Roundtable: The Bankers Talk Shop
Every industry is undergoing change, but arguably your local and national banks might take the cake: Buyouts, significant regulation changes, and new competitors both in the brick-and-mortar and online worlds are just a few of the daily realities and challenges. Locally, northern Michigan’s banks are healthy, its new generation of leaders say (in just three years the leadership at virtually every major bank in the local market has changed).
So the TCBN gathered a handful of local bank presidents together to talk shop, consider credit unions’ advantages, compare notes about the economy, and look forward.
Connie Deneweth, Traverse City State Bank
Geoff Streit, First National Bank of America
Mike Witkop, Huntington Bank
Scot Zimmerman, Chemical Bank
TCBN: First please tell us about your positions and your bank footprint.
Deneweth: I have been the CEO since 2009, and we have four branches and employ 98 people here in the community.
Zimmerman: I am the TC community president, now serving Petoskey, Charlevoix, Elk Rapids, and Leelanau with 17 branches and 254 associates.
Streit: I am the Traverse City market president and have been on-and-off since 2005. We serve all of Michigan except southeast. I am responsible for the area from Cadillac to the UP.
TCBN: So given your wide span of responsibility, what’s on your mind the most every day?
Witkop: Definitely driving deposit and loan growth, in a market with a lot of people doing the very same thing!
Streit: Well, I have six kids, so they’re the first things I think about, and then growing profitability and loan growth and not too many deposits. Deposits are a source of funding, but the way we’re capitalized we want them, but not to the extent that other banks do. Our profit targets are the main goal.
Zimmerman: Taking care of customer needs, though things are always changing…the regulatory environment changes, how we deliver our services changes, customer needs change, the competitive environment changes.
TCBN: What did everyone make of 2015?
Witkop: The housing market was extremely strong, and we are seeing much more development and home mortgage business.
Streit: Commercial real estate prices and occupancy are up, so there are opportunities to help landlords, property owners, and developers. Most business owners have weathered the recession and are finally better off, so there’s a greater breadth of clientele to work with.
Zimmerman: I think the economy healed to the point of stability and comfort for business owners, consumers, and homeowners to extend to buy that machine, trade-up on their home, buy a new car. It’s a much more normal environment with some pent-up demand.
TCBN: So all the recent real estate growth and development. Can Traverse City sustain it?
Witkop: I don’t think you can sustain it with the job base here, no. But maybe with all the people who have trust accounts and are retired.
Streit: Right. That’s one of the two demographics growing in the last census, so there will be more housing demand as more people moving here. Will the supply be absorbed? Data indicates it will. Real estate will slow down in Traverse City, but we are buffered from national effects. And, my counter is when it’s not sustainable, that creates opportunities for others to come in later.
Deneweth: So far it’s fine; it’s working.
Zimmerman: We want smart growth, right? Growth that doesn’t overtax other resources and that doesn’t create a bubble…housing that serves the investors, the city, they county…
TCBN: And what about those retirees who only have second homes here. They aren’t bringing their banking assets with them, are they?
Zimmerman: They’re coming to our community because they like the way of life, and if we are executing, we are part of community, and I agree they are going to bank with us.
Deneweth: They are bringing assets, often sharing among multiple locations or banks, but we also have some customers who are choosing to load up on our town.
TCBN: What about the regulatory side of your businesses? We hear it’s become a nightmare.
Witkop: There are some new expectations as a result of regulatory oversight, but that’s probably done what they’ve wanted; it’s improved the quality of our loan portfolio. It changed because we needed to have more information from clients. When I started in 1984, it was kind of a joke if you ever even got a tax return…
Streit: It hasn’t gotten harder, but it’s gotten more costly. Something one person did five years ago now you have 2-4 people and all that didn’t help customers at all.
Zimmerman: You’re seeing it in all industries. We’re all in the service business. And I think what we’re doing now is just being more prudent.
Deneweth: Yes, I think that’s a good way to put it. We’re more prudent now.
Witkop: And it’s easy to blame regulatory, but the biggest change in our industry is that 15 years ago online banking didn’t really exist. Today 55 percent of transactions happen outside of a branch.
TCBN: Realistically, how different are the banks here? Is there any difference or specialization?
