#331. Why Community Banks are So Important

Posted on | The Agurban
Why Community Banks are So Important
Our research on small towns and subsequent tours of almost 400 towns in 44 states showed the importance of community banks.  And, that importance is growing!

In fact, I’m so convinced of their importance that I’ve developed a special talk on the subject that I will be rolling out in June at the Annual Investment Conference in Destin, Florida, hosted by The First National Bankers Bankshares, Inc.  Our Agurbans over the next several weeks are going to be focused upon our new research and stories of why community banks are so important to the lifeblood of a community.
The initial research for BoomtownUSA:  The 7 ½ Keys to Big Success in Small Towns showed that strong leadership in small towns generally came from three broad areas of the community:  Banks, media, and retailers.  As we’ve seen consolidation taking place in each of these areas, my concern and question for the future of small towns is:  Where are your leaders going to come from in the future?
Even more important than leadership, is the willingness of these community banks to help back new businesses starting up in the community.  With virtually all of the new jobs in the USA created by start-ups, having a ready source of financing for those new businesses is critical to long term economic development.   
Fortunately, there are still over 7,500 community banks in this country, but that number is down from 14,000 only twenty years ago.  And, these banks have been hit hard by both the growth of the mega banks and by the incredibly complicated myriad of regulations, especially the passage of the Dodd-Frank Bill. 
Referring to this bill, one local banker sarcastically told me, “Let’s see….take away fee income, heap on new and costly regulations, tell us who we have to hire, who we can loan to under what terms and underwriting standards, what products we can offer, and what we get to charge for said products.  That sounds like a real recipe for success to me!”

Since 2007, the three largest banks in this country (Bank of America, J P Morgan Chase, and Wells Fargo) have grown their share of the nation’s banking assets from 21% to over 35%.  Those three banks today, have more assets than ALL of the community banks combined, with under $10 billion in assets.  And, they continue to grow, gobbling up market share from those community banks, with built in advantages (the playing field is tilted in their favor) because they have been judged “too big to fail” by the regulators in DC.

Next week’s Agurban:  Examples of community banks that have transformed their towns.