By Brian NixonJeffrey Ball—like many community bankers—is an advocate. For customers. For the community. And for the banking industry.
Ball is the president and CEO of Friendly Hills Bank, a $125 million institution based in Whittier, California, that serves Los Angeles and Orange County. He is also the chairman of the American Bankers Association’s Government Relations Council, which shapes the industry’s policy priorities in Washington.
In the latter leadership position, Ball sees the council’s mission as one of helping the industry create a better environment for banks to support economic growth. That includes advocating for what ABA calls tailored regulations that focus on banks’ business models and risk rather than arbitrary asset thresholds.
“My little bank is not going to jeopardize the whole financial system,” Ball says. “Yet, when I have an exam, I have 20 examiners that show up at my 26-employee bank. That’s excessive and unnecessary. So we really need to tailor the regulation to the risk. And that would allow me to better serve my community without all of the overhang that I have of higher regulatory costs.”
If all of this sounds sensible, then get on board and share your bank’s experiences with your lawmakers. “We all face the challenge of this crazy regulatory environment that does not tailor regulation toward the risk of the bank,” Ball says. “We have a model that seems to be more focused on size. But what’s happened is a requirement for a big bank becomes a recommendation for a smaller bank. When you’re running a smaller bank and a regulator gives you a recommendation, you might as well assume that it’s gospel. So, even as a recommendation, in effect, it becomes a rule.”
Ball knows banking from both a community bank and large bank perspective. A fourth-generation native of Whittier, he worked in a local community bank as a part-time teller during his time at home from attending the University of Puget Sound in Tacoma, Washington. After graduating, he joined the bank’s management training program, which provided experience throughout the bank while also learning more about local businesses.
Eventually, he joined Bank of America in Los Angeles and worked in investment banking before leaving to start Friendly Hills Bank in 2006.
“Whittier at one point had several independent banks,” Ball says. However, by the early 2000s, that financial services environment had changed. “If you were operating a small business in the area, you were banking with a large institution or with someone outside the area.”
To Ball and Friendly Hills Bank’s other organizers and investors, there was a clear opportunity for a new community bank. That’s not to say things were easy. “Not long after we opened our bank, we had the financial crisis,” Ball notes. “We had to sit back as a board and assess this. My board made the decision that, yes, we do want to fight and stay in business.”
The experience—advocating for his bank—provided an understanding of both the California Bankers Association and its policy priorities in Sacramento and with ABA and the industry’s federal priorities in Washington. Ball served as chairman of CBA from 2013 to 2014 and has served on the state association’s board of directors since 2010. He also has served on CBA’s government relation committee since 2009 and currently chairs the committee.
In his local community, Ball helped found Kinetic Academy, a Huntington Beach charter school that one pair of twin sons attend. (Another pair of twins are in college.) Kinetic Academy, which emphasizes learning by doing, is one of the few K-8 schools in the nation that features financial education as part of its core curriculum.
“Jeff is a visionary leader, who is collaborative, inclusive and engaging, and his enthusiasm is contagious,” says Simone Lagomarsino, CBA president and CEO. “He is a tireless advocate who is dedicated to supporting economic growth and improving the quality of life across our country. He also is very passionate about the positive impact our banks will have once we can reduce the regulatory burden.”
Ball believes that banks’ business customers can help propel the industry’s message about the damaging impact of regulatory burden. After all, they experience it in their own operations. “We rarely see business laws get relaxed,” he points out.
“Our clients are important partners who we can work with in advocacy,” he adds. “They can make a strong case to elected officials. Those who can demonstrate a specific impact and talk about challenges they face are especially helpful.”
There are two major aspects to bankers’ political advocacy. One is the commitment of time to building personal relationships with lawmakers. “The physical presence is important for bankers to tell their stories,” says Ball. The second aspect is financial support to “build the political muscle we need as an industry,” Ball says.
The good part is that, given the current environment in Washington, “we have a lot more positive energy” in terms of effectively making the case for economic growth versus fighting defensive battles, he notes. “The priorities haven’t changed a lot but what has changed are the mechanisms within that.”
This means the industry is well-positioned when issues such as financial innovation and fintech are discussed. “Bankers are protectors of the payments system,” Ball says. “As regulated entities, we have very strict standards we have to follow.” Banks also are trusted entities at the center point of the customer relationship. “As the fintechs look to develop new products, often it brings risk to the consumers,” he says. “The product or service may not come with deposit insurance and other benefits that banks provide. There’s a level of confidence that a consumer has—and perhaps takes for granted—when they’re dealing with a bank. We have very strict limitations. Consumer protections don’t necessarily extend to other sectors.”
Looking forward, Ball also sees the issue of industry consolidation and few de novo startups as a continuing challenge. “We are losing a lot of banks,” he says.
“That consolidation comes down to two factors: higher costs of regulation and return on capital. Whether deciding to sell or to start, it gets down to return on capital. I think having de novos is very supportive of local economies. They need appropriate scrutiny, but it shouldn’t be limiting.”
Another offshoot of the higher costs of regulation is the increase of nonbank lending. Regulated banks “are always at the lower end of the risk curve,” Ball says. “Nonbank lenders are higher risk and more expensive. Today, those nonbank lenders are competing more and more in our space. All of that creates a higher competitive factor for banks.”
In the face of that competition, Ball remains an advocate. For his customers. “What I tell my clients is, ‘Look, who would you rather be with?’”
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Listen to the ABA Banking Journal Podcast with Jeffrey Ball: