Adam Mitchell is not in a hurry to repeat the trials of 2020, but the new CEO of Citizens Bank isn’t about to forget the lessons learned, either.
Mitchell, who was named to his post from president and chief lending officer in April, said while not pleasant, the challenges of last year proved in many ways to be the bank’s finest hour.
“The final regulation on PPP loans came out on a Thursday and at 5:15 p.m. on Friday, I pulled the team and decided to go all-in on PPP loans,” he said. “Quite honestly, I saw some bigger banks entering the platform and was worried that our customers, our local bread-and-butter of how we do business, would lose out on these funds. We were one of the first banks in the state and the region to actually get involved with PPP loans.”
Leadership quickly formed a team to grind through the weekend, developing automated processing on the front end and bringing on external legal counsel to keep everything within guidelines. When the smoke had cleared, the Batesville-based bank had helped its Main Street clientele preserve operations in the pandemic’s darkest hour.
“To me, that is what community banking is all about,” Mitchell said. “In a time of crisis, you do not hide from it. You face it head-on. We needed to be there for our friends, our families and our customers, as well as making sure our associates are safe and happy, so they can get through it, too.
“And if you don’t do that, if you’re not there in times that are good and bad, I don’t think you can really define yourself as a community banker.”
COVID-19 descended like a solar eclipse last year, creeping over a business community bracing for the worst. Not the least of which were community banks; after all, such institutions crumbled first under the blows of previous calamities such as the Great Depression, Black Monday 1987, the Great Recession of 10 years ago and other regional events. Surely, went conventional wisdom, a global pandemic would hit Main Street hardest and pick off the small and the rural first.
But as with many other elements of this unprecedented period, the still-unfolding drama of COVID-19 and its variants has yet to follow any path but its own, including in the business community. And as a result, institutions such as Citizens Bank are faring better than most anyone expected.
Anyone, that is, except an intriguing dissenting opinion published by the Walton School of Business at the University of Arkansas in Fayetteville. Professor Timothy Yaeger and doctoral student Cao Fang constructed a “stress test” for banks, to predict the level of distress suffered in the industry and how that distress is felt differently according to institutional size.
In an article written last year, the duo noted while community banks (those with assets under $10 billion) are, unsurprisingly, projected to fail faster in 2020 and 2021 than their larger peers, they also predict a faster bounce back in these companies over a five-year period. The reason, they surmised, is because COVID presents a steeper “V” decline and rebound pattern, unlike the protracted “U” of previous financial crises. This especially works in favor of smaller banks that typically lack the reserves to ride out a prolonged market siege.
To Mitchell, this makes the pandemic experience one of opportunity: a time to leverage operational innovation and formulate market strategy in a way that readies the bank to maximize the coming rebound to the fullest.
“If you don’t take the pandemic and learn from it about how it changed how things work and how things might be changed forever, then you’re losing the whole story of the pandemic,” he said. “There’s a bunch of positives that actually came out of the past 18 months.
“Our online channel went up 40 percent through , which I think is the perfect blend. You’re going to have the technology function, and you’re going to have the physical component, though strategically smaller. And, the people within the branch have to be really talented and make sure they know everything.”
Pushing the technology envelope doesn’t just serve the customers of today; it is also an important element of attracting new ones tomorrow, Mitchell said. Digital offerings are an important leveling agent between small institutions and very large competitors; what used to be an arms race of multiplying physical branches — advantage big banks — can now more fairly be fought online.
“You still see large institutions branching out,” Mitchell said. “You see JPMorgan Chase coming to town, for instance, even though they’re branching out in a smaller footprint. You’ll still have a branch presence, even in the future model, though probably not as many. But the future will really turn on two things.
“Number one, focusing a lot on the people behind the technology having a community bank presence. Secondly, being faster to make a decision — what we continue to do better than most — which makes customers really like doing business with you. If you can get something done and do it quickly and be nimble, it really helps you. You don’t have to go through so many layers to get something done.
“I think that’s always going to be the key to being progressive in future models. You can have the best technology in the world, but if it’s not responsive, and if a customer can’t get an answer when they have a problem, then you’re not doing anyone a service.”
Established in 1953 by a group of local business leaders, Citizens Bank today operates 19 locations around the state, employing 208. Markets are a mix of urban centers in Northwest Arkansas and Central Arkansas, as well as a clutch of mid-sized to smaller communities, such as Imboden, Cave City, Monticello and Arkadelphia.
Mitchell said additional growth is forthcoming. He declined to go into detail except to say the new locations are about a year off, will represent organic growth and are rooted in the entrepreneurial mindset that has ruled bank operations since its founding. This, he said, keeps Citizens moving forward, no matter how radically different startups and new companies look from era to era.
“That [mindset] is the thing that carries you forward,” he said. “We posture an internal culture that your ideas are appreciated, and we have to be changing and evolving as we go with our customer base. We’re entrepreneurial, ourselves.
“In the small-business arena, you’ve got to be available to be really, a consultative banker, because [customers] still need the same help to get their business going. They just might need a little bit more of the legs of the chair around them to make sure that the business actually runs well. That’s part of bankers being on the side of the small-business owner, which is still the lifeblood of all of our communities.”
As for challenges and opportunities, Mitchell said staying attuned to staff optimization will be key. He also sees the future in quality partnerships.
“On the path forward, you’ll see differentiations in lines of business,” he said. “Most banks will get the majority of their revenue from loans, but I think the challenge for any bank going forward is the need to diversify. If you have everything in one basket, it’s not good for insulation.
“I think the way fintechs are rolling, a lot of banks will hold up their hands and say, ‘How do I get in the door?’ The way I see things going on, they’re going to open up the ability to have equity partners in these fintechs, so you don’t have to go in and hire the hundred people to develop your own technology. You can actually partner with others. I think you’ll see that in the future as the new wave, allowing community banks to participate on a big-bank scale.”