EconSouth (Second Quarter 2005)
Q & A
Community Banks Find
An Interview with C.R. Cloutier of MidSouth Bancorp
Even as regulations change, technology advances, and the largest banks grow ever larger, community banks continue to survive and often prosper.
A recent Federal Reserve Bank of Atlanta study found that from 1998 through 2002, in all but the smallest size category, community banks performed as well as, and often better than, large banks in managing net interest margins, aggregate profits, and credit risk.
C.R. “Rusty” Cloutier, president and chief executive officer of MidSouth Bancorp Inc. and MidSouth Bank in Lafayette, La., sees every day why community banks perform well. Cloutier was the bank’s founding CEO in 1985, a time when south Louisiana’s economy was struggling mightily, with unemployment exceeding 20 percent. He’s steered the bank through tough and prosperous times.
EconSouth talked with Cloutier about changes and the keys to success in community banking. Part of being a true community bank, Cloutier believes, comes down to being a vital part of the community and meeting customer needs.
EconSouth: Other than size, what distinguishes a community bank from other banks?
C.R. Cloutier: I think it’s philosophy. Are you engaged in the communities you serve? As a friend of mine said, Is the bank supporting the local high school football team? Or is the bank running some type of national operation where the employees really don’t know the community, are not well aware of it, or have not adjusted to the community?
ES: Has what it takes to succeed as a community bank changed?
Cloutier: The big change has been dealing with all the regulations. Take the big five banks. They have big staffs dealing with all the government regulations. Quite frequently a community bank just doesn’t have the staff for that. The president and CEO, or quite often the number two person, has to handle all the regulations. You have to deal with it, and I think that’s encouraging consolidation in the industry. I think more banks are exiting the industry because of that and, secondly, because of the age of the banks’ board members.
ES: How much of your time do you spend on regulatory matters?
Cloutier: Day to day, we spend a lot. The chairman of our board and I just met about our board meetings. We talked about trying to get more focus back into making money and running the business. I’ll bet we are now spending 50 or 60 percent of our time in board meetings on regulations because you’ve got to make them [directors] aware of them.
ES: In what other ways has community banking changed?
Cloutier: When I opened, people came to the bank a lot more. Now there’s a lot more sales culture in this business than there used to be. When we opened, we hung a shingle outside, and in walked a ton of people. Today, nobody walks in the bank any more. And there’s a lot more competition.
ES: Has the process of hiring and recruiting people changed much over the years?
Cloutier: I think today people are much more concerned about their quality of life than maybe we were when we started the bank. We were just trying to make a living. When 25 percent of the people are unemployed, you don’t want to become one of them. Today, people are more concerned about enjoying life.
ES: Some of the big banks have announced that they are making renewed commitments to customer service, an area where community banks have traditionally excelled. Is that a threat to community banks?
Cloutier: Each bank has its own philosophy. Bank One is now JPMorgan Chase, and it’s interested in high-end customers, the trust business, and large commercial loans. Capital One is a consumer-based business. As I tell people, there are 8,700 banks in the United States. To my knowledge, there are 8,700 different plans and operations. Even among community banks you don’t see two banks with the exact same mix of business and strategies. If I’m in a town of 2,000 people, I’m not going to have a big trust business or a lot of high-end business.
ES: How is the economy in your area?
Cloutier: Things are going along very well. But we also remember the tough days of the 1980s. When we started in 1985, we were the ninth bank in Lafayette. And between 1985 and 1992, seven banks here either went out of business or were sold because they had to be. They were not good sales. We had 22 percent unemployment. It was tough.
ES: How does consolidation in the banking industry affect your business?
Cloutier: I don’t think you think about it a lot. Once an announcement’s made, you go in and study how it’s going to affect you. You realize it’s a consolidating industry. Some banks are still in good shape; in some parts of the country, they’re not in real good shape. I think over the next 10 or 15 years we could have another 1,000 banks consolidated.