Writer: Caty Hirst
2 min read April 2022 — Texas’ accelerated economic activity and the nation’s shifting financial landscape over the last few years have forced local banks to implement creative strategies to remain profitable and match the growth of the market.
Across the country, banks are expected to have brought in $24 billion in fees from servicing PPP loans over the last few years, according to an analysis by the Wall Street Journal. In addition to fee revenue, many local and community banks saw an increase in new client acquisitions which prompted incredible growth, the Dallas Business Journal reported in April 2021.
“I don’t think you can talk about coronavirus in the banking industry without including PPP (Paycheck Protection Program) loans. We were the largest originator of PPP loans among independent banks in our region and it gave us the opportunity to serve 3,800 local companies in their time of need through $550 million worth of loans,” David Bohne, CEO of San Antonio-based Broadway Bank, in an interview with Invest:. Broadway is continuing to expand across the state of Texas, announcing in April 2022 that it was growing its Austin-based team to expand outreach to additional clients.
Data from The Independent Community Bankers of America shows that community banks generated 60% of PPP loans during the pandemic and made out 72% of all PPP loans to minority communities. Finally, community banks served 85% of all rural PPP loans.
Jeff Ivey, president and CEO of the River City Federal Credit Union, told Invest: that the bank has made its name in the community by serving small businesses and forming close relationships, and the PPP loans were a big part of that effort during the pandemic.
“One of the biggest challenges we faced was the speed at which the pandemic affected local businesses and our members, and the need to offer real-time solutions. … Early on, we jumped on the SBA’s Payment Protection Program because we quickly saw that the true small businesses in our market weren’t going to get the attention or help, that they needed to secure the available funds. This loan was important to small businesses because it meant they could keep their doors open and staff employed,” said Ivey.
In another strategy to grow, community banks are merging to offer more competitive services and a stronger portfolio. Honda National Bank and Community National Bank announced their intention to merge in September 2020, with the deal closing at the end of that year.
“Because of the economics of the markets that we are in, it is much harder to be profitable in the current regulatory environment as a $300 million bank,” Ronnie Miller, president and CEO of Community National Bank, told Invest: in an interview. “By merging the two banks, we become a $650 million bank. Our boards realized it gives us an edge from a completion standpoint to be more profitable and more efficient.”
Bohne told Invest: local banks will continue to have an edge over the national brands in the years to come.
“As a local bank with national capabilities, we can do what bigger banks can do, but they can’t always do what we do, like meeting face-to-face with bankers and having local decision-makers. We’ve always had the edge when it comes to great bankers and delivering personalized service. Broadway also has a legacy of innovation and overcoming adversity,” said Bohne.
The pandemic has also accelerated a technology shift, with banks large and small pivoting to providing cutting-edge technology solutions to clients as the workforce moved to the virtual landscape.
“In terms of momentum, we’re focusing on meeting the needs of our customers by gearing and staffing our team to take care of them. Because of the investments we’ve made in digital banking and technology, we were able to pivot quickly to serve our customers. Things are advancing quickly, but so are our clients,” said Bohne.”
In key trends, Bohne said they are seeing more growth in deposits and in the wealth management portfolios. Challenges for banks across the country — Texas banks included — will be keeping up with the technological needs of clients; recruiting and retaining staff amidst a severe labor shortage and fierce competition to recruit and maintain clients.