Possibilities recently sat down with Mark Daigle, president and CEO of First National Bank of Durango, Colorado, to discuss the state of banking.
Possibilities: What are the issues or challenges you’re facing right now as a community bank?
Mark: Like many community banks, the increasing costs of regulatory compliance have been something we have had to deal with the last few years. As for other challenges for us specifically, one of our greatest strengths also presents us with some issues. We are the oldest and most established bank in the county at 133 years old, with the most locations, and we are in a deposit-rich environment, which has allowed us to create a strong core deposit franchise. But being in a deposit-rich market that will soon have nine other banks in a county of 60,000 does create some issues with overall loan demand and keeping the amount of loans on our books that we would like.
Obviously with the amount of liquidity we have, there is a temptation to look further out on the yield curve for investments in order to retain our margin. We’ve maintained the discipline not to do that because of the interest rate risk involved. Continued margin pressure is the price we pay for that discipline in the current environment.
We also face challenges in terms of the number of financial institutions in a relatively small market. We are in one of the most competitive markets I’ve seen in my career. I’ve operated in Florida, Texas and Nevada, and we might be the highest banks-per-capita market I’ve seen.
There is also the ongoing issue of the balance between using technology to control expenses and provide products and services while also maintaining the personal service that’s important to our customers. That is something we have to constantly stay on top of.
POSSIBILITIES: First National Bank was the first bank to open in Durango. How do you ensure your bank remains a cornerstone of the community?
Mark: A big part of that is engagement. The job of community bankers is to be engaged with their customers and community, and that’s an important aspect of what our bank has always been about. We owe it to the heritage of everyone who has sat in our chairs before us that we remain a cornerstone in Durango and support the community that supports us. You have to utilize your balance of time, talent and treasure, as they say, to provide that support. Just about every event or community-based function will have a bank helping to support it, and we’re involved in nearly all the events and causes that you will see here. We’ve been known for a long time as “the bank that built Durango,” and it’s a cultural component of our institution to be involved in the community and understand its needs so we can best help it continue to be the great community it is.
POSSIBILITIES: You’ve been in banking for 30 years. What’s changed in that time? What’s stayed the same?
Mark: I started as a drive-up teller in college and basically have been in the industry ever since. Obviously, technology is completely different from where it used to be. When I started, we were just switching from typing up financial spreadsheets and using calculators for all the math to some of the very first desktop computers and automated financial analysis tools. That has certainly made for a big change in terms of efficiency and how you operate. Technology has also changed things for our customers. There is online banking, e-mail, payment services, bank-to-bank transfers, remote deposit and other tools they are now able to utilize. Technology has helped create enhancements for regulatory compliance and fraud prevention, although it seems as we get more sophisticated with fraud prevention, those trying to commit fraud get more sophisticated as well. The regulatory issues have always been there, and it ebbs and flows based on what’s going on in the industry and the economy. But, the amount of time and effort that goes into compliance in terms of the staffing needed has increased dramatically, even for smaller banks.
The basic principles that people are looking for in a banking relationship—quality of service, help with meeting their needs
and achieving their goals, and trust—are still the things the customers want.
POSSIBILITIES: As technology and regulations continue to shift bank operations, how do you stay focused on providing exceptional customer service?
Mark: It has to be part of your culture. You have multiple constituencies as a bank, such as shareholders and staff, but if you’re not giving your customers what they are looking for, none of your other constituencies are going to be happy or relevant.
So it’s important that you stay engaged with your customers and find ways to know what they want and need. For example, we often find that people feel like a bank should have a certain type of technology even if they don’t use it to its full potential. That was true with ATMs early on, and now no one would dream of opening a bank without one. It’s important to be listening to your customers at every opportunity that you get. There are lots of consultants and people with ideas about how you should interact with your customers, but I think it’s a mistake to think you will be able to dictate to your customer how they will interact with you. You have to listen to what your customers are telling you and provide the tools and service necessary to meet their varying needs.
POSSIBILITIES: How can community banks ensure they continue to have a successful future?
Mark: It will be a challenge for many community banks, given just some of the operational cost burdens from a compliance perspective. Community banks will likely have to try to figure out what’s the minimum size to survive and bear those costs, though I don’t know what that number is. It may be a moving target, if the regulatory burden continues to increase, especially in this interest rate environment. I think we will continue to see aggregation with some of the smaller banks that are out there. That can be healthy, but those smaller communities run the risk of losing the benefits of having a bank that can be a true partner in the community.
I also think it’s critical that, while we want to stay current on technology and the services larger banks are offering, we also don’t forget what makes community banks different. We have to be able to capitalize on those differences and be a resource for our customers. There is a distinction between community banks and larger banks as to whether or not you are a consultative banker or a just a vendor of services, and the consultative side often gets lost the bigger you get. I’ve worked for both big and small institutions, and one of the reasons I wanted to be a community banker was because I wanted to be a consultative resource for my customers.
We also have to remain relevant politically. We have to recognize and remind people that we are systemically important as an industry. The job creation and other benefits that come from community banks lending to their local businesses and helping them succeed, those are things we need to capitalize on and not let be forgotten.