Few moments in sports capture the idea of winning against the odds quite like the 1980 "Miracle on Ice," when a young, outmatched US Olympic hockey team defeated the four-time gold-medal winning Soviets to get to the final game. The US went on to win the gold against Finland. Their extraordinary victory was less about overwhelming strength and more about strategy, teamwork, and seeing possibilities where others saw limits. At the Federal Reserve Board’s annual Community Bank Conference in Washington, DC, earlier this month, three CEOs at successful community financial institutions (CFIs) detailed strategies that have helped them succeed in a fiercely competitive environment. Hosted by CNBC’s Jim Cramer, CEOs of North Carolina-based Live Oak Bank, Texas-based First Financial Bankshares, and Alabama-based ServisFirst shared their insights on community banking strategy. The panelists also discussed challenges for the industry and how the federal government could help ease some of those challenges.Emphasis on Relationship ManagementOne common thread among all of the banks featured on the panel is a strong relationship focus. “We have about 170 lenders, and it’s required that they sit down with a customer face to face,” said Live Oak Bank CEO Chip Mahan. Live Oak Bank is one of the country’s premier lenders of Small Business Administration loans, serving businesses across 40 industries nationwide. “The lending officer has to prove that they have a relationship if things go bump in the night. When the going gets tough, you're going to be victorious.” Mahan also lunches every other week with all the new hires, many of whom tell him that they had called periodically to see if there were openings. “If you treat folks the way you want to be treated, they want to work for you.” Sometimes, striking the right balance in managing customer relationships means rethinking how your CFI is structured. For instance, First Financial Bankshares used to have a labyrinth structure of separately chartered banks — some state and some national. “That didn’t work,” said CEO Scott Dueser. The company then merged them under one charter and centralized the back-office, but each of its eight regions “looks like an independent bank” with its own president and advisory board that can make their own decisions up to a certain point.“It puts that decision-making process closer to the customer who wants quick decisions,” Dueser said. “These boards are made up of the movers and shakers of that community, and that is why our loan portfolio is so strong. They know who to loan to, and they know the economy. If they don't approve a loan, it doesn’t come up the ladder.”Similarly, ServisFirst has multiple regions across the Southeast, each with a non-legal board, a regional CEO, and its own chief credit officer. “We ask all of our bankers to reach out to their top 20 clients every month — that’s just one each business day,” said CEO Tom Broughton. “Staying close to the customer is the most important thing you can do.”How Artificial Intelligence Helps Them CompeteOne challenge the three banks face is competing with nonbank lenders for services such as merchant cash advances, some of whom are “charlatan lenders” with exorbitant rates, Mahan said.To counter this, Live Oak Bank has partnered with a fintech that leverages agentic AI that “listens in” on conversations between the bank’s lenders and prospective business customers. If the prospect is currently paying a 40% rate on a merchant cash advance or another nonbank loan, the AI agent can automatically suggest to the Live Oak lender a credit minimum to lure the prospect out of the nonbank loan and into Live Oak Bank instead.When Cramer asked what ways “other than punitive” the federal government could boost the US manufacturing sector, Broughton said the state of Alabama is developing more trade schools in partnership with manufacturers, meaning a booming trades sector is coming to the area.The growth of AI is also creating opportunities, Dueser said. Oracle and OpenAI have just opened “the largest AI data center in the world” in Abilene, Texas, spending $500B on the effort and contracting 6K workers to construct it. “Abilene is just booming right now.”Growing Hope for Asset-Based Regulatory ReformEasing regulation was a no-brainer, particularly to enable CFIs to keep and service more loans on their books, Dueser said. “We quit loan servicing years ago because of regulations — that wasn't good for the customer, and it wasn't good for the banking industry,” he said. “We've got to think about that and get that stuff off, so we can go back and serve our customers the way we need to be serving them.”Regulators should also revisit asset thresholds for tiered regulatory structures, Dueser said. In an earlier conference session, Treasury Secretary Scott Bessent said that regulators should do just that: As the economy has grown over the years, so have banks’ asset sizes, and so $10B in assets — or even $500MM in assets — shouldn’t automatically trigger increased regulatory requirements.“You would think that if a long-standing big customer came in and made a big deposit at the end of the year, you'd be excited,” Bessent said. “But one bank told us that they wouldn’t take it because it was going to push them over $500 million, and then the trigger was there. So we want to make sure that you're able to grow without setting off these regulatory trip wires.”
Dueser appreciated Bessent’s comments.“During the pandemic, we grew $4 billion because we stayed open and the deposits moved over — and all of a sudden we were $10 billion,” he said. “We were not prepared to be $10 billion, but the regulators expected us to act like a big bank. You can't expect a $10 billion bank to look like a $100 billion bank. We're not.”In the time since the conference, the Office of the Comptroller of the Currency (OCC) has announced plans to discontinue tiered regulatory requirements. Only time will tell if other regulatory agencies will follow suit.Broughton also questioned why it’s become so difficult for de novo banks to open. A group in Alabama is being required by regulators to raise $28MM to open its doors — quite a feat, he said. But startups are the ones to lend money to the smallest mom-and-pop businesses in the community, so the government should make it easier for them to open — and stay viable.Overall, the discussion highlighted how CFIs can balance tradition and innovation, focusing on relationships, embracing AI, and advocating for smarter regulation. As the industry evolves, their shared vision suggests that the future of community banking will hinge on adaptability, connection, and the courage to rethink what local banking means.
Dueser appreciated Bessent’s comments.“During the pandemic, we grew $4 billion because we stayed open and the deposits moved over — and all of a sudden we were $10 billion,” he said. “We were not prepared to be $10 billion, but the regulators expected us to act like a big bank. You can't expect a $10 billion bank to look like a $100 billion bank. We're not.”In the time since the conference, the Office of the Comptroller of the Currency (OCC) has announced plans to discontinue tiered regulatory requirements. Only time will tell if other regulatory agencies will follow suit.Broughton also questioned why it’s become so difficult for de novo banks to open. A group in Alabama is being required by regulators to raise $28MM to open its doors — quite a feat, he said. But startups are the ones to lend money to the smallest mom-and-pop businesses in the community, so the government should make it easier for them to open — and stay viable.Overall, the discussion highlighted how CFIs can balance tradition and innovation, focusing on relationships, embracing AI, and advocating for smarter regulation. As the industry evolves, their shared vision suggests that the future of community banking will hinge on adaptability, connection, and the courage to rethink what local banking means.
