But
2004 presents a brighter overall financial picture
As
the new year begins, Delta banking executives are generally
expressing a significantly brighter outlook. Doubtless
much of this can be attributed to the improved climate
in agriculture during 2003. Farms loans are a major part
of many Delta banks’ business, and the higher yields
and better prices reported over the past year have done
much to boost local economies and generate increased demand
for loans and other banking services.
Certainly challenges remain—the robust row crop
results have yet to extend to the still-struggling catfish
industry, although many bankers see signs of recovery
in that market as well. And like banks throughout the
nation, in 2004 and beyond, Delta institutions will have
to comply with a wide range of new regulations pertaining
to privacy and security issues.
Alton McRee, CEO of the Federal Land Bank Association
of South Mississippi, provides an overview of the agricultural
rebound: “The row crop industry saw a significant
boost in 2003 due to the excellent crop and weather conditions
in the Mississippi Delta, along with good commodity prices
and an excellent farm bill.
“The farm bill continues to provide a positive outflow
of income into all sectors of the Delta economy. It has
been well received by both lenders and producers, and
has provided a stabilizing effect on farm income.”
The Federal Land Bank Association of South Mississippi
is a cooperatively owned lending institution. McRee says
the bank experienced a very good year in 2003, and continues
to see high demand for good quality production ag property
and recreational property.
“With the Delta being predominantly an agricultural
area, what ag does drives the economy,” agrees Albert
Britt with Clarksdale’s First National Bank. “We
had a very good ag year in 2003, and it was probably one
of the two or three best years in the bank’s history.
We feel very positive about 2004.
“We’re high on Clarksdale and the Delta, and
we’re doing all we can to help make it the best
place to live,” he continues. “Citizens here
are very focused on tourism, and the bank helps to promote
Clarksdale tourism—we realize its potential for
the local economy.”
Bobby Steinriede of Guaranty Bank calls 2003 a “tremendous”
year for row crops. “For some, it was as good as
it’s ever been,” he comments, “and 2004
also looks very promising. Guaranty Bank looks for a strong
year in both growth and profits.”
The bank experienced significant growth in recent months,
he reports, due to both the improved ag economy and to
investment services the bank now offers. “A little
over a year ago, we started Guaranty Investments in Greenville,”
Steinriede explains. “Adding these services helps
us to be a complete bank for our customers.”
Says Joe Ricotta with Community Bank in Indianola,”
With current economic conditions here, we’re very
optimistic about 2004. After a bumper crop last year,
cash is flowing back into the economy.”
As a prominent ag production lender, the bank should experience
above-average growth this year, he adds. “Prices
have held up, and that has made a huge impact on farmers’
ability to pay off old debt and start planning for needed
expenditures.”
Community Bank is aggressively seeking new customers,
says Ricotta, with marketing efforts that highlight the
one-on-one relationships and quick decisions that the
bank offers.
Jefferson Bank in Greenville is also primarily an ag lender,
and Senior Vice President Bing Barner foresees an even
better ag year in 2004. “With row crops making progress,
and catfish getting better, we’re fairly confident.”
He adds, however, “You don’t see many ag lenders
really gaining or losing customers. It’s hard to
come up with new ag customers—although we have picked
up several recently. So expansion is difficult.”
While many Delta banks are reporting increased popularity
of internet banking, Barner says Jefferson Bank has not
noticed a particular interest in online options among
its agricultural customers.
“The ag outlook for the Delta is better than it’s
been in several years,” agrees Bryan Jones with
Bank Plus in Yazoo City, “and we’re seeing
some other good opportunities in the Yazoo City area.
We’re working to develop a new industrial park site,
and we hope to see some of the satellite Nissan suppliers
locate in Holmes County.
“The Nissan plant has been great for Bank Plus as
a whole,” he continues. “We’re very
fortunate to be their banking partner.”
“Our hats are off to our state and federal officials
for their efforts that led to the new farm bill,”
says Sells Newman, Senior Vice President of Marketing
and Legislative affairs for First South Farm Credit. “I
hope consumers recognize how Washington and our state
delegation recognized the needs of our ag industry in
lean times. The farm bill is something that will still
be there as we move into the future—something we
can depend on when continuing to make loans to farmers.”
First South now offers farm real estate loans, Newman
reports. “We’ve very competitive, and have
been able to get business from a lot of people looking
for land for hunting or timber use. Because the ag lending
field is so narrow, competition is good for all, and we
welcome it. The more banks out there which can make these
types of loans, the better the opportunities for people
to get the loans they need.”
Growth in agricultural lending is not the only positive
sign in Delta banking—many banks in both large and
small Delta communities are reporting expansion of products
and services, physical expansions into new areas, and
an increased acceptance of electronic transactions.
