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Sunday, 26 October 2014 22:00

Community banks positioned to grow despite regulatory hurdles

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Mark Kolanowski Mark Kolanowski COURTESY PHOTO

Mark Kolanowski assumes the chairmanship of the Community Bankers of Michigan as consolidation in the industry begins to pick up, driven by the rising costs of complying with federal regulations enacted from the 2008 financial crisis and the current period of “tepid” economic growth.

The CEO of Hastings City Bank and its parent company, HCB Financial Corp., since 2000, Kolanowski has been in the business for 28 years. For the next year, he’ll chair the trade association that represents community banks in Michigan.

Kolanowski spoke with MiBiz about the present environment that community banks face and what he sees in the future.

From your position as a community banker, what does the landscape look like right now?

We have opportunities and challenges that are out there right now for us. On the challenges, we have the regulatory burden, tepid economic growth and low interest rates. On the positive side, technology is creating some super opportunities for us to improve our community-banking experience for our customers. We have the ability now to transform our branches from transactional centers to informational centers where we can spend more time developing relationships with our customers, and that truly is the core of community banking. We’re developing a real high-tech, high-touch combination that we really see customers appreciate.

How do you define the term “community bank?” What is it?

It’s not defined by an asset size. You often hear $1 billion or a certain number of assets to define a community bank. For me, it’s more defined by a bank’s business model. Those that are customer-centric and relationship-(based) banking — focused on improving communities and (serving) small business — to me that’s community banking.

We’ve seen some mergers announced and have heard a lot of speculation about consolidation among community banks. What do you see in the future?

I think we’re going to see some consolidation, but it’s not anything new. We just haven’t seen it for a while, so it feels new. It’s not new. It’s just back. We had a big timeout. Stock prices couldn’t support mergers during the downturn in the economy and banks just couldn’t put deals together. We’re seeing some of that again.

Does this consolidation threaten the community banking industry?

I would say, ‘No way.’ The community-banking industry plays such an important role right now in our nation’s economy. While community banks comprise just 20 percent of the banking industry’s assets, we provide nearly 60 percent of the industry’s small business loans. One of the positive outcomes of the past Great Recession is that people were able to clearly see the difference between community banks and mega-banks. Our core concern is supporting our communities and lending to small businesses and farmers. Mega-banks’ core concern continues to be corporate America. For those that continue to adapt to meet the needs of their customers, the future remains extremely bright.

Why do you think we’re not seeing the development of new banks as we have in the past?

My take on that is the economy. It’s not as strong as we’d like it to be. We see positive things happening in the economy, but we still see things out there. We can’t get sustained 3 percent GDP happening. We have improving unemployment numbers, but no real wage growth. As the economy continues to improve, we’ll see new banks start. We just haven’t had a strong enough economy yet for that to happen.

The Dodd-Frank Act enacted by Congress added new regulations to the entire banking industry and has driven up compliance costs. If you could change one thing about the law, what is it?

I need to change more than one thing. But if I could change only one thing it’s that the regulatory community has to recognize that there’s a significant difference between community banks and larger banks. There has to be a tiered regulatory environment in place, and Dodd-Frank has to address that. We as an industry have to continue to advocate for that. Right now, with Dodd-Frank and what’s happening in the regulatory environment, it is the worst that I have seen in my 28 years (in banking). It is the most difficult environment that we’ve been in, and that’s an issue that is one of our biggest challenges. We’re not a complex institution that poses tremendous risk on the nation’s economy. There’s a difference.

Is it a tough time — or a great time — to be a community bank?

I think it’s an exciting time to be a community bank right now with some of the opportunities we see presenting themselves and with technology and how we have been recognized and what we do with small businesses. We’re resonating well with the Millennial generation. That’s very exciting and says great things about the industry in the future. The Millennials who tend to be entrepreneurial-minded folks really like our brand of banking. They like to support locally owned small businesses like community banks. So it’s kind of an exciting time.

Read 3227 times Last modified on Sunday, 26 October 2014 21:24

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