What’s the difference between one of the popular neobanks like Chime, that use banking-as-a-service deals to take deposits, and a community bank facing an influx of deposits when they are already flush with funds?
The difference is wanting to say “no thanks” — but instead figuring out a way to say “yes.”
Such conversations may take place over a phone or over a desk, with the banker eye to eye with the customer. Nothing against the challengers and the phenomenal growth some of them have had. They meet the demand of people who don’t crave much human contact and who like the low-fee or no-fee promise of fintech banking via the internet.
But while they face challenger competition, community banks are often playing a different game than the newcomers.
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During the pandemic and since, Planters First Bank, in Cordele, Ga., with $380 million in assets, has had consumers and businesses coming in with deposits, sometimes sizable ones, in the search for safe harbor through deposit insurance. Facing the same low loan demand many other banks and credit unions have, the bank has been unable to meet the needs of all depositors using its own balance sheet.
“That’s a very tough conversation to have, to say you don’t want someone’s deposits,” explains Mike Phillips, CEO. But the bank found a way to tap outside partnerships to send the money to other companies through programs offered by IntraFi Network and StoneCastle. The bank retains the relationship, the depositor has an account 100% protected by deposit insurance, and yet no further burden has been placed on the balance sheet.
This type of solution serves as an illustration of how “agility,” that word usually associated with financial labs and fintech firms, gets exercised by community banking institutions. It’s about problem solving in the moment.
Competition Demands a Response:
Planters First is a good illustration of how quickly a financial institution can implement change on a wide scale when the status quo is not an option.
A Small Player Fighting a Multifront War
In 2020, Planters First adopted a set of fresh approaches and new or improved services that make an impressive list at any time, let alone in the midst of a historic pandemic and associated recession. The bank also made several major shifts in how it uses its staff.
Much of this was planned before the Covid threat materialized but the bank plunged ahead.
Mike Phillips, in a joint interview with Eli Tinsley, President and Chief Banking Officer, and Dan Duchnowski, Chief Marketing and Chief Deposit Officer, describes the three competitive arenas the 124-year-old bank works in.
- In its legacy market. Planters First faces a no-to-low growth situation in and around Cordele, where local institutions “steal share from each other,” says Phillips.
- In its growth markets. North of the legacy market, the bank has expanded its activities into Macon, Ga., and towards Atlanta, where the SunTrust/BB&T merger created opportunities. In another metro area, Warner Robins, Ga., there is a strong military economic presence (Robins Air Force Base) and a local infrastructure that grew up around it that has helped the bank build. (Planters First is a small business specialist.)
- In its ag lending business. The bank is up against experienced farm finance players, including elements of the Farm Credit system.
Overlaying that is the competition from the challenger institutions that The Financial Brand often writes about. Duchnowski started his banking career at an early internet institution, NetBank, out of Alpharetta, Ga., so he’s had a taste of the leading edge. He says that many Planters First customers, especially younger ones, have been attracted by digital institutions like Varo and Ally Bank.
“These institutions are taking market share locally,” says Duchnowski, “and we have to take them seriously.”
Building Competitive Muscle for Battling Fintechs and Challengers
The bank’s response to digital and local challengers alike in 2020 was a massive ramp-up of both technological capabilities and also how it uses its workforce. This included:
- Adoption of mobile and website-based video banking through POP i/o.
- Introduction of improved mobile and online banking channels, and stronger promotion of both.
- Creation of a call center, called the “Solutions Center,” including a webchat option.
- The addition of a loyalty program called BaZing through StrategyCorps, with benefits such as roadside assistance and discount buying.
- Beefing up email marketing.
- Switching to local photography over stock shots in marketing and advertising.
- Creation of videos featuring local businesses and Planters First bankers.
- Beginning construction of a branch in Warner Robins to improve brand recognition in the area.
- Partnering with a fintech specializing in small business lending to handle Paycheck Protection Program lending when it began to exceed what was prudent for the bank’s balance sheet.
As in-person activity dwindled during the pandemic, Planters First found that this freed-up sponsorship funds that helped the bank get through its ‘do’ list.
When offices were shuttered, except for drive-up service, one measure the bank took was to temporarily reassign anyone who had extra time to a cost-cutting project. This consisted of dividing the bank’s payables into categories and having bankers go through old bills to weed out expenses that were no longer necessary.
“We’re an efficiency bank, not a slash-and-burn bank,” says Phillips. As branches opened up again, the bank did some balancing, cutting hours at some locations and reassigning people to other locations or other parts of the bank.
When Consumers Want Another Human’s Advice
Driving the buildup of digital banking was the realization that younger consumers want and expect digital convenience, according to Duchnowski. The trick of it is that the bank is finding that it’s not an “either/or” situation.
“Young people want to know there is a banker behind that video app and behind that mobile banking app that they can talk to if they need to,”
— Dan Duchnowski, Planters First Bank
The video banking service, webchat and the solution center get to aspects of that, as does the traditional sit-down with a live banker.
To Phillips, it’s a matter of blending digital and traditional.
“Community banking is banking with your neighbor,” Phillips explains. ” Our bread and butter is financial counseling. Folks don’t have to visit our branches, but if they want us, we’re here.”
Eli Tinsley gives an example.
“There’s a first time for everything financial,” says Tinsley. “The first-time homebuyer can only research so much on the internet. After that they want to talk to an advisor who will give them quick responses and a sound solution. Our employees can make that connection, and do it in ways that are relevant to the consumer’s circumstances.”
The solution center, with five employees who handle phone inquiries, webchat and video communication, plays into this as well.
“These are all local bankers who know our communities,” says Duchnowski. “They aren’t working out of a different state or a different country.”
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Partnering Can Be an Equalizer for Community Banks
As fintechs become a greater part of financial services, Phillips sees them increasingly becoming partners rather than only competitors.
“We’ve learned what we are good at, and what we are not good at.”
— Mike Phillips, Planters First Bank
He says fintechs that specialize in certain loan categories can be a good source of additional credit opportunities that a community bank can’t staff for. At an earlier bank, he recalls, good opportunities came from dealing with fintechs that focused on debt consolidation loans and student lending.
This and the other strategies discussed above give the management team hope that the family-owned bank can remain independent and grow organically, rather than seeking out mergers.
“We’re comfortable in our growth markets, focusing on small business,” says Phillips. “Dan and Eli are challenged with making us appear larger than we are, through all our recent efforts, and getting our brand out there.”
Georgia has seen much M&A, which has caused its own disruption and impacted some institutions’ service. Duchnowski believes this creates opportunities for a focused community bank that’s not afraid to try new things.