Pub. 8 2019 Issue 1

The CommunityBanker 8 I t’s anything but business as usual in community banking. The industry continues to evolve, and a variety of disrup- tions are transforming the way some banks operate. In the coming weeks and months, a few trends to monitor include: Bank Holding Company (BHC) restructuring. A growing number of banks are weighing the pros and cons of following in the footsteps of BancorpSouth and Bank OZK (formerly known as Bank of the Ozarks), which last year dissolved their holding companies and merged them into their subsidiary banks. These organizations point to simplified financial reporting, streamlined regula - tory oversight, and reduced administrative costs as the primary reasons for making the change. Other banks con- templating a similar move also cite this rationale as justifica - tion for restructuring. Choosing to disband your bank holding company is, of course, a major decision that will need the buy-in of many, including your board of directors and shareholders. As such, it requires a thorough comparison of the potential cost- savings and other benefits with the advantages of staying with the BHC structure, particularly if your organization has total assets of $3 billion or less. You should also consider the investment of time and resources required to merge your BHC into a subsidiary bank. This includes shareholder and regulatory approval, modification of contracts and policies, and advisory fees. Bottom line: do your research. While eliminating the BHC structure may prove beneficial for some community banks, it doesn’t make sense for all. Review your current and future strategic plans, then determine whether the BHC will help or hinder your chances of achieving your goals. Core deposit competition. Rising interest rates and the competition among banks for core deposits is prompting some institutions to make aggressive funding decisions, such as paying very high rates on their checking and savings accounts and CDs to increase deposits. Admittedly, this approach may address funding issues in the short term; however, you must ask yourself if the end justifies the means. After all, raising rates drives up the cost to obtain those deposits and erodes margins. It creates the equivalent of a pricing war in retail, conditioning customers to hop from bank to bank in search of a better rate rather than fostering loyalty. There are more tactical approaches to generate and main- tain additional core deposits. Rather than raising rates for interest-bearing accounts, you’d be better served to: Trends in Focus Holding Company Restructuring and Competition for Core Deposits Are Two of Numerous Issues that Will Impact the Banking Industry in the Year Ahead By Josh White F E A T U R E