Commercial banking continues to generate business in Tri-parishes

It is almost a chicken and the egg consideration. Which came first, business or banking? The truth is it would be difficult to have one without the other.

According to the Federal Deposit Insurance Corp., out of all 7,657 insured financial institutions in the United States, 6,529 carry their asset concentration as commercial banks. Of that total, 4,087 are exclusively commercial lenders.

A commercial bank, also identified as a business bank, is a financial institution that typically offers its customers lines of money market and transactional savings, lending for commerce, and time deposits.

When the Glass-Steagall Act was passed in 1933, most financial institutions established separate departments for commercial and retail banking under one roof. However, undivided commercial banks have dealt strictly with businesses. Investment banks became limited to operating in the stock and bond markets, a move that protected the assets of individuals and business owners, and many commercial and retail banks as well.

Just like business, commercial banking has seen a lot of changes over the years. Or, like commercial banking, business has experienced changes. Either way, as times changed, smaller commercial bankers made sure their customers recognized the differences between their services and those of the few mega-banks among their total numbers.

“Response time,” said Coastal Commerce Bank Vice President of Commercial Lending Brian Arceneaux when asked to identify the biggest difference between national and international institutions compared to those that focus on smaller regions and communities.

“I’m a commercial lender,” Arceneaux said. “I have to think about response time. I recently had a customer and we got a [lending] answer within three or four days. With large banks, it can be two or three weeks before they get an answer. By then, that customer has moved on [to another lender]. You can’t just wait around.”

“Here you are working with a smaller business and entrepreneurs,” said Business First Bank Senior Vice President Gloria Navarro. “It is a whole different approach [than with mega-banks] and more relationship driven.”

Arceneaux and Navarro each expressed that one of the primary differences between larger institutions and theirs is that their customers get to know them personally.

This pair of financiers represents a large number of commercial bankers who have seen significant differences and similarities within their industry.

Having developed an interest in commercial banking while taking finance courses in college, Arceneaux decided that a career in banking offered more stability and a sense of helping others than managing the chain restaurant where he worked before getting his first bank job as a teller in the New Orleans metropolitan area.

Arceneaux worked his way through the system as an analyst and a loan officer among different finance institutions to eventually find his place with Houma-based Coastal Commerce Bank, which carries approximately $350 million in assets.

Navarro was raised around a family-owned dry wholesale business in Panama City, Panama, one of the world’s largest banking centers, before immigrating to the United States to work on a master’s degree. She began her banking career in the Tri-parish region, and moved from being a credit analyst and financial administrator to filling her current role with Business First Bank, which itself has approximately $25 million in deposits and close to $18 million in loans.

“It is a variety,” Navarro said. “That is the beautiful thing of it. We have all the way from fast food, we have clinics, we have oil and gas companies, we have a couple of shipyards, we have trucking companies … it’s that variety.”

“That’s part of our business, to get to know your business,” Arceneaux added. “I get to wear this hat, then change to that hat. It is important for us to know as much about you and your business as possible so when a question comes up it is easy to answer. So, if I need to know something about the oil business I can pretty much know it. But if someone asked me to handle coal … what is that?”

“You really are becoming financial advisors [for your customers],” Navarro said. “As advisors, you don’t want to put them to experimenting with things that are not reasonable, logical or understandable at the client level.”

While the national economy and business world has had shifts and changes during the past three years, so has commercial banking.

“Banking has experienced a lot of changes,” Navarro said. “I find the community banks, especially here in Louisiana, have really blossomed. They have been able to differentiate themselves from the big banks.”

Navarro pointed out that one of the elements that led to the 2008 banking crisis, a meltdown that most community-based banks across the nation were able to avoid, came because of an overabundance of sophisticated and confusing products.

Arceneaux confirmed that many bad loans made during the early years of the 21st century were the result of marketing plans and mega-banks ordering their loan officers to sell specific amounts of different products with the intention of reaching number projections rather than considering what was best for specific customers and communities.

While passing along problem products and buying and selling loans among themselves became a trend among the largest of the large institutions, Arceneaux and Navarro said that most community banks and small commercial lenders avoided trouble because they were not able to offer those trendy products.

“We shouldn’t be getting into products and services that we don’t understand, and that the community is not even asking for or needs,” Navarro said. “It turned out being a blessing for smaller banks because we did not have the sophistication to bring those products to our clients. That, in a way, protected a lot of the infrastructure we have.”

On the other hand, smaller financial institutions are able to keep up with the big business banks because of technology. In Louisiana, and other states in the line of hurricanes, conventional wisdom was that it might be better to bank with a larger institution so that transactions and assets would remain available in the event of an evacuation.

“Not so much anymore,” Arceneaux said. “Mainframes are outside the areas of danger and with the Internet you can go anywhere and move money around.”

Navarro also credited technology for offering the customers of smaller commercial banks the availability of making deposits and transactions electronically. She also stressed that going to the customer, in contrast to her customers coming to her, offers not only a personal touch, but is a symbol of respect and understanding for the customer’s time.

The Troubled Asset Relief Program (TARP) that was introduced in October 2008, and was immediately met with controversy. It continues to be an issue when it comes to how business customers relate to banks.

The federal bailout program was first projected to leave taxpayers holding the cost of $300 billion. According to the Congressional Budget Office, by December 2010, taxpayers were out $25 billion. It was still an amount that left the public distrustful of financial institutions in general.

However, more specifically, the number of banks that accepted federal bailout money was far less than originally expected. It was also primarily limited to the largest of the large institutions.

Former FDIC Chairman Bill Isaac admitted in March that TARP legislation failed to stabilize the financial system.

MidSouth Bank CEO Rusty Cloutier, who strongly opposed TARP legislation, agreed that the bank bailout plan might have actually contributed to the hardest economic recession since the Great Depression.

“In Louisiana we don’t have any banks that are on the FDIC watch list,” Cloutier said. “We didn’t do a lot of the speculative lending that happened in other parts of the United States.”

Arceneaux blames TARP for rules that now create greater challenges for commercial banking. “Regulations are getting to the point that it is hard for some banks to stay operable,” he said. “[Because of TARP] larger banks are taking away some of the loan authority for local decision makers and consolidating authority upstream somewhere.”

Navarro and Arceneaux said that because smaller commercial bankers do not have to worry about making a larger corporate organization happy, they are able to focus on business at hand. Part of that business is keeping up with their customers.

“[Even with automation] you still need customer contact,” Navarro said. “You bring your tools to enhance the service.”

Navarro admitted that the future of commercial banking will require professionals in the business to be increasingly technology savvy. “Brick and mortar is becoming an obsolete concept,” she said. “Now you can even make a deposit through your cell phone. The new generation believes in technology, so it is not like banks have a choice. You need to adapt to the times and go where your client base is going.”

“Part of my job is to develop business,” Arceneaux said. “You have to respond to where [your customers are] going.”

“I think we are going to see a lot of activity for the remainder of the year,” Cloutier said. “The better the economy becomes, the better the banking industry becomes.”

The one certainty these financiers were able to confirm is that solid commercial banking is good for business and solid business is good for commercial banking, regardless which came first.

Business First Bank Senior Commercial Banker Gloria Navarro says automation has made the difference in her job during the past decade. Technology, she added, still does not replace keeping in direct contact with customers. MIKE NIXON