Unlocking the power of customer experience, compliance and innovation

TowneBank and SAS create a connected, cloud-based ecosystem for regulatory compliance

Digitization, economic volatility, globalization, increasing regulations, high interest rates and instability in recent years have created a uniquely complicated banking landscape. Staying ahead requires not only astute financial management but also resilience and innovation. TowneBank exemplifies this combination.

Established in 1999, TowneBank has grown from a local bank to a regional powerhouse with assets totaling $17 billion. Through strategic acquisitions and a commitment to community banking, TowneBank has expanded its footprint across Virginia and North Carolina, becoming a trusted financial partner for businesses and individuals alike.

The bank first turned to SAS when it was preparing to implement the new current expected credit losses (CECL) reporting standard – a regulation aimed at helping banks estimate losses in their loan and securities portfolios.

Complying with CECL regulations

CECL regulations aim to ensure banks maintain adequate reserves by protecting against the underestimation of credit losses. It also requires more transparent reporting on credit data and estimation methods. Ultimately, CECL regulations aim to improve the stability of the banking system.

Implementing these regulations requires sophisticated data systems. It must be capable of managing historical loan performance data, external economic forecasting data and complex statistical modeling to estimate potential credit loss. In addition to the technology challenges, personnel at TowneBank needed to quickly wrap their minds around the new regulation to be able to appropriately manage the reporting. Finally, the bank needed to be able to verify the quality and integrity of its data in its CECL calculations to ensure its reports were fair and accurate.

The consequences for failing to meet CECL requirements are severe. Banks can be hit with regulatory sanctions, legal liability, financial loss and reputational damage. So for TowneBank, navigating this new regulatory requirement with precision and expertise was essential.

“One of the biggest challenges with CECL is that it’s a brand-new regulation, so there wasn’t an industry standard, and there wasn’t a lot of guidance on how to implement it,” explains Erich Reuter, Executive Vice President of Quantitative Analytics and Enterprise Stress Testing for Towne Bank. “For us, it was important to partner with somebody in the industry who was very familiar with the challenges that we’d be faced with as a bank, the data needs, the analytics needs, modeling efforts and how to learn through an analytical framework.”

Connected, protected and trustworthy data

Successfully implementing CECL required TowneBank to be able to access data easily, quickly and securely. The data also needed to be integrated from multiple departments, like finance and risk, cohesively.

To address these challenges, TowneBank decided to implement its solutions in the cloud.

“We went with SAS in the cloud environment – as a younger organization that’s growing and building out its technology framework – because we’re able to leverage SAS’ many decades of experience in the banking sector and the targeted solutions offered,” Reuter says. “We have 15 years’ worth of data sitting in our SAS warehouse. With the cloud, we’ve been able to quickly answer questions throughout the organization, whether they’re finance, accounting, risk questions, marketing questions or data questions.”

Storing data in the cloud also offers increased security.

“These resources have allowed us to off-source that information to the SAS environment and not have it on site, which minimizes risk,” Reuter says. “There’s always the risk of fraud or hacking events in the banking industry, so having this information stored off-site in a very secure environment has been a positive for us.”

Another priority for TowneBank is ensuring the data it reports is fair, accurate and unbiased. TowneBank wanted software that provided visibility into the mechanics of its data, modeling and reporting.

“One thing that drew us to SAS is that it’s an open solution – we’re able to dive into the data because the solution is not a black box,” Reuter remarks. “A phrase we commonly say in the industry is ‘trust but verify,’ and with the CECL solution, we’re able to pull data out, verify the information and validate that the information coming out of the solution is trustworthy, which is key for us.”

Empowering the team with outside expertise

In addition to its technical needs, TowneBank prioritized upskilling and equipping its staff by partnering with SAS® Professional Services® catalog.

“SAS came in with its expertise and industry knowledge to help us build out a framework that we did not necessarily have the knowledge or expertise to build ourselves,” Reuter says. “We’re able to leverage the SAS relationship and SAS vendor and contractor relationships they work with to build out this framework. That’s something I don’t think that we would’ve been able to do as easily or on time without those professional services that were provided by SAS.”

Consulting with SAS allowed the team to get up to speed on the regulatory requirements as quickly as possible by allowing them to gain not only software insights but also insights into industry best practices.

“What we liked about SAS is that it came from a background of working with larger organizations, so the insight and that knowledge from those relationships can be filtered down to an organization our size,” Reuter remarks. “We’re considered a midsize bank, so the fact that SAS has worked for many years with the larger banks, we were able to gain all that expertise and apply it to TowneBank. One of the great benefits of SAS is that we know that we’ll never be able to outgrow SAS.”

Overall, this partnership has allowed TowneBank to maximize its resources. “As a growing organization, it’s very important for us to get as much out of a solution and personnel that we have as possible,” Reuter says. “We have limited resources, so we want to make sure we have a solution provider that’s able to meet needs that maybe we can’t meet ourselves, and that’s what SAS provides us. I run a pretty small team, but that’s all that we need because we can leverage the resources at SAS to act as a much larger department without hiring those people on staff.”

Meeting customer needs with data

After successfully implementing an analytical framework for CECL compliance, TowneBank began exploring other innovative ways to use its data.

“Over the last few years, TowneBank has performed very well in the customer surveys … and I think a big part of that is analytics helping us understand our customers’ needs and how we can best help them grow both personally and in their businesses,” Reuter says.

TowneBank has been able to use its connected data ecosystem to analyze customer behavior across the brand. By creating a connected customer experience with data, the bank can better anticipate customers’ needs.

“Now when a customer comes in, we’re not simply looking at a single point of contact; instead, we’re looking at the whole story,” Reuter continues. “We’re also able to look at them in the context of thousands of other customers that we have, so we can try to anticipate their needs and approach them with potential solutions that maybe they haven’t even thought of asking about yet.”

Staying ahead of the curve

Moving forward, TowneBank plans to expand its data and analytics ecosystem to continue to mitigate risk and improve the customer experience.

“The thing that I am most excited about with the partnership with SAS is that we have been able to tell a very compelling story to management, our shareholders and our customers,” Reuter says. “With data, we can talk about why it’s important to bank with Towne, how we can benefit our customers, and what we can do to help them grow and meet their financial needs. And one of the benefits of having SAS is that's going to allow us to meet future needs – regulatory and those of our customers – with confidence.”

This forward-looking approach ensures that the bank remains resilient and responsive as it continues to evolve in the dynamic banking sector.

Reuter concludes, “Partnering with SAS has provided us the opportunity to implement the CECL standard, stay ahead of the curve and know that whatever comes ahead of us as we continue to grow in this industry, SAS has already been there.”