Carter Bank & Trust’s Focus on the Future

By Karen Kroll

“This is the way we’ve always done things” just doesn’t cut it at any bank anymore. Which is why many banks have dedicated years to the task of eliminating the many obstacles—technological, logistical and cultural—that might keep them stuck in the past. But what happens when a bank puts its commitment to change on the fast track?

To find out, we checked in with Carter Bank & Trust. This $4.1 billion bank, based in Martinsville, Virginia, has a strong sense of tradition—and an equally strong push toward modernization. In setting the balance between the two, marketing plays a big role.

Soon after Kim Adkins joined Carter Bank as VP and director of marketing, she sent customers a letter outlining the first new fee schedule in 22 years. She signed her name and provided her contact information at the bottom of each letter “without a second thought,” she says.

Several days later, Adkins began responding to what would be a total of about 700 calls. “They’d say the reason they came to Carter was that ‘we don’t fee them to death,’” she says.

So Adkins explained the new fees and asked callers what they liked most about Carter Bank & Trust. For many, it was convenience. For the past several decades, Carter Bank’s drive-throughs have been open at most locations from 7 a.m. to 7 p.m., six days a week—and customers’ relationships with their bankers figured prominently.

As expected, few callers welcomed the fee changes. But most appreciated the opportunity to talk with a person, Adkins says. Her efforts were an example of Carter Bank & Trust’s high-touch approach to customer service, even as the organization grew to more than 100 branches in Virginia and North Carolina, she says. As is the case for many community banks, the need for change was clear—but not at the cost of what made it important to its customers.

Now, the bank is positioning itself for more sustainable growth.

For years, Carter Bank’s business model had been to fund the balance sheet with deposits from free checking accounts and CDs, as well as interest on money loaned, primarily for real estate ventures. “Those were the bank’s bread and butter and it worked for forty years,” says CEO Litz Van Dyke.

But as regulations intensified and customers expected more technological conveniences, Carter Bank & Trust struggled to keep pace. Many operations remained manual. Not only were they inefficient, but the bank eventually fell behind on the infrastructure needed to manage its credit risk. “You have to have a risk management infrastructure that’s appropriate or you’ll pay the price,” Van Dyke says.

In 2016, Carter Bank & Trust entered into a consent order with the FDIC and Virginia Bureau of Financial Institutions. Van Dyke came on board that year to help reorganize the bank and address the issues highlighted in the order, which he expects to be resolved soon. Over the past few years, Van Dyke and his colleagues have been restructuring Carter Bank & Trust to boost both regulatory compliance and efficiency. It’s changed many processes and operating systems, including its core software, which manages all major banking functions, such as account management and loan origination and servicing.

The bank’s current loan loss provision exceeds many of its peers. Today, Carter Bank & Trust is “well capitalized and has enough capital and core earnings to deal with any problems,” Van Dyke says.

The bank also automated numerous back office functions. “We’re doing as much as we can to eradicate paper processes,” says Matt Speare, chief information officer.

A shift to sales and marketing

The changes aren’t over. Van Dyke continues to work on increasing the bank’s net interest margin, which is now above 300 basis points, up from about 227 several years ago. The bank’s peer group tends to run from 350 to 360 basis points.

To get there, Van Dyke is working to boost demand deposit accounts by about $1 billion. That will reduce Carter Bank’s reliance on CDs as a source of funding and will lower the bank’s cost of capital, he says.

To attract customers, Carter Bank & Trust is rolling out a host of new products. Mobile banking is slated to launch by spring, and treasury management capabilities for business customers will come later this year, Adkins says.

As the operational changes take hold, marketing becomes key.

One step is a change in the tagline from “Carter Bank & Trust, home of lifetime free checking,” to “Proud of the past, focused on the future.”

Carter Bank & Trust employees will help spread the word. All front-line staff are trained in helping customers work with the new tools. The bank also is beefing up its social media presence and encouraging employees to participate in community events.

At the same time, Carter Bank & Trust is committed to maintaining its tradition of personalized service, Adkins says. That includes taking responsibility when things go wrong—and reaching out in person to make things right. One example: during the transition to the new operating system, a snafu affected about forty customers. Adkins called them personally to let them know about the mistake and to assure them it wouldn’t happen again. “Those are the little things you try to do to keep a ‘high touch’ approach in place,” she says. “Even with $4 billion in assets.”

Karen M. Kroll is a business and financial services writer and content marketer based in Minneapolis-St. Paul. Email: [email protected].