Special Focus Sections:
Banking & Finance
Growth is slow in coming as banks vie for business through alternate means

Service, convenience still key, experts claim

BY JACK CRISS
DBJ Executive Editor

“Banker’s hours” may have to be extended.

Financial and banking executives are having to hustle for dollars that are increasingly hard to come by in an industry that has been especially hard by a soft economy, low interest rates and job losses. Consequently, bankers are having to roll up their sleeves in an effort to lure customers away from other financial relationships. Nowhere is the more true than in the Mississippi Delta.

Bankers across the region are reporting that, while there is enough business to go around, fewer economic pies are being baked. This, in turn, is leading to much greater competition and a return to old-fashioned ways of keeping and/or luring away customers: better service, more conveniency and eye-to-eye relationships.
So, on top of having to deal with the onerous strain of heavy regulation, tough economic times and what industry analysts are saying is a coming battle with credit unions, Delta banks are working harder than ever for less and less. Indicators aren’t showing relief anytime soon, either.

“The S&P has now rallied approximately 16% and the NASDAQ nearly 19% since year-to-date lows reached on March 20,” says Stacey Wall, CEO of Pinnacle Trust in Ridgeland. “Much of this recent rally has to do with our successful war effort; however, I view a surge in optimism with less than glee,” Wall adds.

“In fact, in early 2001, I warned that record highs in consumer confidence were a high-risk warning for the stock market,” Wall goes on. “Confidence had peaked at that point, and it continued to drop until late February and March of 2003 when it fell into its ‘extreme pessimism’ zone, which was to me a bullish indicator. Following the crowd at psychological extremes is the best way to go broke!”

With eyes on the market—and the competition—Delta bankers have found that they need to focus on the strengths of their business with no looking back. The Delta Business Journal caught up with many of these bankers to get their feel of the current market, their own outlook and what may lie ahead.

“The Farm Bill of 2002 instilled a new optimism in the farming community,” says George Jarman of AmSouth Bank in Greenwood. “The farmers now see a probability of profitability that they had now seen in a while. This has helped us all in the Delta

Our biggest challenge in the banking community remains regulatory issues,” Jarman continues, “especially when it comes to mortgages. There is a great deal of red tape in place originally designed to help borrowers know what they were getting into. It’s a hugely cumbersome process. Of course, now we’re seeing a buyer’s market and with interest rates at historical lows, purchasing a home is much more affordable now.

Finding new customers is also a formidable challenge,” Jarman says. “We’re having to be much more aggressive in a somewhat shrinking market. Greenwood is holding its own, as is the rest of the Delta, so I personally remain optimistic.”

Another banker in Greenwood, Marion Boyd of Union Planters, concurs with much of what Jarman says.
“Banking is fairly flat in the Delta right now,” Boyd conveys. “There’s not a whole lot of growth and little expansion from existing customers. We’re also looking at a possible decrease in cotton acreage this year, which is going to further hurt the region and the Nissan plant didn’t do a whole lot for the Delta in terms of suppliers coming in.

But Downtown Greenwood is undergoing a renaissance of sorts,” Boyd says. “Thanks to Viking Range’s input with The Alluvian Hotel and Staplcotn’s expansion, we’re seeing reinvestments like these stimulate the local Delta economies.”

Boyd says Union Planters is doing what every other bank is having to do: maintain strong relationships with current customers. He says that the times we’re in requires a more personal approach.
“For about the next 12 months, our market here is going to remain flat,” Boyd predicts. “There are encouraging signs, though. In spite of 9/11 and the Enron and WorldCom fiascos, our economy never quite fell into a full recession. I’m ultimately bullish on the Delta economy.”

The personal touch of banking is evident in Bill Allen’s approach. The new Senior Vice President of BankPlus in Belzoni, Allen says he puts his many years of farming to good use in his current position.

“Recently, I closed a loan, but the farmer in question forgot to sign a line,” Allen gives as an example. “So he’s out planting cotton and I load up in my car with a notary public on board and we proceed to meet him out on a row crop to get a signature! I put myself in the farmer’s place, because I’ve been there and know that they need programs tailored very specifically,” Allen says. “And, if I have to drive out in a field, so be it!”
BankPlus has grown tremendously in the state, Allen says, notably becoming the affiliate bank for Nissan’s Canton facility. Still, Allen sounds a similar theme when he says that service must come above growth, because in truth, service means growth.

Trustmark Bank commands a strong presence in the Delta, including three branches in Greenville, two in Greenwood and one in Leland. According to Bill Callaway, President in Greenville, the struggle for growth is an issue facing Trustmark as well.

