Writer: Max Crampton-Thomas
2 min read May 2021 — Community banks are a vital part of the banking and financial sector and never has this proven to be more true than during the ongoing pandemic. Small businesses are especially attracted to working with community banks as they can provide the personal attention a small or growing business may require, which has been essential throughout the challenges of the last year. Sunstate Bank’s President and CEO Lloyd DeVaux touched upon this in an interview with Invest: as well as how the bank has been managing the historically low interest rate environment, future growth plans in the current landscape and more.
What was the bank’s experience with the PPP loans?
A lot of small banks don’t do SBA lending and that created some problems at the beginning. The rules changed a lot in the first weeks of the program, and they continue to evolve as the areas of priority shift. Fortunately, Sunstate Bank was already a registered SBA lender, so we were able to get started pretty quickly. We picked up a lot of new customers through the program. At least 30% of our loans were to new borrowers, and we expect to turn a good portion of these into long-term clients. Small businesses are often more attracted to community banks like ours because they can get more attention, while the bigger businesses tend to seek financing from the national banks. The program was a great success for us, and we have already gotten almost every first round loan forgiven.
How has the bank managed the historically low interest rate environment?
The first thing banks always think about during a crisis is liquidity. We took a cautious approach at first, to make sure that there were no liquidity issues, and then we were able to adjust our deposit rates as the market stabilized. We are flush with liquidity right now. On the lending side, the rates have come down and while the market seems to be a little soft right now, we expect this to be just a temporary lull. Many of the small businesses that were forced to cease operations during the lockdown, like hair and nail salons and local restaurants, will come back in the short term as they continue to be vital pillars in the community.
What are the bank’s plans to continue growing?
We are continuously looking at opportunities to expand. We were fairly close to signing an acquisition when the pandemic hit, but we put the deal on hold given the market uncertainty. But we are keeping our eyes and ears open regarding new opportunities, and we have held some early-stage talks. We are keen to cover more of our market geographically and expand our product lines. For example, we do not currently offer domestic residential mortgages. As we get bigger, it makes more sense for us to be in this arena. We would also like to expand our international business. A lot of South American companies, for example, are looking for U.S. partners and we have significant expertise in this area.
To what extent has investment in technology become more accessible for community banks?
Community banks have a lot to gain from outsourcing as much of the technology side of the business as possible. With the threat of cybersecurity, we need experts on the ground on a daily basis, and so we work with a large technology provider across all of our networks and helpdesk. We recently shifted onto an entirely new and modern technology platform that will allow us to offer new products like corporate cash management services. We are constantly thinking about how we can use technology to become more efficient. I’ve spoken to a few fintechs about how we can use their technology to speed up the account-opening process, and we’re going to continue exploring these opportunities. The pandemic has drastically changed people’s banking habits, and we have to evolve alongside them.
How has the pandemic shifted the bank’s hiring strategy?
The big issue during the pandemic is training new employees. The experience a new hire gains from sitting next to and learning from a more experienced colleague during the first months is invaluable. Training is important to us and we spend a lot of time on it, and while this has been challenging during the pandemic, we’re learning and improving in this area all the time.
What are the main compliance challenges facing the Florida banking sector?
Compliance with the Bank Secrecy Act and anti-money laundering regulations continue to be a complex, time consuming and expensive burden for banks. One piece of this is the verification of beneficial ownership. A new law that was recently passed will now require the Treasury (FinCEN) to create a central database of beneficial owners, which means that certain companies that want to operate and work with a bank will have to register themselves and disclose their beneficial ownership structure. It might take a couple of years to implement, but eventually this will make things much easier for banks when it comes to navigating some of the compliance regulations.
What is your outlook as the economy emerges from the pandemic?
We’re going to see tremendous growth in the Florida region due to the pent-up demand. This should have trickle-down effects in keeping our local housing market strong and boosting small retailers. I’m bullish on the economy’s prospects for at least the short and medium term.
From the bank’s perspective, we are in the process of completing a holding company to get back on the acquisition trail. This will help us expand our domestic and international businesses. We have a positive outlook for 2021 and 2022 for the bank. We expect interest rates to remain low for the next couple years.
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