CEO Roundtable 2024: The Year Ahead

With the economic uncertainty that defined most of 2023 showing signs of easing, community bankers are optimistic about the year ahead. Despite challenges like managing the net interest margin, increasing costs and fraud, community bankers are facing the future with resilience, determination and experience. 

While some challenges and opportunities may look familiar, we are also seeing a real interest in AI and what it might look like on a practical level for community bankers. Some CEOs are educating themselves about AI, while others are exploring new technologies to harness its power. All are looking to its potential benefits while finding ways to minimize its risks. 

We spoke to four community bank CEOs about their hopes for 2024.

“2024 will be an AI investigation year. It’s intriguing and a little scary, but there are some business use cases for it. It's figuring out good use cases and what areas you want to avoid.”

—Shane Pilarski, Alliance Bank

Our CEO roundtable participants:

What will your community bank’s most significant challenges and opportunities be in 2024?

Shane Pilarski: A common one you’ll hear from many banks, especially community banks, is managing the net interest margin. At Alliance Bank, we experienced a lot of loan growth in 2023, and with the Fed raising rates, that helped us from an interest income perspective. We’ve also been very disciplined on the cost side, but that can only hold for so long. We anticipate that our fund costs will increase in 2024, so finding the best way to manage that will be one of our biggest challenges.

J. Michael Radcliffe: Like every community bank in the nation, we’ve experienced a massive increase in funding costs over the last 18 months, which will continue to be a challenge in 2024. We tend to adopt the ‘Goldilocks approach’ to our net interest margin when pricing for deposits: We don’t want to be at the top of the market to erode our net interest margin, and we don’t want to be at the bottom, because we’ll lose deposits. So, we’re striving to hit the right spot. Our second most significant challenge will be liquidity. We’re a stable linchpin in the community, and one of our most significant opportunities will be to continue differentiating ourselves from the megabanks.

Alice P. Frazier: Internally, we always say that our biggest challenges are often our most significant opportunities. Our management team has discussed the higher interest rate environment and how to reposition our balance sheet while anticipating potential areas of increased risk. We are also focusing on the rising interest cost on deposits and managing that going forward. We’ve taken a hard look at our investment portfolio and realized we’ve taken losses on investments of lower yields and shorter maturity dates. And we reinvested that for higher profits and income going forward.

Thomas Bates, Jr.: The continued rate environment and deposit gathering will be our most significant challenges. And when trying to maintain an acceptable net interest margin, you have to be intentional about the kind of customers you go after. Opportunity-wise, we have acquired some mortgage originators from a large group of strong producers that shut their operations down. So, going into the spring buying season, we see the potential for greater volume, even with an elevated rate.

What products or services does your community bank anticipate introducing, if any, to increase its income in 2024?

Bates: We’re not going to introduce anything particularly new. We just signed up with TCM Bank to do our credit cards, so we intend a more significant push on retail and business payment cards. We’ll also focus on leading with treasury management services, which is part of the strategy to increase accounts from small- to medium-sized businesses. We see that as an area where we can earn some fee income through merchant services and additional non-interest-bearing deposits. 

The percentage of employees who would seek employment elsewhere if they had the option to work remotely

Source: Topia

Frazier: We just announced a new business line for us: government contract banking. Being this close to Washington, D.C., we have a lot of government contractors in the area. We spent several years searching for the right leader with the expertise we need that fits our culture and understands and appreciates our conservatism related to that. That person just joined us, and we look to that division to add new lending and deposit opportunities to drive income for next year.

Radcliffe: We’re not looking at anything new to roll out. It’s more about enhancing our existing abilities. We are working on further implementing our commercial loan origination platform and developing our e-sign capability for our loan closing and deposit side. Let’s face it: People expect the Amazon experience. Click a button and, in 30 seconds, be done. The critical piece for us is being able to deliver on that experience.

Pilarski: I can’t say that, at this point, there are specific products or services that we plan to introduce. In 2024, we will focus more on educating our clients on the tools we have to help them handle their finances more effectively and minimize their fraud risk.

