Hal Russell, president and CEO at Tacoma-based Commencement Bank, has a few numbers that tell much of the story.
When he and his board of directors started Commencement in 2006, 10 banks had their headquarters in Pierce County. Today, count four.
In 1974, there were 18,000 banks in America: Today, count 7,000.
It’s been a difficult few years and a difficult few decades for bankers.
Back in 2006, no banks failed. In 2009, 140 disappeared. In 2010 the number rose to 157, nationwide. But last year, only 51 failed to survive.
Commencement, with approximately $145 million in assets, has increased its base by some $35 million over the past three years. Beyond that, the bank is looking to expand.
Russell, chairman of the Community Bankers of Washington, spoke with The News Tribune on Tuesday.
Question: How did you survive when a lot of other banks did not?
Answer: We’re a really, really conservative bank. Diversification has kept us from being in trouble, and a little bit of it was luck. We weren’t willing to grow for the sake of growth. Initially that was frustrating to the board, but after the first couple of years, they understood why that strategy made sense.
Q: You recently attended a community banking conference in St. Louis. What was the goal?
A: It was the inaugural Conference for Community Banking in the 21st Century, sponsored by the St. Louis Federal Reserve. The purpose was to discuss the role of community banks with new and existing small businesses, and the challenges facing community banks and how to remain competitive and viable. One of the challenges is the competitive pressure from larger banks – Wells (Fargo) and Bank of America (for example) – but also how to provide services and products. Add to that Dodd-Frank (regulatory legislation) and other regulations that are related.
Q: Was there good news?
A: Yes. The Fed and the CSBS (Conference of State Bank Supervisors) are considering a two-tier regulatory system. It is not a level playing field. Large banks have the resources to address these concerns, and small community banks will struggle – and that will be a drain on our income. (In a two-tier system) the regulations would not be identical. The good news is that they’re considering it.
We are actually being heard. That was encouraging.
Q: How big of an issue with community banks is regulatory compliance?
A: We have one person who is our compliance officer, and he wears many other hats. Now, banks are preparing themselves for the inevitability of dealing with the high cost of new regulations. Some small banks will not survive that. Fortunately, we’re in a good position.
Q: If it’s going to get worse, what alternatives do smaller banks have?
A: One, sell. Two, simply do business differently. Three, buy – and that’s what we’re hoping to do.
Q: You see Commencement expanding?
A: I’ve got the capital to acquire a small organization, but I’d need to raise more because I want to retain a high capital level.
Q: Regional community banks continue to grow through acquisitions – I’m thinking about Columbia and Umpqua especially. Is there still a place for smaller community banks?
A: There’s still a niche for us, both urban and rural. Relationship banking has not died. People calling a bank and speaking to a person – people still enjoy it. We have an old style of banking. Decisions are made on the sixth floor of this building, not on the East Coast.
Q: Along with regional banks and the big national banks, you also need to deal with credit unions.
A: At Commencement, we deal more with small businesses. We don’t have as much of a consumer focus. That may be just by virtue of having one branch. We’re going after different markets. As we look at other organizations to acquire, they may have more of a consumer base. I don’t see us changing much in the near future.
Q: And the local economy – how do you see things going in Pierce County?
A: I’m not seeing a lot of change from last year.
Q: Other than acquisitions, what kind of changes are you planning at Commencement to increase your market share?
A: We’ll be working on a shareholder-relations plan over the next 30 to 60 days, where shareholders meet with some directors and executive management. We’ll ask what we could do better. Not all of our shareholders are clients. We’re not afraid to admit that we don’t have all the answers.C.R. Roberts:253-597-8535 email@example.com