“We offer an enormous array of products, but, when the general economy is down, it’s tough to grow and prosper,” Callaway says. “I’m thinking it’s just a matter of time before we see a turnaround. It might not be dramatic, but it will be noticeable. “

Callaway, a 20-year Greenville native, sees reasons in the Port City for his optimism. “There is an abundance of available land in this market, the transportation infrastructure is improving, what with the new bridge here and I-69 on the drawing board, the education system has shown recent gains...the signs are here in Greenville,” Callaway maintains.

“With the recent plant closures however, you obviously see a smaller payroll which results in a negative ripple effect for our whole economy,” adds Callaway. “But, our diversity helps us stay strong and therefore the downturns don’t just decimate us.”

Joe Ricotta, with Community Bank in Indianola, says “It’s tough to both maintain growth and bring in new business, but that’s what you have to do in this market in these times. We have found that we’re picking up new customers based on word-of-mouth from our existing customers.”

Ag lending is the backbone of Community Bank, Ricotta says. “We’re prominent agricultural production lenders and this has meant a lot to our success here. Of course, whatever the need is, we’ll try to meet it. Community Bank has given each of its locations in the state the autonomy to make independent decisions whereby we can say ‘yes’ or ‘no’ right in this office.

“I’m starting to see the Delta make that economic turn,” Ricotta notes. “For instance, this bank is involved in a major economic deal that could come to fruition very soon. And certainly, with this being an election year, a lot of issues are going to be coming to the forefront that I hope will bear positive fruit for the Delta.”
Ag loans are also a strong component of Jefferson Bank’s business according to Joyce Franklin. With two locations in Greenville, Franklin says her bank keys in on ag and mortgage lending.

“You know, this economy is not as strong as it needs to be,” Franklin says, “and certainly that can be said of the entire Delta. But here in Greenville, our economic climate is as good as comparable areas, so we have to hang our hat on that. The city leadership here is doing outstanding work to strengthen the town, so I am optimistic.”

Fred Miller of Bank of Anguilla is also optimistic, but says he sees the Delta economy as a “mixed bag”.
“Low interest rates have hurt banks a bit, but here at our bank we’ve gotten our costs of funds down about as low as we can so when rates rise again, we’ll be able to recoup or losses,” Miller says.

“Customers are able to take advantage of these low interest rates, but at the same time it hurts our retirees and those who buy CD’s,” Miller continues. “Credit quality has improved with help from the Farm Bill and our cash flow for our row crop farmers is much better now. But, sad to say, without government programs in place no farmer in the Delta could break even as long as commodity prices are down. Our catfish farmers are also taking a hit, but we’re still 10 to 12 months way from seeing any real turnaround, so the experts say.”
Albert Britt, a 30-year veteran of banking with First National Bank in Clarksdale, says that–so far–2003 has been a good year for his bank.

“Since December, all of our crop loans have paid off and we ended up seeing some decent gains in Coahoma County,” Britt says. Essentially an agricultural bank, Britt says “the majority of FNBs loans go to farmers and to businesses who deal with farmers and their needs.

We look at the recent Farm Bill as a case of something being better than nothing,” Britt goes on. “Most of our ag customers are pleased with the results of the bill, so we view it as a positive step.”
With four locations in the Clarksdale area, Britt says First National Bank is well-positioned as a mid-sized community bank “and that’s how we like it,” he laughs. “We always see steady, consistent growth instead of the boom or bust. I find it a good position to be in.

Of course, the key to all banks our size is keeping good credit quality,” Britt continues. “It can be a problem when you get hammered by bad loans, which, fortunately, we don’t. And, as always, success in this industry depends of relationships. People don’t do business with a ‘bank’–they do business with ‘individuals’, so that is key.”

“Our loan demand has picked up and we’ve grown in deposits.” So says Bobby Steinreide of Guaranty Bank. “”We have also seen adequate income and I believe we are poised to come of this recession.
On the loan side,” Steinreide adds, “I’d say that 25% comes from a combination of row crop and catfish with 60% coming from the commercial and consumer side. We feel that’s a good mix, though our plans are to further expand the consumer side.”

Steinreide agrees that the Farm Bill has been positive. “Our ag loans, based on current projections, are better than they’ve been in the last two to three years. If we can make a crop, with the price supports that have been put in place, we can make a profit. Pundits are taking all kind of cheap shots at the Farm Bill but, right now, it’s the light at the end of the tunnel for a lot of our customers. We’ve had some recent increases in prices and any increase in commodities would necessarily lower the federal government’s involvement, which would be a good thing.”

With six locations in the Delta, including three in Greenville, Guaranty Bank has carved a niche in this region, which Steinreide says is part of the bank’s mission. “What’s good for the Delta is obviously good for us,” he says. “There are a number of good banks here and we’re all very competitive. But we also all work hard to support the Delta and in the long run, everybody wins.”

