So let's start, first of all, with this new regional bank.
Consolidation is the latest one. Give us your take from your point of
view in Arkansas. What's causing this and have we seen the
end of it or should we expect more? Yes.
So I wish I could say that you see the end of it.
I believe you'll probably see more on the dramatic raising interest rates
that's having an impact on all banks, particularly community banks, those that
have securities that are popular, that may be experiencing significant
unrealized loss. But the particular merger between
Bankwest and Bank of California, that made sense probably for them, it seems
that that's going to be a stronger institution.
You've seen their stock price bubble up, and so hopefully that'll be better for
folks in California. Merging two good institutions together
to make one stronger institution. So we're seeing a fair amount of
consolidation, I think it's fair to say, in banking right now at the regional
level, I'm not sure I've seen as much at the community level.
Do you expect more consolidation? Is that a good thing or a bad thing?
Well, you know, it's how I look at it. So what we always think about is do the
folks who typically don't have access to capital, to banking services, will they
continue to have access? And you've seen over the last several
years tremendous consolidation in the banking space.
And so at one time you go back 20 years or the 15,000 banks, now there are less
than 4500. And what typically happens is those who
are least able to bear that bear the brunt of it, because
rural communities, underserved minority communities, those are the communities
to lose their banks. So we're troubled when we see the
consolidation. Particularly, that means that people are
moving have to move further and further away from a bank and not have access to
capital credit and to those services where you have a relationship with drive
that drives the ability to have capital. The other big development of the week
was the announcement of these proposed regulations coming out of the three
federal bank regulators. Does that affect your bank at all, or is
it just the big guys still the way they're structured right
now, it's those banks, 200 billion assets above, and we're at about 2.5
billion. You know, most community banks, you
think about it, know 10 billion, unless it's not going to to affect us because
right now that markets about 100 billion assets and about you have a lot of
relationships with some of those big banks including as investors in Southern
Bancorp insofar as they're feeling more pressure because they have to have more
capital requirements. Could it trickle down to you?
Well, I'm not seeing it right now. I can tell you that our relationships
with the larger banks, Jp morgan Chase is a customer as it is an investor.
I'm sorry, Bank of America is an investor.
Even some of larger regionals, like Cadence, like regions like Simmons Bank,
those banks, our partnerships remain very, very strong with their continue to
double down on their relationships with that.
And we're trying to find ways to continue to work together to better
serve our customers and to serve those who have often been left behind, left
out of access the capital and the banking system.
So you fill a particular niche in the banking system with some of the people,
small businesses, individuals, people who are perhaps not at the top of the
socioeconomic strata, if I can put it that way, And sometimes underbanked
people give us a sense of how the economy, the US economy looks to those
people, your customers right now. Yes.
So we serve a lot of customers in the Arkansas Mississippi Delta, one of the
most economically challenged communities of all the United States.
And that community has been suffering for a long time.
And so when inflation hits them harder, right.
So groceries, utilities, gas prices, those things are getting worse.
And so they're struggling. It is a challenge for our consumers.
There are small business customers. They seem to be holding steady.
You don't see them investing in their business as they have in the past.
They're not taking out a lot of loans that are holding steady, but it's those
small consumers who we make small consumer loans to.
We're starting to see their pastas take up just a little bit.
It's not material to our asset quality, but we're seeing we're noticing that
just a little bit. And so I do worry about them as these
inflation numbers, you know, continue to we're trying to get it under control
because the Fed just raised rates and that's an effort to get inflation under
control. But it has a double edged sword for
them. So when you raise rates, their cost of
borrowing goes up. But then if you don't get inflation,
they control that money, then go as far. So it's it's it's a tough balance that
we're trying to try to help them navigate.
What is the role of technology as technology develops and trying to serve
your customers better or more of your customers?
Frankly, it's very important.
And we're investing heavily in technology.
We have several apps that our bank has developed internally to reach customers.
We have apps where we're really trying to train people how to save, to help
them become savers. But also and actually right now I'm in a
meeting with my team and we're working on strategies, including technology, to
bring our financial education services to the mobile device.
Some people are, you know, are much more comfortable
using their mobile device and sitting across the table and talking to someone
about their financial health, you know, going to one of our credit counselors or
homebuyer counselors and sitting down and talking with them and being very
vulnerable about your financial situation.
It's a stress is stressful. People don't want to talk about the
mistakes they've made. So we're trying to see, can we bring
some of our resources to a more. Device.
Can we employ chat box and other types of services that where people can maybe
in their perhaps their own home get the education necessary in an inappropriate
manner that actually allows them to make good use of that information and move
themselves from being underbanked to being full, in fact, and having full
access to the banking system. The federal government response to the
pandemic has injected a fair amount of fiscal stimulus in, and we still have
some of that to come through, particularly when it comes to things
like infrastructure. The Chips in Science Act, are you seeing
any of that money flow down to your customers?
Yes. So we're starting to see that and we
hope will help. We see more, in fact, an inflation
reduction. There is a $27 billion greenhouse gas
reduction fund that's being created. And EPA is rolling out the rules right
now and we're rolling out the competitions to really apply for those
dollars. But they're trying to ensure that some
of those dollars go to underserved communities, disadvantaged communities,
because we know the impact of climate change doesn't affect everyone.
To say those communities at least have the least amount of resources are
hit harder by the impact of climate change.
And so those dollars coming into those communities will not only help stimulate
the economy, but also may provide a buttress or buffer from the impact of
climate change on those underserved communities.
So that's one thing that we're seeing now.
But but we believe that the Supporting Inflation Reduction Act, those
infrastructure dollars, will have a positive impact on the communities,
including some of the rural underserved, means that we serve.