ABA President Offers Insights into Banking Industry

It has been a choppy four years for Arkansas’ banks, between high interest rates and escalating inflation, yet the state’s institutions continue to evolve to meet customer needs and deliver on personal service. That is the message from Lorrie Trogden, president and CEO of Arkansas Bankers Association. Trogden sat down recently with Arkansas Money & Politics to share her views on the shifting landscape of banking in the Natural State and the ways Arkansas institutions are evolving to meet them.

ARKANSAS MONEY & POLITICS: Anecdotally, it feels like there are more ‘new faces’ entering Arkansas’ banking landscape of late. What is the reality, and what is attracting these new institutions?

LORRIE TROGDEN: I think we are seeing an influx of some other banks, and our banks are also growing. We have some acquirer institutions in this state where our banks are going into other states and doing mergers and acquisitions rather than being acquired. You don’t see a lot of banks in this state getting bought by out-of-state banks.

Specifically regarding the banks that come into the state, Arkansas has a great economy, and that’s something that outside companies look at. We have a great state economic development commission that’s out there promoting Arkansas, and outside interests are attracted to that. As an association, we are OK with having more banks in the state.

AMP: Other industries in Arkansas, namely the legal profession and health care, have struggled to provide adequate access in all parts of the state. Where do we stand in terms of banking deserts? How easily can the average Arkansan out in the country somewhere access banking services when they need them?

TROGDEN: Arkansas’ banking industry was built on smaller community banks all over the state. When I visit our member banks, most of those visits don’t happen in and around Little Rock; actually, most of our banks are headquartered a good hour and a half to 2½ hours away. I’m on the road, going to all the corners of the state, because our smaller community banks that originated in these small towns haven’t left them.

In some instances, these banks have a branch that is not necessarily profitable, but they leave it open because they don’t want to create a banking desert. The people in that town and in the neighboring towns depend on that bank, so they leave the branch open, and they do business there for that very reason.

In other cases, companies might put in an interactive teller machine, or ITM, which is different than an ATM. With an ITM, customers can talk to an actual customer service representative on a video screen, and that person could be located pretty much anywhere. The point is our member banks are very cognizant about ways to do business that do not create a banking desert.

I will say one thing that’s complicating those efforts is overreaching, overburdensome regulation that has come out of the Biden administration. Regulatory agencies such as the Consumer Financial Protection Bureau have just really hammered down on things that don’t help banks and don’t even really help the customer.

AMP: For example?

TROGDEN: There was a section in [the Dodd-Frank Wall Street Reform and Consumer Protection Act] around small-business lending, and it mandated 13 data points to be collected on applicants to ensure fair lending in the small-
business sector — which is great. We want our banks to be fair in lending, and we want to get that capital out into the communities. We don’t make money unless we loan money out, right? Well, the CFPB, which is required to promulgate the rule, came out and said instead of 13 data points, they want banks to collect 81 data points.

That means the tire shop down the street that’s a longtime customer, in the middle of the working day, let’s say, has a piece of machinery go out. The bank has their financials on file. The bank knows the customer very well. Today, the customer can call and say, “You know, this new equipment’s $5,000. I’m a little short. I need a small loan to cover the cost.” The bank might say, “We know you. We’ve got your financials. We know you’re good for it. Write a check. We’ll put the money in your account, and you can come by later today and sign your paperwork.”

Under this new rule, that same longtime bank customer will have to stop what they’re doing, come into the bank, fill out a loan application with 81 different data points, some of which is identifying sexual orientation or gender identity that really don’t have anything to do with lending.

Plus, there’s a lot of new technology the regulations require to transfer this data over to the government, which is very, very expensive and, by the way, doesn’t exist yet. The bank has to hire more people to work in compliance, and none of that lends itself to putting more money into the credit market.

What this all means is you may have banks that can’t afford to do as much of this type of lending, which creates the banking deserts we’re talking about because it affects a small community bank’s ability to make small-business loans to where they simply cannot afford it.

AMP: In keeping with the regulatory theme, what is the view at the state level? What marks do you give the Arkansas legislature for creating a pro-business climate that is as or more attractive compared to other states?

TROGDEN: I give the Arkansas legislature very high marks. As an association, we spend a lot of our time during sessions talking with legislators about different types of issues. In my time with the association, legislators and the governor’s office and the state bank department have always been very amenable to talking about things. When legislation is being considered that might create some kind of reporting that is going to be overburdensome on the bank or is going to cost a lot of money for them to implement, we have enjoyed a great working relationship where we see if we can reword it, amend it or cut it out entirely because it’s just not necessarily going to do what it is they want it to do.

In particular, [Arkansas] State Bank Department Commissioner Susannah Marshall is great. She understands banking. She’s been in banking now for, I think, 26 years, and it may be even longer. She is very pro bank. She wants our banks to be strong, and she wants them to succeed. She’s going to make sure that they are safe and sound because at the end of the day, that is her mandate and that is what she does, but she also wants to make sure that they have the ability to take care of their customers and take care of their communities.

AMP: Back in 2020, with the shutdowns and various mandates about how businesses of all kinds, banks included, had to operate, prognosticators at the time suggested the COVID-19 pandemic was showing the industry a different business model in which technology offered a more efficient way to serve customers. In fact, that has not panned out, and banks have suddenly gone back to expanding the brick and mortar. What are you hearing from your membership about what spurred that, and what advantages does it provide them?

TROGDEN: Well you know, people decided after COVID-19 that they actually liked going into their banks. Banking is part of major life decisions for customers, and a lot of them have decided they don’t like doing that over the phone or over the internet. When they’re trying to buy their first house or when they’re buying their first car or they’re setting up their first IRA or they’re setting up a health savings account, you know, they really want that person-to-person interaction.

There was actually a J.D. Power survey that came out this year that said satisfaction scores go way up when a customer is welcomed into the branch and they are thanked for their business and they’re called by their name.

AMP: Does that vary by generation, or is that something more universal?

TROGDEN: I think everybody is finding out that doing business via the internet isn’t necessarily what they want all the time, Not too long ago, I had a 20-something tell me, “Well you know, I do most of my banking online, but I feel like when it’s time to buy my first house, I want to go into the bank and talk to somebody about that.”

I said, “Absolutely. Go in,” but then I also told them, “Don’t wait until you’re ready to buy a house to go in.” Banks want to be with their customers throughout their life cycle. If the goal is to start a small business, don’t wait until the day you want to get a loan to start that relationship. Meet with a banker and talk to them about where you’re at right now, what your goals are, and discuss what you can do to get there.

AMP: In summation, what is your general assessment of the industry overall? What sort of a grade do you give banking in Arkansas?

TROGDEN: I would most certainly give us an A. Our banks are safe. They’re sound. They have good liquidity. We rank above industry averages on a lot of that stuff. The doors of Arkansas’ banks are open for business, and they’re doing quite well, so I would give them an A.

Banks today have so many products and services that can help a person budget and that can help them save and all kinds of good stuff. A relationship with an Arkansas banker is more than just, “Hey, fill out a loan application and turn that in, and we’ll see where we go from there.”

People are setting themselves up for success every day by forming relationships and letting their bank walk alongside of them.