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"I think it was an opportunity to strengthen those relationships." "We walked them through it because we knew we were going to convert during a payroll week," Mills said. Many of those customers were contacted directly leading up to the conversion, specifically the treasury management customers. The conversion of the commercial customers has been mostly smooth.
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Most customers have figured out how to log in to the new system and update their mobile app. Late last week, Mills said, much of the frenzy had calmed down. His feelings are common among leaders of banks with more than about $3 billion in assets essentially, they assume they will begin to be treated like a $10 billion-asset bank long before they reach that size. The bank's balance sheet is well below the threshold and it lacks a strong interest in M&A, but Mills said he wants to be prepared. The company also wanted a system that it could use should it decide to breach the $10 billion-asset threshold, where several new regulations kick in, including additional oversight and stress testing. That should help control costs, too, Mills said. Also, the new contract calls for FIS to charge the bank by accounts, rather than by assets. Not including the cost of the conversion, the bank expects the processing costs to drop by as much as half.
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It is likely a driver of the bank's efficiency ratio: 67.86% at the end of the first quarter, about five percentage points higher than for banks nationwide with $1 billion to $10 billion in assets, according to data from the FDIC. Mills said the privately held bank spent $8.6 million on processing last year. The cost of operating the old system was a major driver of the decision to convert.
"Commercial loans are more technical and require a more sophisticated system," Mills said. Ultimately, the previous system was inadequate and could have put the bank at risk of running afoul with compliance. For instance, the bank has had to amend - though not restate, an important distinction, Mills said - a few of its call reports filed with Federal Deposit Insurance Corp.
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The patchwork of systems and software was prone to human error. "We ended up with a processing system that was somewhat of a Frankenstein project," Mills said. Over the years, the company has made small upgrades and bought ancillary third-party software to keep up with its asset growth and diversification into more commercial products. The new system streamlines the process for getting customers enrolled in online banking, gives the bank the ability to provide electronic notices and statements on loan accounts, offers the ability to send financial files to treasury customers directly, consolidates mortgage loan servicing and enhances automated clearing house payment origination capabilities and reporting. Other core solutions were not as "tightly integrated with online banking" particularly with treasury management, Mills said. The bank chose a more contemporary offering from FIS, the Integrated Banking Services system. "Since 1986, we've been working with a group of people and they have supported us very well so it made sense to go from one FIS-managed solution to another as long as the product met our needs," Mills said. Mills said the company shopped around, but ultimately decided to stick with the same vendor, FIS, partly because of Community Trust's history with the firm. The bank had been using the Kirchman Bankway system since 1986, following the merger of Bank of Bernice and Bank of Choudrant (which had combined assets of $38 million). The conversion was two years in the making. Meanwhile, the bank has been expanding at a fast clip its assets have doubled since the end of 2010 mostly through organic growth and as a bank gets bigger so will its regulators' expectations about how it manages risk. Its old system was outdated and the patches and middleware needed to make it functional were costly. "No matter how much the bank tries to prepare and plan for contingencies like these, things will inevitably go sideways and there will be unforeseen problems that the bank will need to address," said Jeffry Pilcher, publisher of The Financial Brand, a marketing website for financial institutions.īut Community Trust, unlike most banks, had a strong impetus to make a change. Core conversions are painful which is a big part of why they're so rare. "In hindsight, maybe we didn't communicate the way we needed to."īut Mills may be a little too hard on himself. "We just felt we did a very good job in preparing our customers there were several letters talking about the conversion with specific instructions," he said. "Our social media and marketing teams are trolling constantly," Mills said. Now, the bank has been busy trying to track negative comments on social media and looking for ways to turn the negative experiences into positive ones by helping customers get up and running on the new site and on their phones.
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