••• SPONSORED SECTION •••
North Carolina’s banking industry, from Charlotte headquarters to small town branches, has been a strong part of the state’s economy for decades. But forces beyond its direct control are reshaping its present and future. Fewer federal regulations, are welcome relief, but tariffs, interest rates and other issues are causing concern and uncertainty. To better understand what’s happening, Business North Carolina gathered industry experts to take stock of the industry, explain its current position and describe possible paths forward. Their conversation was moderated by Editor David Mildenberg. The transcript was edited for brevity and clarity.
The discussion was sponsored by:
• North Carolina Bankers Association
• Pinnacle Financial Partners
• PNC
• Robeson Community College
• TowneBank North Carolina
WHAT TRENDS ARE SHAPING THE STATE’S FINANCIAL INDUSTRY?
CURRIE: North Carolina continues to be a fantastic growth story. Jobs, residents and opportunities are increasing statewide. Urban and rural regions are growing. That isn’t happening at the same level nationally as it is here. That will continue to be a tailwind for the state’s financial industry.
Current banking trends support efficiency. Consumers and businesses demand faster and easier ways to do business, such as payments, loan applications and deposit-account openings. But that pursuit has been at the expense of the personal relationship. Banking will always be a relationship business.
GWALTNEY: Uncertainty is a common theme in my conversations with bankers. There’s uncertainty about tariffs, changes in government agencies, interest rates and inflation. All dampen the economy, which affects banks through slower loan and deposit growth. When driving through heavy rain or thick fog, rather than continuing, it’s safer to pull over and wait for the weather to clear. Many businesses are choosing that approach. It’s less risky.
Changes underway in federal regulatory agencies are directly affecting the industry. It’s an understatement to say those changes are dramatic. Beyond the large-scale downsizing in staffing and changing leadership, many of the regulations issued during previous administrations have been withdrawn. We’re relieved and pleased with much of what we’re seeing. But we’re unsure where it all will land. That makes planning difficult.
ANDRESS: The industry loves the additional flexibility that comes with less regulatory burden, including stress tests and other requirements put in place, at least for the largest banks, after the Great Recession. Those regulations, maybe at some point, were a step too far. I’m not suggesting that there wasn’t a good reason for them, but maybe it’s time for more flexibility.
There’s a broader range of economic outcomes today than maybe ever, so we don’t know where we’re headed. But the additional regulations have put the entire banking industry in a good position. We can all feel good, whether or not we like some of those regulations.
ALLEN: This year began with a strong sense of optimism. People were expected to be active, deploying capital and engaging more. We started to see that, but people have become more cautious. There’s uncertainty about the long-term impacts to suppliers. Projects in place are moving forward. But there is a sense of pause, waiting 60 or 90 days for better clarity.
DAVIS: Bankers always take a cautious approach, slowing or waiting until there’s a better feel for which way things will settle. Uncertainty enhances risk. It’s important to understand your operating environment before doing anything too bold. Optimistic but cautious is the overriding theme that we hear from our customers and peers.
IS NORTH CAROLINA STILL A GREAT BANKING STATE?
ALLEN: Business news channel CNBC named North Carolina the second-best state for business in 2024 and first in 2022 and 2023. It was for good reason. It’s a strong banking state. Many banks are headquartered in Charlotte, which has been a key player in the industry for years.
ANDRESS: North Carolina is the first destination of many recent college graduates, whether they studied here or elsewhere. That is incredibly beneficial to our economic growth.
DAVIS: Beyond a strong foundation, other aspects of the state’s economy are positives for financial institutions. There’s a strong digital technology focus. The industry must continue investing in data analytics, cloud integration and other technology to be competitive. The university system is robust and focused on technology and business. As current economic uncertainties settle the industry can leverage and catapult to success from that foundation.
CURRIE: Banks and financial firms are catalysts for economic development. A strong banking presence makes any community economically stronger over time. North Carolina is home to some great homegrown financial institutions. It seems like every bank from the Northeast and Midwest has North Carolina in its strategic plan. That creates great opportunity for North Carolinians and keeps the job market vibrant.
HOW QUICKLY IS TECHNOLOGY CHANGING THE INDUSTRY?
ALLEN: It’s rapid. As new technology is introduced, banks follow, ensuring they all have the same bells and whistles. While technology is integral to what we do, we can’t completely embrace artificial intelligence. The human component is vital to our industry. We must complement technology with talented people who understand the industry and our clients.
DAVIS: Everybody gets enamored with new technology; I’m no exception. But banks are in the people business. I read that technology will never do some things, including engaging and empathizing with a human being. Technology does many things, especially data and quantitative efforts, better than us. So, we should focus on the qualitative aspects of life and relationships.
