Community banks are proceeding with caution as they confront some of the industry's biggest challenges: expanded use of social media and mobile banking and changing regulation.

Executives who attended this year's Independent Community Bankers of America's national conference say they realize social media is here to stay and that they must adapt to reach more customers. Several attendees said they were heading back to their banks intent on bolstering their use of nontraditional outlets.

Other bankers expressed an interest in offering new products to offset soft loan demand. Most executives and directors left with lingering concerns about new regulations that were tempered somewhat by hope that regulators were listening to them.

"Social media is the wave of the future," Norman Wagstaff Jr., a director at Citizens Community Bank in South Hill, Va., said. "Teenagers almost only communicate through social media. They don't even make calls anymore."

The $163 million-asset Citizens, which launched mobile banking earlier this month, is starting to "tackle all aspects of social media that it can," said Wagstaff, who has been a director since 2007.

Executives at Security Bank of the Ozarks in Eminence, Mo., are looking at mobile banking as a way to generate fees since the "old way to make money is gone," said Brad Williams, the $47 million-asset bank's chairman and president. He said Security Bank once thrived on overdraft fees and providing credit life insurance but new regulation has reduced their profitability.

Security Bank could start requiring minimum account balances and cross sell more services to clients, though management has not made any decisions on those ideas, Williams said.

After attending the ICBA conference, Mary Yates, a director at First American Bank, realized more could be done with mobile banking and social media. The $838 million-asset bank texts clients when an account statement is ready, and Yates said she thinks First American will explore ways to add notifications about possible account fraud.

"Mobile banking and social media won't go away," Yates said. "You have to protect the privacy of your customers. We're embracing this as a new way to market the bank but we are also cautious."

An abundance of caution was evident with Peter Bochnovich, chief lending officer at Dime Bank in Honesdale, Pa., who was on a "fact-finding mission" while visiting with the technology vendors. Bochnovich said he was searching for information on services for social media, which is new to Dime, and back-office products for lending.

"Our social media is in its infancy," Bochnovich said. "You have to be careful so we're going slowly. You have to walk before you can run."

Other bankers, including Matt Gambs, chief executive of Diamond Bank in Schaumburg, Ill., wanted to learn more about SBA loans. Diamond has "made mistakes in the past," so Gambs said he wanted to talk to SBA lenders about compliance and risk. The $175 million-asset bank also recently discussed SBA lending with its regulator, he said.

"In our market, we lost the war for retail," said Gambs, whose bank focuses on commercial lending in the Chicago suburbs. Gambs said he had realized that Diamond could not compete with other banks' low loan rates. Instead, it is relying on superior service.

"If a potential customer asks about price in the first few minutes, then I know they are probably not going with me," Gambs said. "There's always someone willing to do it cheaper."

Several community bankers said they were considering how to improve their service so they could become more competitive. Community Bank of Bergen County is taking a back-to-basics approach, said Peter Michelotti, president and chief executive of the Rochelle Park, N.J., bank.

"It's knowing your customer, being out in the community and being involved," Michelotti said. "You have to compete, but remember it is a service. You have to put your best foot forward."

Citizens Community in Virginia also wants to open more customer-friendly and cost-efficient branches, Wagstaff said. The bank is paying attention to instances where banks incorporate touches such as coffee bars and conference centers. "These are trying times and we need to do expansion in an economic way," he said.

Kalamazoo County State Bank in Michigan is "trying to establish a higher lending relationship with customers," said Thorne Angell, the bank's chairman.

"We need to build back our portfolios," Angell added. "We've been so hammered by regulations that it has been hard to build."

Numerous attendees expressed concern about looming regulatory changes. Bankers would rather find out specifics rather than cope with uncertainty, Yates said.

"We're just waiting and seeing what the [Consumer Financial Protection Bureau] is going to do and see how it might affect our bank," Yates said. "It's better to be aware even if it doesn't affect us in the end."

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