank since 2011 and director and CEO of Piedmont Community Bank Holdings since 2010. Before joining Piedmont, he served as chairman and CEO of RBC Bank (USA).