AI is a positive. Properly utilized, it forces us to do what we do best, which isn’t punching numbers into a spreadsheet. But it does take a person to interpret that data and discuss its implications with a customer. Our customers entrust us with a lot of important data. We need to use technology wisely. That’s the key.
ANDRESS: About five years ago, fintechs were supposedly going to replace the banking industry. Banks are as strong as ever. Fintech’s inventions have accelerated the industry’s growth. In some cases, banks have co-opted their technology. In other cases, acquisitions were made. It comes down to fitting together technology and people. The two go hand in hand. Our CEO says it’s not your father’s banking business anymore. The technology-oriented discussion at internal meetings today is very different than years ago.
WHAT ARE THE INDUSTRY’S WORKFORCE CHALLENGES? HOW ARE THEY BEING ADDRESSED?
ALLEN: The talent pipeline has shrunk. There are fewer bank-run training programs. Pinnacle Financial Partners doesn’t have one. We recruit bankers from other banks; that’s our model. I’d like universities to become more engaged, offering a banking career path.
NCBA under Peter’s leadership has been more involved with them. Graduates need analytical skills. That’s not beyond the typical finance and accounting degrees. But that knowledge needs to be applied to what we do and how we do it. Soft skills are important, but we can develop those better than the more technical and analytical skills.
Pinnacle’s Bankers in Schools program puts our bankers in middle and high schools, where they talk to students about careers in the industry. They’re more than loan transactions and financial management. It’s information technology, cybersecurity, administrative and more.
DAVIS: TowneBank recently began a training program, because there aren’t many available. It’s common practice to let somebody else train workers. Bankers move around. That’s the way it happens.
We’re still in our infancy, but we’re establishing relationships with major universities. We recruit at them. I’m scheduled to sit on an upcoming panel, interviewing and hiring recent graduates, who will enter a formal training program. The industry needs more of that.
PATE: Our accounting and finance program blends traditional fundamentals with modern technology. It has many fintech elements such as blockchain analytics and digital banking. Hands-on experience is emphasized through industry partnerships and internships. Simulation software creates practical scenarios for our students.
Our faculty maintains close working relationships with banking and financial professionals. They’re invited into our classrooms on a regular basis to discuss current trends, needs and opportunities in the industry. What they share shapes our curriculum. Everything is data driven and evidence based now, so we need to teach those skills and impart that way of thinking to students.
We’ve added a course, Data Analysis and Decision-making, to our accounting and finance degree and business administration degree. Students learn to collect and analyze data, visualize information, assess risk, make predictions and navigate decision-making processes effectively. We teach the theoretical part in the classroom, putting them in position to apply their knowledge in the job market. We’ve added a one year 12-hour certificate program called Bookkeeping and Data Management. It provides fundamental accounting skills focused on financial decision-making through data organization and analysis.
We added a work-based learning option to our curriculum. Students earn course credit. It’s seen statewide through the apprenticeship program and work-based learning programs in general. We’re giving students an option, allowing them to choose an apprenticeship or internship or a traditional classroom course for the credit they need.
A few years ago, we changed our Customer Service course to Customer Experience. That broadened its classroom work to include understanding complex customer requirements and handling stressful situations. We aligned our goal with what we’re doing in the classroom and the customer service skills that are required today.
The job market for accounting and finance students is promising. There’s strong demand for entry level accounting, bookkeeping, financial assistance and similar positions. Our local banks and credit unions consistently seek our graduates. Their technical knowledge and understanding of the local economic landscape are valued by small businesses. Remote work opportunities have opened doors to larger firms and jobs in urban centers.
CURRIE: The two banking jobs that are most in demand are bankers and technologists. The industry needs commercial and retail bankers with deep relationships in their communities and experts who can translate technology to business leaders.
HOW DO STATE POLICIES AFFECT THE INDUSTRY?
ALLEN: The real tell is the state’s successes. The state’s three largest metros — Charlotte, Raleigh and the Triad — rarely go a week or two without welcoming a business relocation or expansion. They’re figuring out how to be competitive at the state level to attract companies.
GWALTNEY: I recently spoke to a company that’s considering an expansion into a Tier 1 county — one of the state’s less economically advantaged counties. There are state incentives to make those moves more possible. That’s something the state has been smart about. It certainly can do more, but it does some things well.
North Carolina has an extraordinary business climate. It’s one of the top three fastest growing states in terms of population. Shortly after I moved here, the General Assembly was considering the Job Development Investment Grant program. NCBA typically stays in its lane, but under the leadership of Bob Hatley, its chair at the time, it weighed in on that. The math made sense, because there was accountability if the business didn’t create the promised number of jobs with the incentives it received. It has worked, and other states do it, too. It’s a game that we must play to be in play for businesses to come here and create jobs. That makes the state better.
