By Bill Poquette, Editor-in-Chief, and Alaina Webster, Managing Editor
The titles of two presentations pretty well identify the range of the program for Midwest Independent Bank’s Community Banking Conference, recently held in Blue Springs, Mo.: “Twitter, LinkedIn, Facebook, Instagram” for openers, and midway through a reminder that, “Good Times Are Here Again, but Let’s Not Forget the Importance of Banking Fundamentals.” In a full day plus two half days, Aug. 22-24, the Jefferson City, Mo.-based bankers’ bank also provided 140 guests from Iowa, Kansas, Missouri and Nebraska a healthy dose of technology education, from payments to online accessibility to card skimming and cloning to cybersecurity.
Emphasizing the importance of not only social media but mobile social media, opening presenter Chris Lorence said, “We check our phones every 12 minutes, 75 times a day.”
Lorence, who is group executive vice president, member engagement and strategy and chief marketing officer for the Independent Community Bankers of America, was quick to point out that the importance of engaging customers via social media is only going to increase going forward. Currently, he said, the workforce is 29 percent baby boomers, 34 percent millennials and 34 percent Gen X (discounting 2 percent considered “traditionals”). However, Lorence warned, by 2025, the makeup looks much different: Boomers will make up only 8 percent of the workforce, while Gen X, millennials and Gen Z will account for 28, 33 and 31 percent, respectively.
Two of these generations were born tech-savvy, and even Gen X has adapted quickly. Because of their intense engagement with online platforms, Lorence cautioned against ignoring social media.
“Eighty percent of people on Twitter mention a business by brand when they tweet,” he said. He also noted that 78 percent of people who complain to a brand on Twitter expect a response within an hour. Just because a bank doesn’t actively participate in the social media scene doesn’t mean they can write it off.
“At a minimum, you have got to go back to your banks and say ‘I need a budget for social media monitoring,’” he told the audience.
When banks do engage with both potential and current customers online, Lorence embraces the SOCIAL model for communications:
Simplify: pictures; infographics; short, uncomplicated text.
Optimize: share, comment if you can’t create; schedule posts; monitor competitors.
Connect: network; introduce yourself; cross-connect your social media channels.
Inform: Be a resource; be three-dimensional; don’t over-post or use clickbait leads.
(be) Authentic: ask and listen; have a personality; consider how you want to be perceived.
LinkedIn: money and connections are made on LinkedIn, and banks should be there.
Finally, he advised, “No politics, no religion.”
Several federal and state regulators on the MIB program briefed the audience on their agencies’ assessments of the condition of community banks generally (very good) and supervisory concerns gleaned from examinations and analyzing data trends (liquidity, ag concentrations).
Allen North, assistant vice president of the Federal Reserve Bank of St. Louis, who coined the “Good Time Are Here Again, But …” theme, noted that non-maturity deposits are funding a greater percentage of assets, and wholesale funding at community banks, which tapered off after spiking in 2008-2009, is becoming more prevalent again.
In late 2017, the federal agencies and the Conference of State Bank Supervisors indicated jointly they were not discouraging use of noncore funding but focusing on regulatory expectations, and their highest concern was when noncore funding is used for rapid loan growth. From the regulators’ perspective, North explained, core deposits are the most stable in times of financial distress, and composition of funding sources becomes more critical for banks with higher-risk loan portfolios. Significant growth should not be funded solely with wholesale sources. During times of economic stress, he added, the issue is not whether a bank can obtain sufficient liquidity, it’s the price it has to pay.
During a regulatory panel discussion later in the program, John Jilovec, Kansas City-based deputy regional FDIC director, agreed with North, noting that liquidity is one of his agency’s top concerns for community banks. “The more rural the area, the more the liquidity issue rears its ugly head,” he said. “Have a really robust funding plan,” he urged. “We don’t want capital-solvent banks failing for liquidity problems.”
Jilovec also cautioned that access to brokered deposits and Federal Home Loan Bank borrowings may be restricted if overused by liquidity-strapped institutions.
North pointed out that farmer liquidity is starting to be strained, but farmland values are holding up and high yields have helped make up for low commodity prices. But the overall outlook is not good, in his view, especially considering the potential impact of tariffs.
So how are regulators viewing ag concentrations? North helpfully ticked off some of their expectations:
- Is the absolute capital level commensurate with the risk?
- Is the bank maintaining strong underwriting standards?
- How long is carryover debt amortized?
- Are collateral evaluations reliable and collateral margins reasonable?
On the tech side of things, MIB’s Executive Vice President/Chief Operations Officer Sheila Noll discussed payments during the Thursday afternoon breakout sessions. While payments in the U.S. are a big business (non-cash retail payments in the U.S. are valued at $175 trillion annually), Noll was quick to point out that the U.S. is actually falling behind globally in the race to real-time payments.
“Faster is not real-time,” she said, “Venmo is not actually real-time.”
Real-time payments, she explained, are certified, final, immediately available, instantly settled and confirmed. Currently, the Federal Reserve’s Faster Payments Task Force, the ACH Network, Card Payments Networks, Zelle and The Clearing House are all working on developing and deploying real-time payments — the goal being ubiquitous adoption by 2020 (a deadline Noll does not believe will be met).
For banks looking into a future of real-time payments, she suggested the following actions:
- Identify relevant use cases that fulfill a bank’s specific strategies.
- Pursue digital and instant payment solutions that make sense for your institution and customers.
- Include customers from all demographics in surveys and/or advisory councils.
- Educate yourself now on what is available (this will change often).
- Decide whether to purchase or build.