Regional banks are in a sweet spot for growth

The banking industry has recently navigated a challenging period characterized by bank failures and volatile interest rates. Higher rates and rising costs have created hurdles for businesses and individuals seeking loans.

Yet, despite these challenges, regional banks continue to see opportunities for growth in supporting our local markets.

While many national banks have succumbed to the increased stress of the lending environment and reduced their lending activities, many of their regional counterparts, equipped with ample equity and capital, are primed to adopt a proactive approach, particularly from a business development perspective.

Consider the case of BOK Financial, which has $50 billion in assets. By continuing to lend into our markets in the middle of the country, we have experienced more than 10% growth in loans over the past two years.

So why exactly are regional banks resilient and primed for growth?

THE REGIONAL BANK ADVANTAGE
Regional banks bring a unique value to the financial landscape. They offer similar services compared to larger national banks but with a distinct, localized edge. Their deep integration within the communities they serve allows for a nuanced understanding of client needs and local decision-making, which larger institutions may overlook.

With many operating in the heart of the U.S., these banks align closely with the core values of their communities, thereby insulating themselves against the economic volatility more prevalent in coastal regions. Stability enables focusing on long-term strategic growth rather than short-term reactionary measures.

TALENT ACQUISITION AND RETENTION
Attracting and retaining talent is critical for success. Regional banks’ financial strength and resilience, mainly during periods when others have struggled, make them attractive to top-tier talent across various markets. Employees in regional banks have access to deep experience and knowledge across their organizations, which enables them to provide consultative advice to their local clients.

LOAN ENVIRONMENT
What’s the loan environment like today? Well, it depends on the circumstances, the industry and the individual. Therefore, many regional banks are committed to addressing their clients’ lending needs because they likely count on substantial deposit balances and capital reserves that allow them to support their clients and communities consistently.

DIGITAL TRANSFORMATION IN BANKING
The banking industry has undergone significant digital transformation in recent years, with many transactions now conducted via smartphones. Both national and regional banks have deeply invested in technology. While this digital shift provides instant access to account information, the importance of physical branch networks remains. Branches have evolved from where people conduct transactions to where they sit down and partner with a local banker for solutions.

ARTIFICIAL INTELLIGENCE & FRAUD DETECTION
While the banking industry closely monitors the rise of artificial intelligence (AI), its full integration within the sector is yet to be realized.

AI has shown potential in detecting and alerting about atypical transactions. However, when it comes to credit decision-making, AI faces challenges due to the potential for inherent biases in its models, so we don’t see the industry moving in that direction soon. Despite these challenges, banks, regardless of their size, are actively seeking strategies to leverage the benefits of AI effectively.

Editor’s note: Fayetteville banker Chris Schaechtel is the Arkansas market president for BOK Financial. The opinions expressed are those of the author.