The past year has been a busy one for State Bank and Trust,
which has opened two new offices, and relocated their
branch in Webb to a new building. Clay McWilliams also
reports that new banking technologies are gaining in acceptance.
“Online banking is definitely growing,” he
says, “as people get more comfortable with computers.
Convenience now seems to be the main thing in banking
for many people. There is also more use of debit cards
and electronic transfers.
“Most of our growth is coming from existing customers
as their businesses grow,” he adds. “Many
companies are having to go outside their traditional territories
to expand their business, so being a statewide bank helps
us help them keep their accounts together.”
At Cleveland Community Bank, Ronnie Vaughan reports that
loan demand has been quite strong. “We had a good
year in 2003, and expect another good one if the economy
continues to improve.
“There are some good prospects for new industry
in Cleveland, and new jobs will certainly benefit the
community,” he comments. Cleveland Community Bank
has been in business for 90 years, he points out, and
retains a loyal customer base, even in an increasingly
competitive environment.
Observes George Jarman with AmSouth Bank in Greenwood,
“While the house refinancing boom is mostly behind
us, there are still opportunities for people to save money
by refinancing. I look for interest rates to stay low.
“The Delta economy still lags behind other regions,”
he continues. “Everyone is focused on creating job
growth, and of course more jobs mean more growth opportunities
for area banks.”
One of the Delta’s newest banks, Covenant Bank in
Clarksdale, celebrated its third anniversary last fall.
Chairman and CEO Willis Frazer says, “We are very
pleased with our progress in Coahoma and Tunica counties.
Customers have responded very favorably in both loans
and deposits, and we’re excited about the outlook
for 2004.”
Adds President Freddie Britt, “There’s the
beginning of a real housing market in Tunica County, which
is what is needed for the second phase of development
to begin. The state’s largest residential builder
is already working in Tunica.”
Covenant Bank is already ahead of their five-year business
plan, Britt reports. A branch expansion study is underway
in five counties, and he says the bank hopes to locate
at least one new branch by the end of the year. A recently
formed holding company, Covenant Financial Corporation,
will assist in expansion plans, adds Willis Frazer.
The Bank of Yazoo City has expanded into the Jackson metropolitan
area, according to Phil Williams. “This has allowed
us to expand our market, and meet the needs of metro customers
who are looking for the type of bank relationship we offer.
“While certainly the whole region is affected by
the health of agriculture, it is not the major part of
our lending activity. We do a lot of consumer and residential
lending, and I expect that will remain flat or perhaps
rise slightly in 2004. The second phase of the federal
prison here in Yazoo City is expected to create around
350 jobs—that may trigger an increase in loan demand.”
At Citizens Bank and Trust in Marks, Frank Sibley reports
that a five-year plan is nearing completion. “We’ve
met our goals, and are looking now at our next five-year
strategic plan,” he comments.
The bank is consolidating some services and outsourcing
others,” Sibley says. “We’re in the
process of enhancing our telephone banking, and plan to
offer internet banking this spring.
“Our loan growth has stayed good,” he continues.
“Being service-oriented is one of our strengths,
and another is that each of our branches operates independently—the
officers don’t have to contact the home office for
decisions.”
In Drew, Delta Southern Bank—like many local businesses—is
focused on the revitalization of downtown, says Branch
Manager and bank Vice President Robert Simpson. “Our
parent company supports the Main Street Program efforts,
and we’re working hard to help small businesses
get started,” he comments. “Downtown Drew
looks good, and opportunities will continue to come as
buildings are renovated—we see a real potential
for increased small business loans.”
Simpson adds that the Drew branch has experienced growth
in each of the last two years, but that a primary challenge
is finding new commercial accounts, just as a challenge
for the town is attracting new industry.
The Bank of Anguilla celebrates its 100th anniversary
in 2004, an event that will be commemorated in the bank’s
promotional efforts throughout the year, says Fred Miller.
“We’re primarily an ag lender, and many of
our customers came out of 2003 with as good a year as
they’ve ever had,” he reports. “In Sharkey
County, we saw perhaps the best yields in over a decade.
“The catfish industry has been a tremendous worry,
but we’re seeing some rebound, with supply and demand
numbers looking much more favorable.”
He adds that while lack of manufacturing and high unemployment
are still contributing to economic woes in Sharkey and
Issaquena counties, there is a general sense that “things
are coming together.”
Also celebrating its 100th anniversary this year is the
Bank of Benoit. Alice Herbison comments that such a milestone
demonstrates how a small bank can survive, even in such
a volatile economic climate as that of the Delta.
“People still like doing business with hometown
banks, because of the personal service and the belief
that we can cater better to their needs,” she says.
