CEO Q&A: From Financial Crisis to Digital Transformation

Ten years ago, Ryan James became the youngest CEO in Florida when he was tapped to lead Surety Bank, a $125 million community bank in Deland, Fla. James reflects on how the bank supported its customers through the financial crisis and how he’s positioning the 93-year-old institution for the next 90 years. Listen to the full interview on the ABA Banking Journal Podcast.

Q You became CEO in the wake of the financial crisis, and at the age of 30, you were the youngest CEO in Florida during a very turbulent time for the state economy. What was it like stepping into that role under those conditions?

A I started with the bank in 2001, and became CEO in July of 2009. I had all these plans to grow the bank, but the recession hit immediately. Within two months, 20 percent of my capital was charged off for bad loans. Any plans for growth or marketing were halted right then and there. Instead, it was: you’ve got to work out those loans and get to it.

I was in commercial lending prior to being CEO, so a lot of these loans I knew. I went to a seminar for bank CEOs and bank directors during that time, and they were going over allowances and impairments, which was the number one topic of discussion throughout the whole nation: what do you do as soon as you identify a bad loan? They were asking all these questions, and nobody was answering, so I raised my hand and answered. I stuck out like a sore thumb—I was the youngest one in there by about 15 or 20 years—but that gave me a huge boost of confidence that I actually had more of what it takes to get the bank through, because all the current CEOs hadn’t faced any of this [and]they were so far removed from dealing with loans.

Q How did you and your team work through those loans?

A Every impaired loan had its own life. If a business was doing just as good of a job as somebody else that might come in and take over, you wanted to do everything you could to keep them going. It was the opposite of what regulators wanted you to do—during that time, if the [borrower]didn’t show the ability to pay that loan at the original contracted terms, examiners wanted you to foreclose and liquidate as quickly as possible. That was not what was best for the bank, and that was not what was best for the customer.

Q What gave you the confidence in those days to say, “This is right for our institution, this is right for our customers?”

A Real estate values plummeted so much, there were things we lent 60 cents on the dollar, and if we were going to foreclose, we were going to lose 30 to 40 percent of that. We knew that at some point, it had to bottom out and change, so we wanted to work through that. One example was a $2 million hotel loan. At the time, the appraisal only showed that it was worth a little more than $1 million, so we had to charge off $1 million on that loan.

But the family that was running that hotel, their numbers showed that they could afford a 5 percent interest-only over the next year. So instead of foreclosing and losing that million dollars forever, we collected 5 percent interest. In effect, that was a 10 percent return for what was now on our books. And then every year, they would pay a little bit down in principal, and after a few years, we ended up selling the note back to them for $1.6 million. If we would have listened to the regulators at the time and just liquidated, we would have lost that million dollars forever. But in this case, we worked through it, and we ended up only losing about $250,000 to $300,000.

Q We now have a whole generation of banking professionals who have only known the rising side of a credit cycle. What have you done to prepare your employees and your institution for hard times?

A It’s really about understanding how each department [within the bank]interrelates to one another. So many banks just focus on commercial lending or their net interest margin, but that only tells part of the story. We were heavily dependent on commercial real estate loans, fixed rates—and our deposits were primarily CDs. So when things got bad and you had to lower your interest rates or foreclose, you were still paying on those higher CD rates. You definitely have to have a better product mix. You can’t be dependent on just one source of income. That’s what we’ve done a lot over the last 10 years is to not only keep commercial lending as a continual viable source, but to add other layers as well.

Q What are some things you’ve done at Surety Bank to add those other layers?

A After we were on the way up through the recession, I really looked at: how are we going to grow our checking accounts? At the time, when I looked out to get additional software or mobile applications, it all came back to your core. I was having a lot of difficulty trying to get my core to act quickly to add these onto it, and it was hugely expensive—it was costing us an average of over $7 per consumer account. Ultimately, that was why I ended up leaving a legacy core and going with another core, Nymbus.

Q Your new partnership has also enabled you to extend out beyond a brick-and-mortar presence. Can you tell us what you’re doing there?

A We launched Booyah! Bank in under 90 days, and it takes a few minutes to onboard [customers]very swiftly and efficiently. We’re also talking with subscription-based companies that already have a huge base of users that are happy with their products, and at that point, they can offer [bank]accounts to them. We can brand things specific to their organization, their structure, and model their mission statements. There are so many ways that we can bring banking to people now. The community is not bound by your geography—I look at community as shared interest.


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