I hired on as an FDIC examiner right before the bottom fell out in 2008. I started in 2007, and as I was going through my training program with FDIC, we started seeing the broader economy go through some very severe turmoil. It was a great learning opportunity as a young examiner. Every bank I went in had some form of challenge—trust preferred CDO bonds they had bought or loans they had made in new markets as they were expanding at the height of the economic expansion—and so it gave me a very great opportunity to learn from the pitfalls of others, to not cut corners and to not compromise on some of the basic fundamentals of running a sound bank.Q We now have a decade’s worth of banking professionals who’ve never experienced the down side of a credit cycle. How do you help prepare our bank for a potential contraction, especially for folks who’ve never had an opportunity to live through it? A The one parallel, based on our geography, is that we deal with hurricanes a lot. We have inclement weather, and that is something that’s truly baked into the culture in South Mississippi. Folks still remember where they were at and what they were doing during Hurricane Katrina. We need to take the same sort of preparations in our organization to weather storms that may come from an economic or credit standpoint as we weather hurricanes.
While we don’t know when they will come, we do know they will come, and the same sort of discipline we build into the way we construct homes, or the same way we take preparations when it’s in storm season by keeping extra water and batteries at the house, we have to take those same sort of standards into account as we’re originating loans or growing. I think that we may intuitively get that a little easier here, just based on the parallels between our industry and the geographic area that we live in.Q From a risk perspective, what’s on your mind now? A Flood insurance and base flood elevations are a very hot topic in our neck of the woods. Unfortunately, our base flood elevation maps were updated in 2009 in our home market of Jackson County, and the base flood elevation here is extremely high, and that has stymied a good bit of growth and revitalization that was in the early stages of happening. Folks have literally sought higher ground, and that has impeded our ability to grow somewhat as a region.
We are also seeing signs in isolated instances of the same sort of deals coming through from a credit standpoint that were problems in the last recession. We’re seeing some phantom equity pop up in properties that we really don’t think is there. We’re seeing those sort of things pop up, and the scary part of this, not only are we seeing them pop up in appraisals and loan requests from customers, but we’re seeing other banks that do that. So even though we may pass on some of those deals, we find out later on that the customers are getting the financing.
From a broader standpoint—as I look at banking as a whole and the way that folks our age and younger view banks—it is very much less a place that you go. It’s just something that you do. I can’t help but wonder as we look ahead: What sort of evolutions and changes we will need—as a local, hometown community bank—to remain relevant for our customers?Q What is your bank doing to respond to these threats and opportunities? A We are restructuring the way that we are organized as a company to place a much greater emphasis on technology and ongoing innovation. I think it’s very easy for us as community banks who are largely dependent on three big core processors to get somewhat stagnant and to feel like we are handcuffed based only on the evolution and innovation that’s going on in those big three, rather than being willing to invest the time and energy as a bank to seek out smaller, but maybe more innovative, third-party providers that we could partner with.
I believe community banks are here to stay. Community banks are willing to step out on faith and step out on their knowledge of a person’s character and the needs of their local community to make things work that may not necessarily look perfect on paper. So that’s first and foremost, and as an organization, we are very much committed to being here and to acquiring the necessary talent at all levels of the organization that we need to help us continue growing and evolving. We want to be sure that we as a company are ready and prepared to weather any storms that may come—be they literal hurricanes, or just storms in the economy or storms in credit markets—whatever there may be.