An increasingly competitive market, the health of the economy, and the growing popularity of digital financial transactions were among the topics addressed at the Commerce Street Capital (“CSC”) 17th Annual Banking Conference. Industry leaders from across the U.S. addressed both uncertainties and growth drivers to the audience of hundreds of regional and community bankers, at the Four Seasons Resort and Club Dallas at Las Colinas.
Speakers Discussed Regulation, FinTech and the Future of Banking
CSC Chairman Tex Gross kicked off the conference with comments about the current market climate, reflecting on progress made in the financial sector since the 2007-2008 financial crisis. Opening speaker Mark Singleton, President and CEO of Citizens National Bank of Texas, subsequently delved into the topic of the current hypercompetitive environment that community banks are facing, and how sourcing deposits can complement loan initiatives.
In an overview of the U.S. economy and banking industry trends, Dory Wiley, President and CEO of CSC, spoke about current drivers of volatility, including Brexit, interest rates, and inflation. Wiley compared today’s bull market – the longest one since World War II — to previous bull markets and pointed to the success rate of the inverted yield curve in predicting recessions. Wiley also spoke on what he views as unwarranted pessimism aimed toward the U.S. banking system, pointing to the sector’s growth compared to the slowdown being seen in other global markets.
CSC Managing Director Eric Corrigan moderated three panels with some of the nation’s most recognized banking and fintech industry pioneers.
First, he was joined by Joseph Catti, President & CEO, FineMark National Bank and Trust; Josh Rowland, CEO & Vice Chairman, Lead Bank; and Stephen Notarianni, CFO, Crescent Bank and Trust to talk about “Different Routes to the End Game – Success Comes in All Shapes and Sizes.” The discussion centered around the “atypical” attributes of each of the three banks and the individual successes of each despite their differences.
In a panel titled, “Partnering with Fintech – Cutting Edge Solutions for Banks,” Corrigan sat with Bryan Adler, Founder & CEO, Vetter; Margaret J. Hartigan, Founder & CEO, Marstone, Inc.; and Catherine Kraus, Director of Partnerships, Fundation. The panelists spoke about how technology is transforming the banking industry as evidenced through M&A activity and digital payments applications, and how each of their companies and platforms is helping both banks and consumers navigate the changing landscape.
“Community Bank Capital Access and Shareholder Liquidity” touched on challenges and positives in the market for private and smaller financial institutions with Heather Ceresini, Managing Director, EJF Capital; Laura Hamilton, VP of Corporate Services, OTC Markets; and Van Hesser, Sr. Managing Director of Financial Institutions and Corporates Group, Kroll Bond Rating Agency.
Greg Mykytyn, Vice President, Commerce Street Peak Advisors, and Owen Schmidt, Director of ESOP Consulting, Principal Financial Group, addressed Employee Stock Ownership Plans (ESOP) as solutions for banks in unlocking corporate equity. Schmidt explained that banks may opt to use ESOPs to raise additional capital, to create an internal market enabling employees to purchase bank stock with 401(k) accounts, and to provide a market for shareholders to sell stock for succession planning or other liquidity needs.
Jeff Mercer, Ph, D., Centennial Bank Chair in Finance & Senior Associate Dean at Rawls School of Business at Texas Tech University, spoke about educating and hiring the next generation banker. Mercer discussed the disconnect that exists between community banks and young graduates. Mercer said that, “community banks that don’t understand and face these perceptions and realities, and address them in reaching out to prospective hires, may very well face significant difficulties refilling their ranks.” He brought up an ongoing theme at the conference: how FinTech is changing the banking industry landscape.
Michael Perry, Commerce Street Capital Managing Director provided his insights on M&A activity. Perry pointed to concerns that deal value on an aggregate dollar basis is approaching pre-crisis level, but average deal size is down considerably – despite recent large bank MOE activity picking up.
Keenan & Partners’ Principal, Tom Keenan, presented branch rationalization and optimization strategies. Keenan discussed shifts in consumer behavior that translate into fewer overall transactions at community branches and reduced emphasis on teller transactions, saying that it’s time to move people from the back office to other functions. Keenan also mentioned that, the new optimal size of a branch should be 1,800 to 2,200 square feet
George Friedman, Ph.D., the Founder and Chairman of Geopolitical Futures, presented a history of social and economic cycles in the U.S. Starting with “The Washington Era” in 1776, he identified five periods the nation has endured, the fifth and current cycle called “The Reagan Era.” It began in 1980 and will end in either 2029 or 2032, following the crisis of the 2020s.
The conference wrapped with a closing presentation by Commissioner of the Texas Department of Banking, Charles Cooper. Cooper addressed what’s on the horizon in the regulatory environment, weighing the pros and cons of Capitol Hill appointments. He said he expects de novo applications within the next few months for areas that have lost community banks.
About Commerce Street Capital
Commerce Street Capital is an investment banking firm serving financial institutions and middle-market companies. They value client collaboration and build long term relationships based on mutual respect, goals and integrity. Their practices include: mergers/acquisitions, debt/equity placements, valuations/fairness opinions, bank capital services, SBIC funds, corporate/real estate finance, regulatory/due diligence services. (Member FINRA/SIPC)