Carlos Fernandez-Guzman, President & CEO, Pacific National Bank

Invest: sat down with Carlos Fernandez-Guzman, president and CEO of Pacific National Bank, to discuss relationship banking, disciplined growth, and Miami’s shifting tailwinds and headwinds. “The good news is that the community banks that do survive tend to be more focused on what they do best, which is personalized banking. From a sector perspective, Miami and South Florida continue to be attractive,” Fernandez-Guzman said.

How does Pacific National Bank define its commitment to “banking not as usual”?

Pacific’s culture is engineered and geared toward a close relationship with our customers. I would dare say that it’s more of a partnership than a relationship. We strongly believe that the role of our team members is to become a partner in the lives of our clients, to serve as a resource that they can rely on for valuable advice, for direction, and perspective. Most rely on us to candidly tell them what they need to hear rather than what others do, which is to tell them what they think they want to hear on topics of finance.

We tend to be proactive in helping our clients structure our consultations to fit their needs in ways that capitalize on opportunities that serve them well in the long run. We are consultative on both the commercial and the personal side.

How would you assess the banking landscape in South Florida, and what trends are influencing Pacific National Bank’s strategic decisions?

If you look at the environment at large, unfortunately, we continue to lose community banks. M&A activity continues to be robust, and the ranks of smaller banks continue to be reduced. In the end, that doesn’t serve the customer well. Customers have fewer choices, and that’s not a good outcome for the market.

The good news is that the community banks that do survive tend to be more focused on what they do best, which is personalized banking. Miami and South Florida continue to be attractive markets for mid- to small-sized banks. The market’s cultural diversity plays into the smaller bank’s strengths by increasing the importance of cultural acumen when guiding clients through a maze of financial offerings.

Mergers and acquisitions are adding new big banks entries which only offer commoditized banking. When personalized banking shrinks, small businesses and everyday consumers tend to lose access to the kind of attention and flexibility that community banking is designed to provide.

The international factor is also especially important in Miami. The big-box banks, the national franchises, tend to have a completely different perspective than we do with respect to international clients. We welcome international diversity and embrace the challenges associated with foreign nationals; we work through the regulatory issues that often preclude them from banking in the United States. We understand Latin America, the Caribbean, and European regions and the challenges of relationships originating from those geographies. The bigger banks are often more cautious and tend to shy away from international clients, and it’s not uncommon for a foreign national coming to Miami to try to establish a banking relationship and be turned away. Often, it’s because the larger institutions don’t want to take what they view as international business or personal business banking risks.

There’s also a broader dynamic playing out that the market needs to be prepared for. The current geopolitical environment suggests you are going to see changes across Central and South America. There are shifts in the basin that can create a more stable environment for investment back into those countries. While Miami is welcoming new entries from the Northeast, the West, and Europe, we may also experience a flight capital run using Miami as a safe haven but later decide to reinvest in their home countries as conditions stabilize.

That balance of inflow and potential outflow may tilt to outflow. That potential disintermediation will be dangerous. If countries that have suffered capital flight were to become investably viable again, you could see meaningful capital begin to look for ways to relocate back to their home lands. That’s good for the region and countries, but it will create headwinds for Miami’s ability to capture capital that typically seeks U.S. safety and soundness.

What digital initiatives or uses of AI are shaping Pacific National Bank’s approach to expanding services and enhancing customer experience?

AI is expanding, everyone is talking about it, and AI will be an integral part of the future. We believe AI is a tool at this point, and we are not in a place where we are going to allow AI to replace human decisions. We see it as an analytical tool more than a decision-making tool.

We deploy it primarily for analytics. We are not allowing AI to replace human judgment. AI must be overseen by humans, and decision-making must be done by humans as well.

One of the challenges with AI is that it learns rapidly, but it doesn’t inherently know how to distinguish what is real from what is not. It also doesn’t know what to forget. It can absorb empirical information, anecdotal information, and information that is validated, and all of that can influence outputs. Because of that, everything AI produces has to be evaluated carefully and with a discipline focused not just on content but also on context.

For us, the present value is efficiency in data gathering and analysis. We use AI to provide analytical support so our team can make better decisions faster and with more clarity, but we do not use it as a substitute for human responsibility. We are not using it as a vehicle to reduce staff, and we are not using it to replace direct accountability.

Use of AI for efficiency, in our view, should support more client touch, not less. The goal is to reduce unnecessary manual work so our people have more time to be consultative and present for clients. If the technology helps us return time to the customer relationship, then it is serving the personalized banking model correctly.

Looking ahead, what is your vision for Pacific National Bank’s growth, market positioning, and evolution of services over the coming years?

We are continuing to focus on the exact same things we have always focused on. We like growing organically, and we prefer building growth organically. We appreciate possible M&A opportunities, but we are cautious about how those acquisitions affect corporate culture. Corporate culture is important, so we prefer organic growth because it allows us to capture new business without jeopardizing the cultural integrity and personality of our company.

We will continue to strive for growth in the 20% to 25% annually range, both on the liability and asset side of the balance sheets. We recognize that it is aggressive, and we understand it must be done carefully and skillfully. We focus on delivering strong returns to our shareholders, which requires constant attention to efficiency and performance.

Most people think efficiency translates into less touch with the customer. For us, it’s the opposite. Efficiency is a way to reduce unnecessary tasks that prevent more touch with the customer. There is work that is manual and inefficient, which takes time away from clients, and when we improve on that, the time goes back to the customer as it should. That is an important distinction in how we think about the future.

We recalibrate our business plan every three years, and we stick to it. Our projections are typically close to actual results because of our disciplined approach, and when we find ourselves growing too fast, we will pull back, because we understand the danger of outgrowing our backroom engine. The backroom has to be ready to handle what you’re bringing in from a production and sales perspective. We aim to be prudent and disciplined about sustainable growth.

We will look at M&A opportunities. We would like to buy banks that we can integrate, but culture drives those decisions more than finances. A balance sheet can be more easily integrated than culture. People make the difference. If we do not think cultures integrate well, we will pass on the opportunity. Most of the time, we have to pass for that reason, because bringing in a group that doesn’t share our customer-centric model may destroy the model.

There is also a broader industry issue that matters for Florida. What we need is more de novo activity. Banks like ours benefit when smaller institutions open, grow to the $200 million to $500 million level, and then become viable partners or acquisition candidates. Those “baitfish” have largely disappeared because there has not been enough new-bank formation. That changes the ecosystem. You either end up trying to grow via mergers of equals or wait to be acquired. The result is that the market loses an important layer of community banks when this happens.

Discipline, aggressive but thoughtful growth, efficiency, culture, and a customer-centric model —  that’s the message we want associated with Pacific National Bank, and that is not going to change anytime soon.