The Money Market

Local banks are adapting their services to meet the new needs of customers in the recession.



With the U.S. economic collapse of late 2007 came the demise of several banking giants such as Bear Stearns, Lehman Brothers, and AIG — the kinds of events that hadn’t unfolded since the Great Depression. In response came the federal government’s Troubled Asset Relief Program (TARP), which propped up banks whose balance sheets were zapped by the kinds of complex, mortgage-backed securities that led to the bubble bursting in the first place. Now, the U.S. economy continues to struggle back from the brink of that spectacular ruin, and local banks, large and small, continue to confront the echoes of it.

“We have tried to take an active approach in working with [borrowers] to help them overcome any adversity they’ve faced as a result of the recession,” says Mott Ford, vice chairman and CEO of Commercial Bank & Trust Company. 

Some of that adversity has involved unforeseen circumstances such as job losses or reduced incomes among customers. That isn’t as much of an obstacle for Commercial Bank & Trust, Ford explains, because the bank, which has locations in Memphis, Jackson, Union City, and Paris, Tennessee, is hyper-local and focuses more on small business and professional clients.

“We know our customers very well,” he says. “We’re very close to them and they have access to decision-makers in each market that we’re in.”

However, one challenge the bank and its counterparts face is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which tightened regulation of the financial services industry. Although its purpose was to prevent the “too big to fail” phenomenon of the recent recession, and to protect American consumers and taxpayers, it also has made it harder for banks to be as flexible as they had previously.  

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires equitable access to credit for all consumers and provides incentives for banking with low-to-moderate income clients.

In addition to regulatory changes for capital investment by banks and insurance companies, the law introduced new regulation of hedge funds. It also altered the definition of accredited investors and demands reporting by all public companies on CEO and other pay ratios, along with other compensation data. The law requires equitable access to credit for all consumers and provides incentives for banking with low- to moderate-income clients. 

That last item is something Regions Bank, with $127 billion in assets and about 1,700 branches throughout the Southeast, has taken to heart. 

“We’ve gone through and really looked at everything we do from the perspective of the customer, although we’ve always done that,” says Joe DiNicolantonio, executive vice president and West Tennessee area president for Regions. 

And what they’ve found is mainstream consumers are managing their money differently than they did prior to the Great Recession. One significant point that arose from various focus groups was the demand for more of a pay-as-you-go approach instead of relying on credit to meet financial obligations. That, in turn, has given rise to a suite of products called Regions Now, which includes everything from pre-paid debit cards to check-cashing and money-transfer services through Western Union. 

Another recent practice is Regions’ Ready Advance, which advances up to $500 to customers in good standing who have a Regions account and receive regular direct deposits. Unlike the high interest rates of traditional payday loans, Regions charges $10 for every $100 borrowed. 

However, payday advances are not something SunTrust has waded into just yet. 

“That’s something we’re weighing, and I don’t think we’ve fully vetted that yet,” says Johnny B. Moore Jr., president and CEO of SunTrust Bank, Memphis. 

 

Like Regions, SunTrust, which has more than $172 billion in assets and nearly 1,700 branches nationwide along with being the second-largest bank presence in Tennessee, is focusing even more on building relationships with existing customers and attracting new ones by tailoring products and services to suit different needs. So is fighting the perception that credit is unavailable to any but the most credit-worthy borrowers. 

“I think what we’ve seen is we’ve tried to be fairly consistent in our application of credit,” Moore says. “It’s still readily accessible, but I’d say it’s just been getting the consumer back into the credit market or being willing to acquire additional debt.” 

As has been the case for the past few years, many consumers are still sitting on the sidelines, waiting to see what will happen with the economy. The more they hold back, though, the less commerce is generated and the more things seem to stagnate.

As part of its “total relationship” banking approach, SunTrust has been working to make home equity, car loans, credit cards, mortgage loans, and refinances more accessible to borrowers. It also offers several investing platforms for higher-net worth customers. 

As has been the case for the past few years, many consumers are still sitting on the sidelines, waiting to see what will happen with the economy. The more they hold back, though, the less commerce is generated and the more things seem to stagnate.

“We try to lead with great service and we listen to our clients and identify what their needs are,” Moore says.  

That’s been the approach at Triumph Bank since its inception in 2006, says Will Chase, the bank’s founding president and CEO. 

“We opened at the very beginning of the downturn, so we’ve ridden it out since that time,” he says. 

Triumph has four locations in Memphis, along with an operations center. Eighty-five percent of its loans are for business purposes, so in that way the bank is insulated from needs such as payday loans. 

“Our idea is rather than try to create a payday loan product with a very high interest, we offer very low-price services for customers,” Chase says. “We do that based on individual customer needs.”

It’s that approach that has kept the bank profitable — that and having the flexibility to address customer needs more quickly than larger operations. 

“We’ve done really well in the middle of a meltdown,” Chase says, “and have been profitable for the past three years.”

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