Streit: Banking has become commoditized. Our advantage is, you come to me needing a building but we’ve also identified some issues you didn’t know about. We have similar products to other banks but now you have additional information or we introduced you to a new key person. If we want to set ourselves apart we have to become trusted advisors.
Witkop: You hear about creating that right talent pool, finding people who have what we call common sense. And then there are all those other services like online banking, fraud protection, and so many more. So while banking will always have lending as the critical part, there are other services that really can matter.
Zimmerman: A dollar’s a dollar. Sure, we try to differentiate. Sure, we have different services or specialties in something like oil and gas, but it’s the people you have in the business and how you’re serving the client.
Witkop: Talk is cheap. I’ve heard, “Oh, ABC Bank has terrible service.” But what is service? One client is upset with online, but the next wants bricks & mortar. My needs are going to be different than yours. So every client is different.
Zimmerman: I think in this market it is still largely a people-based business. Hopefully if they’re hunting for a solution they’ll stop with us. We want to be more focused on having the right people versus outsmarting another bank.
TCBN: So given all the bank changes and consolidations, are customers today less likely or more likely to change banks?
Streit: You have to be good at making it difficult for customers to leave. More touchpoints and more products and services. Typically there has to be a compelling pain point for a customer to want to leave.
Zimmerman: Anytime you combine two banks, you maybe end up with a different product set or different functionality, like not having that branch in your neighborhood. But more often than not today, you can find a way to meet a customer’s needs.
TCBN: What about credit unions? Are you seeing them competing with you more and more?
Streit: Yes, and credit unions aren’t facing what normal commercial banks would, so their desire to do and produce commercial loans has increased. They serve a purpose, but I think the conversation eventually will come to light that we are doing similar things and are similar creatures and should be regulated and taxed the same.
Deneweth: Yes, we are seeing more and more of them. But they are hiring “C and D grade players.” Customers will see a difference in the depth of experience and training.
Zimmerman: Yes, they are new to the business [of commercial lending] so anybody new is going to have missteps.
Deneweth: That’s a good way to say it. They are very talented consumer lenders; that’s their depth.
TCBN: How important is being based locally or having local decisionmaking? Talk about the “local” message.
Zimmerman: We have 8-9 decisionmakers locally with 75,000-100,000 customer relationships and we reinvest tens of thousands of dollars. We have an advisory board with nine local people; I live in the community, with my ear to the ground. That whole thing stems from decades and decades ago, when local deposits would be siphoned off into the big city. Today the reality is we are actually pulling funds from other markets; almost the reverse. We are doing more loans than we can support with deposits here.
Witkop: We make decisions here every day. We would suggest exactly what Scot is saying. We’re all local…we look at what kinds of resources we can bring…national resources like foreign exchange as businesses are growing that might outpace others. We pay taxes, we are involved on local school boards.
Zimmerman: It’s great marketing to say you’re local, but —
Witkop: I don’t think it is.
Deneweth: That’s all true. However there’s a local knowledge from a decisionmaker’s strandpoint. We think it’s important to have people who can actually approve loans and escrow agreements. It’s helpful to have local business and people here we can can help streamline. We’re winning on that message every day.
Witkop: I would agree, but my point is we all rely on local knowledge, the people I work with. Whatever line of people I work with expect me to know this market. It’s also helpful to have another set of eyes look at things sometimes. You can be a bit enamored with an opportunity and some someone can say, “have you thought of this?”
Deneweth: And it’s not just the decisionmaking. Some clients might get an idea they hadn’t asked for, maybe a fundraising idea or something we have learned from what works in this community; it’s value added. It helps when I have board members going to church, grocery shopping in this community…they will chirp-in and help, too.
Streit: But you can also be local and not solve problems. I’m not sure a client is going to base that as the only decision point.
Witkop: The consumer wants its cake and to eat it, too. But I mean, look at the example of the owners of Fox Motors. There was consolidation and they’re not “local,” but they have done a very nice job in the community.
TCBN: And are banks still heavily recruiting and taking people from each other here?
Witkop: You always want to have conversations…
Deneweth: We picked up 12 individuals from Northwestern Bank.
Zimmerman: It’s a people business, and people do matter.
Deneweth: I think recruiting is a part-time job for all of us.
Streit: Yes, though the revolving door of lenders [changing banks] has slowed a bit.