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Banking Outlook: Doug Neff

Commerce Bancshares Inc. Springfield Region Chairman and CEO

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With more than 27 years of banking experience, all at Commerce Bank, Doug Neff has risen to a top leadership role and is passionate about the industry. He remains bullish on banking’s continued financial growth even as consolidation of branches persists.

2019 Projection: An increasing interest rate environment will continue, as the economy remains fairly strong, and banks should continue to perform well from an income standpoint.

SBJ: What is the climate of the banking industry?
Neff: It’s strong right now. The economy is good, and businesses are doing well. With recent changes in tax rates and tax law, there’s just more cash available. I think you’re seeing some additional investment that you might not have seen otherwise. There’s a lot of activity as it relates to capital purchases and mergers and acquisitions in our client base.
 
SBJ: Is the consistent development of new technology options for customers on phones and computers making branches less of a priority?
Neff: You continue to see consolidation in the delivery model for banks. There’s been about a 4-5 percent decline in physical locations across the industry. The delivery model is changing a lot because of technology. The bank is becoming more digital and the location means less and less. And our customers in the industry are utilizing the physical branch fewer times and using digital attachments to the bank more and more. Some organizations see that as a challenge. I think it’s really an opportunity. Technology is expensive and there will be some mistakes made along the way, but I think you have to be able to play in that game to remain relevant in the industry.

SBJ: Is the competition for talent just as intense now as it was at the beginning of the year?
Neff: Yes, but I don’t think that’s unique to the banking industry. I think it’s just the United States in general. I’m the chair of the [Springfield Area] Chamber [of Commerce] this year, and from just a workforce development standpoint, access to talent is a challenge everywhere. As an industry, we didn’t do a very good job in the last couple of decades developing new talent. We’ve all had to double down on developing our own talent and then try to find them in unique places outside. The whole migration of baby boomers into retirement is a challenge for our industry.
 
SBJ: What are the next trends?
Neff: Continued consolidation. The costs of our business – regulatory, technology, all of those – aren’t getting any lower. Over time, that kind of economic environment kind of causes consolidation. I got into the industry more than 20 years ago, and there were 15,000 banks in the country. And now we’re south of 5,800 banks in the country. There’s just no doubt that continues going into the future. Some of these funding issues will cause that.

Another trend is the continued investment in technology. The banking industry has evolved a lot in the last five years in the way we approach our customers and how our customers get to us. We’re going to continue to invest in people delivery, but I think our industry has got to continue to invest in technology.
 
SBJ: Federal Deposit Insurance Corp.-insured commercial banks and savings institutions reported third-quarter 2018 earnings up by $14 billion, or 29 percent, from a year ago. How would you characterize the industry’s path in 2019?
Neff: The banking industry is very stable right now. It’s very solid. Earnings are strong in the industry; bank balance sheets are very strong because of the credit cycle we’re in. I really think that continues on into 2019. One of the great opportunities is when the industry is strong and it’s building capital the way that it is, it provides opportunities for the banks to do other things through growth or acquisitions.

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