By GSBC President Michael Stevens

In 2021, GSBC launched its first-ever peer group initiative where new students of the Annual School Session were assigned to groups of up to 10 of their peers. The purpose of the peer groups was to ignite relationship building by facilitating connections virtually prior to the start of the session. We know relationship building is a tremendous value to banking schools in general and in our opinion, the sooner we get that started the better.

To provide an incentive for the group to continue to engage throughout the year, we made one of the three intersession projects a peer-group project. The group would identify a topic of interest, agree on an approach and divide the work. Agreement and consensus were not among the goals of the exercise—exploring, challenging, and debating were. The banking industry is full of shades of grey, and we have a lot to learn from one another by exploring that space.

One of our peer groups chose to explore the issue of inflation. There is no shortage of articles on the subject, and we have the added pain of experiencing it daily at the grocery store and gas station, but it is an entirely different approach to have nine community bankers discuss and write about how their banks may respond to it along with rising interest rates.

The group’s first task was to find someone in their organization who was in banking during the last period of high inflation. Anyone? Anyone at all? Two out of the nine banks had someone who was a banker at that time. In retrospect, it should not be a surprise since we are talking about the early 1980s.

The alarming finding was all the negative things in the economy that followed the period of high inflation: failing businesses due to higher interest rates, crisis in agriculture, oil industry bust and the savings and loans crisis. While inflation was not the only contributing factor to these events, the actions to address inflation are difficult and will likely have other consequences. This is going to take some time.

The main take-aways from this paper were:

  1. There is not much experience in the banking industry dealing with high inflation. Bankers should work together to navigate this environment.

  2. Bankers should look further down the road to the sectors of the economy which may experience distress even after inflation has been tamed.

There was quaint story of one banker who matched each new loan to a certificate of deposit and tracked the interest rates by hand to make sure the bank maintained its spread—Asset-Liability Management at its finest!

GSBC will repeat the peer group experience for new students in 2022. We continue to be encouraged and inspired by what bankers can learn and accomplish through forged connections.

Peer Group Acknowledgements:

Sarena Barker, Plumas Bank, California
Jeffery Britt, CFPB, North Carolina
Andrew Horn, Midwest Regional Bank, Missouri
Michael Kinsland, Flatirons Bank, Colorado
Michael McDonald, KansasLand Bank, Kansas
Todd McGowan, Midwest Heritage Bank, Iowa
Neil Rutter, First State Bank and Trust, Kansas
Crandall Streett, Signature Bank of Arkansas, Arkansas
Christie Turner, First State Bank, Arkansas