I still remember nonhomogenized milk. When I was a youngster, our family would go to a small western Pennsylvania town in the summer to buy nonhomogenized milk from a local dairy. It was a welcome break from the homogenized stuff we'd get at the local grocery. Was it good! Rich in body, tasty, with wonderfully thick cream on top. Homogenized milk is safe, but not nearly as good. I wouldn't know where to go to get milk like that today.

Homogenized banking! Think about it. Credit cards, consumer loans, and mortgage loans are made according to formula-based lending practices. Fill out the application, run the numbers through a computer and out comes the decision - yes or no. And now the trend - in the form of credit-scoring programs - has gone even further to include commercial loans and small- business loans. This may be safe, but is it good? Are we forcing massive conformity to minimize human intervention, standardize underwriting criteria, and avoid risk?

The landscape is fraught with diversity, be it geography, climate, industry, or people. We are the world's largest and most prosperous heterogeneous nation, not a homogeneous nation. The richness of our heritage is based on diversity, learning from new blood, new ways, new traditions. What will be the impact of this financial plainness borne of industry compaction? Do we have to be financial clones to compete for credit?

The cycle of continued bank consolidation has not yet run its course. Time and again, those institutions which more quickly and successfully migrate their systems, technology, policies, and procedures to the most profitable end gain the upper hand. That is, they achieve higher rates of return than those left behind.

Yet, in the process, the communities in which the acquired banks are located are subjected to uprooting changes in the manner in which they are treated by their bankers. Yes, there are benefits indeed. The depth of resources is greater. There are more offices and a larger network of ATMs.

But what about individual needs and requirements? What about those who are not the square pegs that fit the square holes to find financial assistance? Large, regional institutions have the ability to mobilize capital rapidly. Consequently, if an industry or a community shows signs of weakness attributable to shifts in product demand or other economic factors, superregionals may redeploy their resources to other less risky and therefore more profitable industries or communities.

Community banks, by definition, are tied to the markets which they serve. They have neither the size nor the ability to mobilize resources in the manner of the superregionals. In the face of this economic reality, community banks would be well advised to build portfolios which are of a standard of quality that meets secondary market requirements; which is to say, community banks would do well to follow the example of the larger institutions and engage in formula-based lending practices.

All of which begs the question: If the community banker must adhere to the same standards of quality as the superregional banker, how can that community banker distinguish itself from the competition? The answer, unavoidably, is in service. The community banker must be prepared to engage in labor-intensive product delivery. The customer who presents a nonconforming credit application must be professionally taught how to conduct his or her personal or business life in a manner that meets universal underwriting standards. For that service - the guiding of the customer through the process - the community banker should expect and demand a higher rate of return.

Does this process force a homogenization of our diverse cultures and economic activities? Yes! The process tends to exacerbate the division between the "haves" and the "have nots." It creates a world of exclusiveness. To their credit, many superregional institutions have created special departments or subsidiaries to deal specifically with communities that represent nonconforming, higher-risk investments. But how far are they willing to go?

Does homogenization contribute to a maximization of our capacity to grow and prosper as a nation? Who knows? Is it good? Probably not! Is it safe? You bet! Should I give up looking for nonhomogenized milk? No way!

Mr. Hotchkiss has been the president of six community banks in the last eight years. He is now president of a bank being organized in Idaho.

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