“We're obviously very excited and nervous because we know how much work will go into [switching cores]. But my staff are entirely on board because I told them I would not make this decision unless they agreed we needed to do it. After all, they have to do the work.”

—Thomas Bates, Jr., Legends Bank

What new technology is your community bank considering in 2024 to service its customers’ needs?

Radcliffe: We are implementing Zoom as our telecommunications software. It will replace four systems and significantly reduce our annual outlay for communications, which currently amounts to more than $100,000. Specifically, Zoom will replace our long-distance and local calling, our annual WebEx subscription, our annual conferencing hardware support, our contact center, our calling management software and our yearly calling fee. Zoom’s business enterprise plan also provides an external chat functionality. The system also features retention and audit features.

The percentage of employees who believe culture is more important than compensation.

Source: Zipdo

Frazier: We implemented Jack Henry’s loan software in 2023 and will continue diving deep into that software in 2024. We will be rolling out online loan applications for retail customers and refining what we can do for our commercial clients to complete loan applications easily and simplify the process. We’ve also been working on robotic process automation (RPA). Through our relationship with BankTech Venture Fund and now ICBA’s ThinkTECH [Accelerator], we’ve been introduced to a new-and-improved kind of RPA concept and HuLoop [an AI-powered automation software]. We will explore that to continue to create some efficiencies on what I call redundant, repetitive processes in the organization.

Bates: We are changing cores after 25 years. So, we’re obviously very excited and nervous, because we know how much work will go into it. But my staff are entirely on board, because I told them I would not make this decision unless they agreed we needed to do it. After all, they have to do the work. We’ll also be rolling out a new loan platform and looking at creating a system to streamline small loans to create more automation in our small loan products. We are trying to get to the point where we can do some auto-decisioning, which will help.

Pilarski: One thing we will implement in 2024 is software to help with the debit card dispute process. We’re optimistic that the technology will help us gain some efficiencies there. We’re seeing an exponential rise in fraud—all sorts of fraud—but debit card fraud continues to rise. Through the regulations, if someone disputes a debit card transaction, there’s paperwork the client has to complete, and some research and filing on our end. So, we’re hoping this software, while not wholly automating the process, will help us gain some efficiencies. Also, 2024 will be an AI investigation year. It’s intriguing and a little scary, but there are some business use cases for it. It’s figuring out good use cases and what areas you want to avoid.

The percentage of banks that state retaining younger talent is “somewhat challenging,” a 19% increase from 2021.

Source: 2022 Crowe Bank Compensation and Benefits Survey

What is your community bank’s single most important business goal for 2024 and why?

Pilarski: Our deposit growth has outpaced our loan growth for the last few years. So, our single most important business goal is balancing loan and deposit growth. The good news is that in 2023, we had a lot of capacity for loan growth. And that really goes back to the challenge of managing net interest margin. We haven’t had to worry about the balance in the last few years as much. We just had a lot of deposits to lend out. Now, we will have to focus on balancing those two things together.

Radcliffe: Our greatest challenges are surviving and succeeding in these difficult economic times with pressures on margins and increased consolidation within the industry, not just for 2024 but beyond. Fortunately, our resources position us to take on the challenge.

Frazier: The board and I firmly believe that our employees are critical to our success, so it is the first thing we focus on every year. How can we make the employee experience better? We have several initiatives we’re rolling out this coming year in the hope that they increase retention and our ability to attract quality talent. Then, given the current environment of higher interest rates, continued demand by clients and higher deposit rates, it will be managing the net interest margin so we can maintain continued good profitability for our shareholders and minimize expenses.

Bates: So, I have a few areas of focus for 2024. Obviously, I want to have a smooth core change. And additionally, we have a new branch in a new market that we want to be online by the end of the first quarter/early second quarter in a town called Ashland City, halfway between us and Nashville. And I want to refocus our efforts in the Nashville market. We can gain a lot of market share in that area. That’s the main area I want to be the most intentional, because with a market that size and a bank our size, you have to focus on what you want to go after. You can’t go after everything.