‘The advantage that a community bank has is it can offer customers a single point of contact. Somebody will walk you through the alternatives knowing your situation.’
Temple University Finance Professor Jon Scott says that while community banks have come out of the recent banking crisis relatively unscathed, the industry stress should still be considered a “wake-up call” for local lenders.
Here are some takeaways from the Federal Home Loan Bank System official’s recent interview with The RMA Journal:
Digital Departures? Some called it the first digital bank run, and it’s clear banks need to keep investing in and developing technology to be sure they can meet customer needs. “Some family-owned banks may say, ‘That’s enough. This is too complicated,’” Scott said. Even if the liquidity crisis did not affect their institution, the implications may have them saying “this is the last crisis I want to deal with.”
Relationship Advice. Community banks, like all banks, feel the pressure to attract depositors. And even though they are raising interest rates, it’s hard for them to compete with bigger banks on numbers alone. “The advantage that a community bank has is it can offer customers a single point of contact. Somebody will walk you through the alternatives knowing your situation,” Scott said.
Concentrating on CRE. Commercial real estate accounts for roughly 25% of community bank loans. Cause for concern? While office space is stressed, warehouses are in demand. Ownership distinctions are important too. Owner-occupied and small business-use CRE may be less prone to default than other CRE because those borrowers have skin in the game. “I don’t see a potential crisis there,” Scott said, “but it doesn’t mean we shouldn’t monitor performance closely.”
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