WHAT ARE BANKING DESERTS? HOW DO THEY AFFECT THE INDUSTRY AND RESIDENTS?
GWALTNEY: The U.S. Census Bureau defines banking deserts as places that lack a bank branch. Their minimum size is determined by their location: 2-mile radius for urban communities, 5-mile radius for suburban communities and 10-mile radius for rural communities. North Carolina has a handful in sparsely populated regions such as the Great Dismal Swamp and Great Smoky and Blue Ridge mountains.
A bank branch needs a certain level of deposits and loan activity to be viable. Short of that, it can’t be staffed, insured or operated. No one wants to be the last bank to leave a community. A lot of angst is spent over that decision. And when that bank decides to leave, extraordinary things are done to serve those residents.
There are about 2,000 bank branches across North Carolina. About a quarter of them are in Tier 1 counties. A large number are in Tier 2 counties, then there are a number in Tier 3 counties, which are the most economically advantaged.
PATE: Rural North Carolina students bring a unique perspective. They’ve been shaped by the transition to an economy dominated by service industries, such as banking and finance, from agriculture and manufacturing. They demonstrate remarkable resourcefulness and practical financial literacy. They learned it out of necessity.
Our students value developing portable skills, which are applicable locally or within other markets. They recognize that financial expertise is particularly valuable in rural communities, which often have limited access to financial services. Robeson County is rural. While we acknowledge that there is a wage disparity between rural and urban workers, our students appreciate the lower cost of living and strong community connections that we have here. Many students want to contribute locally rather than automatically pursuing opportunities in large cities.
HOW IS THE CURRENT INTEREST RATE ENVIRONMENT AFFECTING THE INDUSTRY?
ALLEN: Interest-rate commentary for a bank can go many directions. Like other industries, we like stability. Banks tend to do better in lower interest-rate environments, though zero is tough. That’s typically where our clients become more active. Activity tends to decrease as rates rise. I’m not advocating where rates should be, but a lower environment is usually better for banks.
DAVIS: It’s better when rates change slowly rather than quickly. The industry is adaptable, just as the country and economy. But that adaption can take time. It’s hard to predict the ideal interest-rate environment. A bit lower than where it’s now is probably better. But everything is relative. When I had an 8.25% fixed rate on my first house, I thought I hung the moon. But my children say they could never buy a house at that rate.
ANDRESS: We started this conversation discussing the range of potential outcomes for the economy. The same could be said for today’s interest-rate environment. We could argue for wide interest-rate swings in either direction. That’s why it’s important for banks to be well capitalized and positioned for the foreseeable future.
GWALTNEY: The Fed Funds Rate was 4.3% on April 24. The average Fed Funds Rate is 4.6% over the past five decades. So, we’re in a good place, though recent history would say it’s too high.
CURRIE: The banking industry has faced three major economic crises in five years. We experienced the pandemic, the failure of Silicon Valley Bank and the bank liquidity crisis in 2023, and now the tariff tantrum. Banks are generally well capitalized, well reserved and have plenty of liquidity. An economic downturn is never fun, but I do feel we are prepared this time around. Market fluctuations are part of business, and as leaders, we have to prepare our company as well as we can for the inevitable tough times. Hopefully, we will avert a serious downturn this time around, but we are prepared if that is not the case.
WHAT ABOUT YOUR WORK BRINGS YOU JOY?
ALLEN: We change lives. It’s special when you can put someone in a home, help start a business, or help someone retire or accomplish goals. Our clients become friends. It’s rewarding to see that happen.
We work in the community. We teach financial literacy classes at schools and churches. We support nonprofits. Our workforce volunteers. We do it as a team, as a family. All of my colleagues do these things in their markets. The day-to-day is great, but that allows us to do the big things.
DAVIS: Banking has always played an integral part in the community. It’s great to help others achieve everything that they want to do. That’s rewarding.
ANDRESS: PNC’s Grow Up Great program focuses on early childhood education. If a child doesn’t get a good start, then the chances of catching up educationally and otherwise are long. When I was introduced to it 13 years ago, when I started working for PNC, I envisioned reading books to young children. We’ve done some of that, and it’s a joy. But it has been a privilege to see the work that supports these young children and their families. PNC supports the arts community. If you’re going to have a vibrant economy, then you need a strong arts community.
GWALTNEY: I have a front row seat to all of this. There are 100,000 bankers statewide. They’re great people doing great work. They’re doing large company lending and financial literacy. They were handing out piggy banks to children on National Teach Children to Save Day in April. They do many other things. It’s often said that if something good happens in a community, it usually starts at the local bank. It’s so true. ■