2 min read August 2023 — In an interview with Invest:, Peter Gwaltney, president and CEO of NC Bankers Association, highlighted the strategies used to navigate the recent bank failures, the impact of consolidation on North Carolina’s banking industry and the programs geared toward diversifying the talent pool by encouraging students from HBCUs to pursue banking careers.
What have been some key highlights from the last year and what are your priorities for the remainder of 2023?
This year, our priority was advocacy at the national level, working closely with Congressman Patrick McHenry, who chairs the House Financial Services committee, and collaborating with counterparts from the American Bankers Association (ABA) and Independent Community Bankers of America (ICBA) as we aim to shape public policy and be a valuable resource to our delegation in the new Congress.
At the state level, our legislative activities are focused on supporting legislation that promotes economic growth and sound fiscal policy. We had a successful legislative session and are already preparing for 2024.
How are you navigating and addressing your members’ concerns about economic stability while dealing with clients and customers?
In response to the recent bank failures, we immediately took action to differentiate traditional banks in North Carolina from those that encountered troubles. We reached out to media contacts and engaged with various groups to explain the idiosyncratic nature of those events and that we were not in a banking crisis. In addition to our outreach efforts, NCBA member banks actively contacted their customers, using a variety of communication channels, engaged in one-on-one conversations with their clients, and patiently explained the differences between their banks and the three banks that failed.
Throughout our efforts, we shared real-world examples to illustrate the importance of sound risk management. For instance, having extraordinarily high uninsured deposits, significant concentration risk, and rapid growth can be risky. A good example of this is Silvergate Bank, which failed not long before SVB. Although Silvergate Bank’s failure didn’t receive much attention because it involved self-liquidation and not FDIC intervention, it grew eightfold from 2018 to 2021, indicating potential risks in such rapid growth. Similarly, SVB and Signature Bank experienced significant growth during the same period, which can lead to challenges in managing risks effectively. Additionally, First Republic faced issues due to mismatched assets and liabilities, resulting in difficulties competing in the market when the Federal Reserve increased interest rates 500 basis points over a 13-month period. We use these examples to underscore the importance of prudent financial practices during periods of rapid growth and change. It was crucial to continuously emphasize that the rest of the banking system in North Carolina and across the U.S. was highly capitalized and liquid, as affirmed by the FDIC.
How has the trend of consolidation within the banking industry impacted consumers, customers, and even regulators?
In 2012, North Carolina had 95 bank charters, but today, that number has decreased to 42. However, we have 90 banks doing business in North Carolina, indicating a thriving economy and a competitive financial services market. The consolidation of banks has been a notable trend, driven in part by regional banks seeking to expand into the state and the need for some banks to scale and spread operational costs. This consolidation has been both in-state and out-of-state, with regional banks acquiring existing banks to establish a foothold in North Carolina’s flourishing economy. Additionally, banks have had to deal with the increasing regulatory burden, which has increased over time. Compliance with new regulations has often led to the necessity of hiring additional staff, thereby increasing operational costs for banks.
Regulatory burden has been a persistent challenge for the banking industry, and it has been remarkable how banks have adapted and managed to absorb the associated costs so far. Larger banks have been able to handle the regulatory demands by hiring dedicated staff, while smaller community banks have had to outsource or hire new employees, adding to their operational expenses. As the industry evolves, policy makers and regulators should consider ways to create a more favorable economic environment that reduces regulatory burdens without compromising consumer protection.
What are some projects or initiatives that you are most excited about?
I’m excited about two initiatives that are both focused on the future of our industry. We established the North Carolina Emerging Leaders program in 2016 with a focus on professional development for the next generation of our industry’s leaders. Since its inception, the program has seen rapid growth, with membership of over 700 and a target of 1,000 members by year-end. Additionally, we understand the need to diversify our workforce and have undertaken an initiative to encourage minorities to pursue careers in banking. Our Future Bank Leaders program, in partnership with the Risk Management Association (RMA), was created in 2022 and is designed to prepare students in our North Carolina HBCUs for careers in banking. Through the program, we provide a semester-long credit analysis class taught by a faculty of volunteer bankers, mentoring opportunities, internships, and career opportunities in banking upon graduation. The program’s first semester at Shaw University in Raleigh was a success. Building on this success, we are set to expand the program with two additional universities in 2024, and we will continue to expand to more HBCUs and other schools in the coming years.
What is your outlook for the next two to three years?
We are truly excited about the growth and health of our industry in North Carolina. If I were a bank looking for a home, this state would be my top choice due to its thriving economy and a vast talent pool. We have over 90,000 bank employees in the state, along with numerous professionals in fintech and non-bank organizations related to banking. North Carolina boasts a diverse banking landscape, including the headquarters of major banks like Bank of America and Truist, as well as a thriving community bank sector.
From a business and career perspective, there are exciting opportunities for those employed by banks or aspiring to grow their careers in this field. We, as an association, are committed to serving the needs of our industry, whether it involves adapting to challenges or seizing new opportunities. I take great pride in representing North Carolina’s banking industry.
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