What does the future hold for community banking? What do community bankers need to do to stay relevant? We spoke with Greyson Tuck, an attorney with Gerrish Smith Tuck, which provides legal and consulting services for financial institutions, on the Ncast podcast to get his insights on the future of community banking and how to prepare for it.
Here are a few highlights from the conversation:Strategy & shareholder value
How does a community bank stay relevant? A big part of the answer is enhancing shareholder value, Tuck says. By choosing to invest in a community bank, shareholders are deciding that community banks are relevant. If a community bank becomes an unattractive investments, shareholders will sell—ultimately casting a vote for irrelevance.
Therefore, the fundamental duty of the board and management is to enhance shareholder value Greyson offers five tips for boost value (and by extension, relevance):
- Grow earnings per share
- Provide return on investment (ROI)
- Providing share liquidity
- Provide dividends
- Maintain regulatory safety and soundness
“If you’re doing those five things well, it’s hard to criticize,” Tuck says.
The future of community banking
The fundamental shift in banking as geography becomes less limiting for both community banks and their customers is another important element to consider, Tuck says. Already there are nationwide banks that don’t have branch networks.
Tuck suspects that in the future the idea of a community bank may not be defined by local markets. Instead, they might focus on specific customer bases. Examples include Climate First Bank in Florida, which focuses on environmental sustainability, and NY-based Esquire Bank, which focuses on attorneys.
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Consider all the risks, including climate change
He also warns that community bankers need to consider climate change risk as part of maintaining satisfactory regulatory relationships.
“Even on a microlevel, climate change could impact a borrower which impacts asset quality and directly impacts the bank,” he says.
Mitigating that risk and all the others a bank faces is fundamental to success.
“A great community bank is one that identifies risk, manages that risk, and mitigates that risk,” Tuck concludes.
In sum, the future of community banking is bright for institutions that actively pursue relevance as a strategy. To hear more, listen to our podcast or subscribe on your favorite podcast platform.
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