“In fact, we have picked up customers from larger
banks—people who are looking for a higher level
of service, and like the fact that they don’t have
to go through so many channels for loan decisions, for
example.”
Delta banks are, of course, affected by the challenges
faced by the communities in which they operate—ongoing
challenges such as creating new jobs and attracting new
industry. Beyond these are operational challenges created
by regulations that are the result of the Patriot Act
and other post-September legislation—regulations
that address privacy, security, and consumer protection
issues.
The Butler, Snow, O’Mara, Stevens law firm in Jackson
assists banks in regulatory matters. Ed Wilmesherr says
2004 looks to be a busy, active year in the regulatory
arena.
“The Fair Credit Reporting Act has been reenacted
and includes a number of consumer protection issues,”
he comments. “The Check 21 law (which gives digital
images the same legal clout as original documents) will
have a significant influence, especially from an operational
standpoint.” He adds that proposed legislation would
require banks to notify all affected customers if bank
systems that guard customer information are breached.
Among the most important changes in Delta banking in the
near future will be the result of the Check 21 Act, says
George Steen with Cleveland State Bank. “It is legal
now for banks to provide only a digital image of a check,”
he explains. “Over the next few years, people will
see far fewer original check documents being returned.
While a lot of banks do imaged statements now, you’ll
see a big increase in the next couple of years, even among
smaller and community banks.”
He characterizes these changes as among the most significant
in banking in recent years, a shift as major as the change
to account-coded checks and later, direct deposit.
As Ronnie Vaughan points out, “Because of privacy
issues, opening of new accounts now has to be done in
person. If there are multiple people on the account, all
of them have to come in, and the bank must do background
checks on each of them. While privacy issues are mainly
affecting customers, they have also added to costs for
the banks.”
Adds Alice Herbison, “It definitely takes more time
to open an account—you really have to prove you
are who you say you are. And this also applies to existing
accounts when you do something new, like open a CD, for
example.”
Says Clay McWilliams, “It’s hard for a lot
of people to understand the regulations. Most people come
into a bank and deal with people they know, and they expect
to be recognized. They just don’t like all the paperwork
the bank must now complete to comply with regulations.”
Bobby Steinriede comments, however, that most people understand
the need for increased paperwork if the regulations are
fully explained to them. “We make it clear to them
that this is not the bank, it’s federal regulations.
In the end, they realize that it’s for their safety
and for the safety of their assets.”
Guaranty Bank is also heavily involved in the catfish
industry, and Steinriede says that this sector still presents
challenges for 2004. “The industry experienced some
really low prices, but is showing signs of recovery. People
need to realize how important the catfish industry is
to the Delta.”
States Phil Williams, “Manufacturing is still awfully
weak. We hope the new state administration can attract
new jobs to the Delta. Being from Yazoo himself, I know
the governor understands the challenges we face.
“Low interest rates are also affecting us,”
he continues. “It’s going to be a bit of a
challenge to keep interest rates spread and profits ups.
As the economy heats up, perhaps interest rates will rise.”
Albert Britt agrees that dependence on net interest margins
presents the biggest challenge to community banks. “We’re
not as diversified as other banks, so we really have to
address the challenge of keeping those margins up.”
In this new year, Delta banks will continue to offer a
blend of hometown personal service and the newest technology
options in banking transactions. They will change many
of the ways in which they operate to embrace those new
technologies, and to provide greater security for their
customers. And as the likely continued improvement in
the agricultural sector strengthens many local economies,
not only will the banks share in that improvement, but
will also play a major role in sustaining it.
Doug Springer, president of Merchants and Farmers Bank,
agrees that a big challenge over the coming year is managing
net interest margins. “We’re expecting interest
rates to rise,” he comments, “although it
may not happen until the forth quarter, after the elections.”
Sources of funding are also a challenge, he adds, as investors
look at their options for taking money from banks and
investing them elsewhere.
The bank has been expanding into new markets, Springer
reports. “We opened a location in Olive Branch in
February, and we’ve already seen over $26 million
in loan growth,” he says, adding that other Desoto
County branches are planned. The bank has also expanded
into Madison County.
The merger last year of the Bank of Ruleville and Delta
Bank and Trust in Drew, and an affiliation with Southern
Development Bancorporation, created the Ruleville-based
Delta Southern Bank. Says Sam Denton, “The Bank
of Ruleville had served this area since 1902, and the
affiliation with Southern has only enhanced our ability
to serve the changing needs of 21st century customers.
“We were only the second bank in Mississippi to
be awarded certification as a Community Development Financial
Institution (CDFI) by the U. S. Treasury Department,”
he points out. CDFI’s work to expand the availability
of credit and other financial and economic development
services in rural areas, Denton explains. DBJ
