3 min read February 2024 — In an interview with Invest:, Stewart Patch, regional president of Dogwood State Bank, discussed the challenges that the failure of some banks at the beginning of 2023 has caused in the banking industry. He also talked about the impact of rising interest rates on deposits, and how the bank’s focus on deposits and customer experience has helped it to continue thriving.
What are the most important highlights of Dogwood State Bank from the past year?
It has been a tumultuous year in the banking industry with the bank failures that happened in early 2023. We spent the first half of the year dealing with that and navigating the challenges that rising interest rates presented. We have been fighting rising deposit costs in our portfolio, but have navigated it well by continuing to focus on our core principles of gathering full banking relationships both in the business banking sector and the commercial real estate space; all with a focus on deposits.
Deposits came front and center this year. Lucky for us, we have been focusing on that for our entire life cycle. We have been able to double down on that area without the need to change our culture, which has us well-positioned to continue to fund our strong growth model.
How is Dogwood State Bank adapting to the evolving banking landscape area considering the growth that Raleigh-Durham has been experiencing?
The bank itself has expanded over the last year, from North Carolina into South Carolina with our entry to Greenville and Charleston. We have been able to opportunistically grow our teams in various markets by hiring strong talent. We have done a good job of being thoughtful about where we spend our resources in a challenging economic time. Knowing good companies and good management and focusing on the right prospects will create wins as we emerge from any economic downturn that might come.
How has demand for the services of Dogwood State Bank shifted in response to growth in the region?
We continue to provide a service that a lot of people in the marketplace want. We offer an intimate boutique experience with a high level of service and customer touch. Additionally, with the consolidation that happens in the banking world, mergers and acquisitions create a lot of opportunities for us to deliver our value proposition. One thing that makes us different from other small banks is that we offer the skillset and expertise that allow us to punch above our weight in terms of size and customer profile.
What features of the bank’s value proposition help it maintain a competitive edge in terms of customer service and products?
It boils down to the relationships that our bankers have with customers. We have a continuity of staff and a tremendous platform concerning deposits and treasury management as well as credit solutions. Those are unique features for a bank of our size. At the end of the day, what sets us apart is our responsiveness and accessibility to our customers. We can offer real-time advice and counsel during any situation, which was evident during the bank failures that happened at the beginning of the year. It enables us to talk to customers about our company, our balance sheet, and our health, safety, and soundness, as well as that of our customers.
What is the bank’s strategy to navigate the economic challenges presented by shifting interest rates and inflation?
The increase in the federal funds rate in the last two years has been challenging because it causes our costs related to deposits to increase more quickly than we can book new loans at higher interest rates. We have dealt with some margin compression as the entire banking industry has. Nevertheless, it comes down to our focus on core operating deposits that have enabled us to continue to thrive. Whereas many banks in the industry have seen deposit outflows, we have seen significant growth in deposits year to date. That is a testament to our culture and to the fact that our teams understand the value of that side of our business.
How is Dogwood State Bank supporting the financial needs of the small and medium-sized local businesses?
That is our bread and butter. While we have extremely large customers, the bulk of our client portfolio is comprised of small and midsize businesses. We have seen several banks in our industry and in our market exit that space to some degree to focus on larger customers that they deem more profitable. That trend has opened tremendous opportunities for us to attract customers from larger institutions in the marketplace that want the personal experience and accessibility that Dogwood State Bank offers.
How have you seen technology impact the banking industry over the past year and what is the strategy of Dogwood State Bank to leverage technological advancements?
We have a strong base system in terms of technology. We have consciously decided to be light on physical branches. That lack of brick and mortar has allowed us to invest in technologies that facilitate digital banking at all levels. We have been exploring some things related to artificial intelligence, fraud prevention, and fintechs focused on online deposit account openings. There is a lot of opportunity there, but it is important to be thoughtful when we entertain fintech solutions. We are trying to enhance the customer experience and focus technological advancements around our core principles and what will help our customers and our company thrive.
What characteristics make the Triangle a great place for the banking industry to flourish?
The greatest thing that we have going for us is population growth. That is the result of many factors, such as geography, education, and healthcare that make our region a great place to be. While the Triangle sometimes lacks the flair of markets such as Nashville or Austin, it is a tremendously livable place. That attracts people who move here to live and work. That engine creates opportunity in the banking industry as new companies appear and new relocations and their offshoots come this way.
What is your outlook for Dogwood State Bank and for banking in the Raleigh-Durham area within the next three to five years?
We have navigated the challenges of 2023 quite well and have positioned ourselves to take advantage of opportunities that present themselves over the coming years. We will focus on adding people to our team who have relationships in this marketplace. There is some dislocation happening at other banking institutions, which presents opportunities for us in terms of customers and talent. We will continue to deliver the solutions and value propositions that have resonated with our customers to date, and growing our team and breadth in the market will allow us to reach more and more businesses that want a true banking relationship.
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