Since the Gramm-Leach-Bliley Act was signed into law Nov. 12, 1999, banks and consumers have taken a mixed approach to the one-stop financial center concept.
“It’s been a slow process, but some banks have been really aggressive, depending on their markets,” said McKinley “Mac” Deaver, executive director of the Mississippi Bankers Association. “The enthusiasm for Gramm-Leach-Bliley was to level the playing field and allow our banks the opportunity to compete with those who were competing with us.”
In 1999, Jackson-based Trustmark Corp. made internal changes to pave the way for growth in non-traditional banking services — investments, insurance and mortgage — including changing its mission statement and corporate initiatives.
Trustmark scooped up The Bottrell Agency, one of the most recognized commercial insurance agencies in its lines — commercial, property and casualty and surety — in the U.S. Since then, its gross insurance revenues have approached $70 million a year. Last year, net revenues from insurance operations topped $10 million.
Trustmark broadened its investment offerings to three major areas — a traditional trust company; a brokerage firm, Trustmark Financial Services, Inc.; and a mutual fund company called Performance Funds, with seven funds in excess of $1.1 billion. Last year, revenues from investment operations were approximately $21 million.
The bank’s mortgage services department has grown to service more than 50,000 home mortgages for $4 billion for homeowners in Mississippi, Alabama, Tennessee and Louisiana. Last year, the division originated $1.3 billion in home mortgages and generated more than $45 million in revenue.
Trustmark’s earnings last year were $111 million, with a return on equity of 16.98%.
“In the last three or four years, our return on equity has grown significantly, and we attribute that to growth in the bank and in non-traditional banking services,” said Richard Hickson, president and CEO of Trustmark Corp.
Recently, Trustmark changed its long-standing motto, “We Earn Your Trust Every Day,” to “People You Trust. Advice That Works.”
“It was a major decision for us to change our motto because research showed us it was the most recognizable motto in the state,” Hickson said. “But we thought it was important to convey to Mississippians that we want to be a premiere financial services company in our marketplace.”
Brandon-based Community Bancshares of Mississippi Inc. recently partnered with Ridgeland-based Pinnacle Trust for its first major foray into money management and trust services. Through the affiliation, the bank is mulling total insurance services, initially excluding property and casualty, and is considering offering full-scale brokerage services later on.
“The reason we haven’t done more is that we’ve been so busy building our base bank,” said Freddie Bagley, president of Community Bank. “We’ve gone from $192 million in 1992 to over $1 billion in assets today. Since 1978, our compounded growth has been 15% and our earnings growth has been 16% compounded. We’ve been concentrating on core banking and want to be really good at one thing instead of mediocre at several.”
Bagley said the jury’s still out on intermingling insurance and banking.
“Everybody’s jumping on the bandwagon, but you don’t see too many profitable endeavors,” he said. “Citibank was probably one of the best when they joined hands with Traveler’s but not long ago, they sold off the property and casualty division because it wasn’t working. It would seem to be a natural thing — getting car insurance the same place you get a car loan — but it’s not working like that yet.”
Danny Moseley, CIC, president of the Independent Insurance Agents of Mississippi, said about one-fourth of the association’s member agencies are now owned by banks, yet they typically work autonomously from the banks.
“They’re still doing business just as they’ve always done,” he said.
Moseley said the association lobbied against the Gramm-Leach-Bliley Act because of concerns that independent agents’ business might dwindle with increased competition from banks and the Internet.
“Frankly, those concerns haven’t been realized,” he said. “The average independent agent is doing just as much business and no longer consider banks a huge threat. Customers also haven’t been flocking to buy insurance over the Internet. I don’t see that they’re ready to buy insurance where they bank. They are accustomed to doing business as they have in the past — buying it from a local agent.”
Banks have become like large department stores, offering a smorgasbord of goods or services, Moseley said.
“People can go into a small mom-and-pop organization and get more service on a product,” he said. “It’s hard for a large bank to be all things to all people.”
Nancy L. Anderson, CFA, president of New Perspectives Inc. in Clinton, said some banks typically have a person at a desk at almost every branch to handle investments.
“I’m concerned about how much education, qualification and experience they have,” she said. “Customers who walk into that branch think the person at that desk is an investment professional. Maybe they are. Maybe they aren’t. I don’t see how they can afford to put in a truly qualified person at each branch. If it’s a separate investment location with qualified people, then that’s fine.”
Anderson said she was also concerned that investment department personnel might recommend their own bank’s funds, even though that fund might have a poor record.
“They should be looking at what’s out there that’s best for the customer,” she said.
Some banks would like to add real estate to the list of non-traditional financial service offerings, said Deaver.
“The real estate issue is being debated now in Congress,” he said. “Dozens of banks are not looking to get into the real estate business, but by the same token, plenty of real estate companies such as Century 21 and Coldwell Banker are getting into the mortgage business. We would like the opportunity to compete on a level playing field.”
Bagley said he understands concerns that realtors might have if banks were allowed into the real estate arena.
“But why would you be scared of competition? Ever heard of State Farm Bank? They’re in the banking business, and our challenge is to provide superior service and products so our customers will bank with us. Instead of fearing changes, companies simply need to take care of customers,” he said.
Contact MBJ contributing writer Lynne Wilbanks Jeter at firstname.lastname@example.org</a.