2024 Journal of Community Bank Case Studies

FIRST PLACE: Commonwealth University of Pennsylvania

Part III: Social Media Part III.1: Social Media’s Impact on the Bank Failures In the dynamic environment we operate in today, technology and social platforms have become essential for banks for communication, advertising, and competitive purposes. Customers can now deposit and withdraw funds remotely and communicate concerns incredibly quickly. Risk management relative to social media communication has become more important than ever. Considering the fall of SVB, Signature, and First Republic, and the short duration between each of the bank failures, it is important to examine how social platforms contributed to these events. As mentioned in Part II.1, these banks failed due to insufficient liquidity. This issue was fueled by social media and compounded by the rapid

geographic areas with demographics different from those it has historically encountered. Due to this expansion, the bank has had to deal with much more severe Community Reinvestment Act and Fair Lending regulatory requirements. Recent years have been spent investing considerable time, energy, and resources into bolstering Community Reinvestment Act and Fair Lending efforts to reach demographics that the bank has never had to address before. Regarding bank examinations, FCCB starts preparing for the next exam when it receives the suggested recommendations report from the previous exam. According to Black, management starts by addressing the received recommendations and preparing responses to regulators for each item, even when responses are not required. Jones adds that FCCB heavily relies on its robust internal controls, including routine internal audits and other regular testing, which he says are “all part of our compliance management system that we have in place to address the regulations as well as other parts of the operations.” Looking ahead, Black expects examiners to scrutinize the bank’s CRE portfolio in the upcoming exams due to its recent growth. To prepare for this, FCCB has developed a new CRE policy and scorecard and is stress testing its CRE portfolio to ensure exam readiness. Jones also anticipates that, due to the recent bank closures, examiners will likely delve deeper into specific areas of operations than they usually would. Such areas include liquidity, capital levels, and internal processes. Despite all being areas FCCB has historically excelled in, regulators will still likely scrutinize each for any possible signs of weakness due to the recent bank closures.

Due to its growth over the last decade, FCCB is now operating in many new geographic areas with demographics different from those it has historically encountered.

19