Calvin Dye, of Cleveland State Bank, says that last year, his bank had the best year they’ve ever had. “With the interest rate margin being squeezed now, with falling interest rates, banks typically do well,” he says. “But it appears now that with rates at all-time lows and with margins so compressed, the ability to make a profit is going to get harder. If rates turn back up, it’s really going to be tough on earnings.”

Dye says that his bank’s mortgage lending has been strong over the last several months. “About two years ago, we started offering long-term fixed rate mortgages,” Dye says. “We’re very diversified in the lending process. We do a little bit of everything.

The challenge for us is going to be, again, managing the interest rate spread margins,” Dye predicts. “Consumer debt load is extremely high right now and bankruptcies are on the rise. However, on a local note, Cleveland seems to be holding its own and a lot of credit must be given to the very active role our Chamber of Commerce takes in promoting the economy.”

To help banks in the state keep abreast of all of the many regulatory challenges, Jackson-based law firm Watkins, Ludlam, Winter & Stennis set up the subsidiary company, BankSolutions, last Fall. Ben Shute, a former commissioned FDIC training examiner and compliance officer, was brought aboard to run the division.
“I had over twenty years experience in compliance and CRA examination functions for 121 state-nonmember banks in southern Mississippi, northern Louisiana and southwest Arkansas,” Shute says. “I’ve conducted numerous small and large bank compliance, fair lending and CRA examinations for these banks and I understand the different needs between a large, metropolitan bank and a smaller, community one. Many of the bankers I now work with I’ve known for years in my previous work experience and they welcome the services
BankSolutions provides.”

Shute says the “hot” issues now are FDIC regulatory exams and the newly-approved PATRIOT Act which, essentially, makes banks trace various cash transactions to assist in improving homeland security. “It will put an additional burden on the banks, especially the smaller ones,” Shute admits, “but it is seen as a necessary inconvenience.”

Shute also spends days out in the field, working on audits and reviews on the compliance side with banks on the premises. “I don’t work much out of the office,” he admits. “I spend a majority of my time setting up shop in the particular banks that I am working for. There are so many regulations out there these days, that our services are particularly needed and sought.”

Ron Vaughn is the Senior Vice President with Merchants and Farmers in Cleveland. “Our niche is in commercial lending and, like we all have to in this business, we stress the personal relationship aspect of our bank.” Vaughn says that Merchants and Farmers has a five-point service plan in place which employees have to adhere to while focusing on the customer’s needs. “That’s how seriously we take it,” he notes.

Vaughn follows the same line of thinking on the Farm Bill that most others in the banking community voice. “You certainly have to say that, in this current situation, the bill was good for us. Any help we could have gotten would be a positive step. Of course, we’re fortunate in Bolivar County to have a number of outstanding farming operations, and it’s always good to see them get some breathing room. Sure, it could have been a better bill; but it also could have been a worse situation, as well,” Vaughn observes.

“Farmers do have a sense of relief, though, because of the bill,” Vaughn goes on to say. “The payments they will receive as a result are spread out over a year, instead of being a lump sum, which is a little problematic. I have noticed that more people are planting corn this year, and we’re hoping that might turn into a big cash crop, especially with the current hype over Ethanol.”

Batesville is home base to the First Security Bank, a North Mississippi fixture in the financial community which, just last year, celebrated its 50th anniversary. Bill Fleming is an Executive Vice President and Senior Trust Officer.

“We’ve always been a progressive bank, I think it’s accurate to say,” Fleming says. “The balance First Security has tried to strike is that between a big enough institution to be able to offer quality, across-the-board services but small enough to be responsive in a timely manner.”

Commercial loans are strong in Batesville, Fleming notes, and he believes the same will be true for the bank’s new location just opened in Hernando. “Batesville has seen a real surge in retail growth over the past few years,” Fleming says. “Indications are that may soon be the situation in Desoto County, as well.”

Fleming notes an upswing with internet banking with First Security’s customers, “especially in our more cosmopolitan markets, like Desoto County. There is growth in that sector of our business, thought, especially with the bill payment package which I use and think is the greatest thing since sliced bread!” Fleming laughs.
Jimmy Clayton, CEO and Chairman of the Board of Planters Bank, says that 2003 has so far been very similar to 2002 in terms of what he has seen in the industry.

“We’ve got a stable interest rate environment, albeit a very low one,” he notes. “We’re starting to see a squeeze on our interest rate margin because there’s nowhere to go on the bottom. Plus, the yields that we can get on loans and other investments is steadily declining so that net interest is also getting squeezed and that’s true for all of us.

The economy is really showing little signs of improvement,” Clayton goes on to say. “Our retail outlook in the Delta is hurting because of job losses and on the ag side, we need a huge crop and good prices to put some money back into the equation. These times require a lot of belt-tightening and much closer relationships with our customers. You absolutely have to be there with and for them.”

