An Interview with Joshua Householder, Vice President and Commercial Loan Officer, Bank of Charles Town
March 28, 2014
Q: What do you think sets a community bank apart from other banks?
A: I think you know you’re in a community bank when you walk through the door. The people working in a community bank greet you with a smile and say hello. That’s because the people working there have usually been there for a while. They are your friends, your neighbors and your family.
Q: Do you think there will be such a thing as a “community bank” in 10 years? And if so, what will it look like?
A: As long as there are rural communities and small businesses, there will be a need for community banks. I suspect the community bank of the future will be more heavily reliant on technology. You will likely see smaller branches with fewer front line employees. The use of more sophisticated machines such as cash recyclers will be more prevalent. It will make tellers more productive and accurate as well as decrease customer wait times. There will be much fewer people using checks and plenty more using electronic payment methods. All of this will result in fewer in person visits to branches and necessitate that banks meet their customers where they live and work through the use of electronic transactions.
Q: What is the biggest challenge community banks face, and how do you think it should be addressed?
A: For the smallest of community bank institutions, say $100mm or less in assets, the challenge is in having other larger banks acquire them. But all community banks face a challenge of retaining their existing depositors. Many people using a community bank do so because their parents and their grandparents used the same bank. Community banks have to be able to retain existing customers as well as attract new depositors and increase market share, and to do that, they need to market to their existing customers.
Q: Where do you think community banks are falling short?
A: Community banks are falling short marketing to current customers and expanding the number of products used by current customers. The large institutions do a great job of leveraging email and other mediums to market products not currently utilized by a customer. Community banks need to leverage all the data available to target market and expand these relationships.
Q: What are the biggest opportunities for growth of community banks?
A: Aside from expanding existing relationships, there is an opportunity to focus on small businesses that are often overlooked by the larger firms. These small businesses may not qualify for or even have a need for a loan today, but they shouldn’t be discarded. Start by establishing a business checking account for them and then expand into a business credit card. Perhaps they are a candidate for your remote deposit capture service. They will likely need to accept credit cards, so speak with them about this service. All of these ancillary products can be decent revenue generators. And when this small business needs a loan to grow, they will come to you first.
Also, sometimes we may find that a community bank is more willing to take a risk with a small business because of the more personal relationship – credit decision makers are local and know the market and the people they are dealing with. In other words, the community banker might be more willing to take a risk on a loan that is local that a larger institution wouldn’t consider.
Q: American Banker and others are reporting that there seems to be a scarcity of new talented young people going into community banking. Do you agree and what can be done to address it?
A: I think it’s an interesting comment. I do agree that there is a lack of talented young people in banking, but only to a certain extent. And there are myriad reasons. One of those reasons affects all bankers and that is that the financial crisis has caused some people in the media and public office to vilify a respected profession, which drives away or dissuades young people from seeking out or joining the profession. Another relates to the training available to young community bankers. It used to be that a new banker might get training with a large financial institution and then move to a smaller community bank, but in the same geographic area. Now, large financial institutions have consolidated their credit departments where people learn the fundamentals of risk management and credit underwriting. With these functions consolidated and centralized, they are no longer provided at the local level. So fewer community bankers come through a larger institution and many starting out have not had any training. Executive management for community banks has to be willing to invest in young bankers. There are plenty of quality banking and lending schools to attend. Community bankers need to identify their top talent and foster their growth. Inviting the new banker to attend asset liability or loan committees is another way to provide training and exposure. Management must be mindful that recruiters are calling and so it must endeavor to create a good corporate culture in which employees are happy. For example, the community bank may provide extra vacation days, or perhaps use promotions with a few extra responsibilities in smaller steps instead of a large promotion.
Q: What makes you most proud about being a community banker?
A: It may seem a bit cliché, but I enjoy helping people. And I love having played a small role in the success of a small business. Also, being a community banker has afforded me the time to be involved in, and give back to my community. I serve on the Jefferson County Development Authority Board and have chaired the 2013 and 2014 Eastern Panhandle United Way Campaign. I’m not sure those opportunities would be available to me at a larger institution.
Q: What should be the focus of community banking?
A: I think the focus should probably be matching customers’ needs with financial instruments in a common-sense fashion. Too often this gets overlooked in a larger financial institution. When we focus on the right product or service that meets a customer’s need, it ultimately leads to more loyal customers and therefore profitability. This should be the focus instead of what products have the highest profit margin.
Q: If community banks would substantially decrease in number, through consolidation, failure, etc., what effect, if any, do you think it would have on the communities that they presently serve?
A: I think it would have a severe negative impact on the community. Community banks serve small businesses and small businesses are the backbone of our nation’s economy. It may sound a bit draconian, but the loss of community banks could lead to small businesses being unable to obtain financing and expand, which then leads to job losses.
Q: If a loved one came to you and said that they wanted to be a community banker, would you encourage them to do it? What would you tell her or him?
A: I would definitely encourage them. I would encourage them first to focus on education and to explore all opportunities. But banking, I feel, is a good profession. I would tell them absolutely pursue it, and find a good community bank to work in.
Q: Does community banking in West Virginia differ from community banking in other neighboring states? If so, how?
A: I think the values and ideals of community bankers are the same. I’ve met many community bankers from across the country. I think the principles of community banking are the same no matter what state you are in. We have a full service branch in Hagerstown, Maryland and a commercial and mortgage loan office in Middleburg, Virginia.
Q: What is the best career advice that you ever received about being a banker?
A: I was attending a lending school as a young banker and the instructor posed this question:
“How many of you think it is your job to make loans?” Nearly everyone raised their hand, to which the instructor loudly responded: “You’re wrong. Your job is to get repaid.” To this day, I think about that response every time I make a loan.
Q: What do you enjoy most about your job?
A: I really enjoy listening to my client’s business stories and learning about each one of their individual businesses. They are all different, which is what is so great about being a commercial banker. Every day there is a new industry and a different way to do something better than someone else. It is really interesting.
Q: What is the “low hanging fruit” that community bankers are not taking advantage of to increase their revenue?
A: In addition to some of the things I’ve already mentioned, i.e., marketing to existing clients, utilizing technology, increasing relationships, I think we don’t do enough of negotiating our own contracts. As a community bank, we often rely on vendors, and we need to make sure we are negotiating their contracts to decrease costs. The challenge is that we are different from a larger institution and might not have some of the same points of leverage, but these are important nonetheless.