These days, the word “banking” usually conjures up an image of a large corporate entity with millions of dollars in assets spread out across the world.
But part of the fabric of a small community is its bank. Not only does the community bank help start and maintain local businesses but does so by focusing on the relationship between the lender and its customer.
It is that aspect that shone through for four Texas Tech University finance students who recently competed in the 2016 Community Bank Case Study Competition hosted by the Conference of State Bank Supervisors (CSBS).
The team of Chris Hresko, Jesse Kizewski, Eric Lamm and Sam Moore competed against 30 other teams from business schools across the country, conducting case studies to assess the impact of community banks' small business lending efforts as well as its management and financial performance.
“I learned a great deal about how community banks function,” Kizewski said. “We looked at the regulations banks are required to follow, the relationship that is established between lender and borrower, the massive differences in separating community banks versus larger institutions and the different strategies a bank can take in its lending efforts. I learned how to interview, contact and communicate with upper management of a company and how to go about retrieving additional details or information respectfully.”
The Texas Tech team formed after Hresko, Kizewski and Moore finished the Management of Financial Institutions class taught by Scott Hein, a professor and the Robert C. Brown chairman of finance in the Rawls College of Business. Hein served as the team's faculty adviser and encouraged the students to enter the competition, which is just in its second year of existence.
“I was most pleased with the hard work the four team members put into this project,” Hein said. “I am convinced they learned a great deal in the process, some of which I don't think they were fully able to convey given the time and space limitations of the competition.”
The Texas Tech team chose to analyze the practices and lending efforts of AIM Bank in Levelland, and by doing so was able to tap into the resources of two Rawls alumni in Jonathan Hill, president of the Lubbock branch, and AIM Bank officer Jeremy Ferrell. Kizewski said the group chose AIM Bank because they felt it had the greatest focus on small business lending efforts in comparison to other banks studied in class last fall.
After interviewing Hill and Ferrell about the bank's lending efforts, the team contacted three borrowers from varied backgrounds to get an idea of how the bank operates with its customers. Also, the group examined the bank's lending efforts by analyzing its Uniform Bank Performance Report, an analysis tool used to measure the impact that management and economic conditions have on a bank's balance sheet.
From that research, the team compiled a 25-page paper on the material and a 10-minute video discussing their findings as well as the bank's operations and their recommendations. Of the 23 teams that entered the competition, Texas Tech made it to the semifinals in its inaugural entry.
In the paper, the team found AIM bank's focus on providing resources and guidance in its loans to small business customers increases the likelihood of success but its conservative approach also ensures the bank is protected. The bank also gives personally tailored assistance to its customers that provides a strategy for success, and that success is known throughout the community.
“This competition gave us a chance to look more in-depth at community banks,” Moore said. “It's a rewarding experience to take what we've learned from our professors and see how actual banks incorporate it.
Each student on the team was awarded a $500 scholarship by the School of Banking for its effort and initiative. Hresko, Kizewski and Moore each graduated in May, while Lamm is set to graduate in spring 2017.
Hein credited the work the students did with Hill and Ferrell as a key part of it success in the competition.
“I'm sure our team learned much more because Jonathan and Jeremy remembered when they were at a similar stage in their education and, as a result, they were most willing to share with the team beyond what would normally be expected,” Hein said.
Kizewski, who plans to enter law school in the future, said not only did the competition give him a greater understanding and appreciation of community banking, but also provided him with valuable insight he will take with him into the workforce. Lamm said it piqued his interest in banking.
“Considering I did not have any true experiences within the banking industry before the competition, I am definitely more interested in the banking industry and have a greater desire to pursue this path after graduation and possibly look for part time positions within banking during the upcoming year before graduating,” Lamm said.
The personalized advice and relationship that community banks build with their customers is the key factor that sets them apart from larger banks, and that relationship is what Kizewski said had a big impact on him.
“Almost every community bank stresses relationship banking,” Kizewski said. “Sure, they may not have the technology the larger banks have, but they make up for it by being personally available. My view is community banks are extremely important to the local success of companies in their region as opposed to the success of national companies that have other sources of funding available to them.”