Regarding the Farm Bill, Clayton says, “It gave bankers the reassurance that our ag loans would be repaid. It wasn’t just a band-aid. So the bill, coupled with strong indications we’re getting that commodity prices will indeed be higher by the end of this year, will be a big help.”

Echoing everyone else, Clayton stresses the need for service. “You’ve got to say that it all boils down to people and personnel. Banks today have to be both caring and competitive, and we are at Planters Bank. Essentially, all banks offer just about the same products and are similar in many respects, so what’s the difference? The people. You have to be knowledgeable and friendly. It sounds quaint, but it’s pure fact.”

“The new Farm Bill did not change the fact that the farmers did not get that extra MIA payment last year,” says Alice Herbison of the Bank of Benoit. “Missing that payment affected everyone who was counting on it. Consequently, we’ve seen some farmers scale back, even a few who, unfortunately, got out completely.” Still, Herbison does find some grounds for optimism.

“Commodity prices seem to be going up right now, which is certainly a bright spot,” Herbison says. “But heavy rains early this season may hurt us with replanting on everybody’s minds. That’s an extra cost, of course.”
Herbison notes also the depression of interest rates. “This effects our fixed-income customers who depend on the interest on their investments,” she says. “We’re almost apologetic when people call to check on their rates. In turn, the prices on the bank’s investment yields are down, so we’re looking for better avenues to place our money. All that said,” Herbison says, “we’re still having a good year!”

So is Cleveland Community Bank, according to Ronnie Vaughn. “We’re actually growing at an unusual pace,” he reports. “Most of it is due to a public lack of confidence in the stock market. Folks are pulling out of it because of losses and putting their dollars into short term yields like CDs while they wait for the rates to go back up. Most of the savings that we see are from older customers, which is a wise option for them because your principle isn’t lost and these folks can’t afford the other risks. I’d say 80% of our business is in savings.”
Vaughn says his bank is seeing a steady stream of loan demand, houses are still selling in the Cleveland area and money is being generated out of the local economy. “Plus, of course, having Delta State here is a huge economic asset,” he remarks.

Ed Wilmesherr, of the Butler, Snow, O’Mara, Stevens law firm in Jackson, also aids banks in regulatory matters. The firm has been doing so for some 14 years. He relates that a major topic on a lot of banker’s minds right now is the threat of litigation.

“It is certainly a prime concern, especially with the legal climate of the state,” Wilmesherr says. “Legislation has been proposed to remedy the situation three times that, for various reasons, either passed and got vetoed by the Governor or didn’t get taken up at all. This leaves banks concerned about the threat and has led to an increase in the use of arbitration agreements. Part of my job in working with banks is to ensure that they have the most thorough and well designed arbitration agreements in place.”

Wilmesherr notes the new Treasury Department-issued PATRIOT Act, or Customer Identification Program (CIP), which is now required for banks and their new checking accounts.

“Banks, insurance companies, brokers, must use certain processes to identify people coming to them for loans, accounts and services,” Wilmesherr says, explaining the program. “This act covers virtually every banking relationship and subjects it to the new rules. There are certainly many new rules and regulations that banks and other financial institutions must be cognizant of because of the PATRIOT Act.”

Clay McWilliams, a Regional Executive with State Bank and Trust Company, a $620 million asset bank headquartered in Greenwood, oversees the Delta region including Grenada and the new Batesville and Senatobia locations. “We’ve grown more in the past nine months than we grew in our first one hundred years of existence,” McWilliams reports. “We have increased our asset size by $125 million in this time frame through both internal growth and acquisitions. We’re very pleased with our two newest De Novo locations in Batesville and Senatobia. Additionally, our internal growth has necessitated a new and larger location in Webb and an additional location in Greenville on Martin Luther King, Jr. Boulevard.”

McWilliams says that, in the current state of the Delta economy, success is predicated on picking up new customers, mainly through current customer referral. “We’ve been around long enough and have developed a renowned reputation for customer service,” he comments. “Those two factors go hand in hand. It’s a testament to service when you’ve been involved in the community as long as State Bank and Trust has.
No doubt, we’ve taken hits in the Delta, especially with manufacturing job losses,” McWilliams adds. “The opportunities lately have appeared to be limited. But, you know, this a resilient part of the state and folks have had to overcome a whole lot worse. I have confidence in us bouncing back.

With the passage of the Farm Bill, and with the hope that crop prices will be improved, I think that overall this year will be seen as a positive one for our agricultural community,” McWilliams says. “Our ag customers are pleased and, of course, that’s important to us that their confidence level may be going back up.”

Banks throughout the Delta, it can summarized, are in a “wait and see” mode, but are not being complacent during the wait. Stressing the importance of the customer at all times, Delta banks will no doubt continue to reflect the strengths of those customers. DBJ