Community banks must not be so concerned with Wall Street that they snub Main Street, analyst Nancy A. Bush said recently.

Speaking Tuesday at the annual meeting of the New York Bankers Association, Ms. Bush said she is troubled by community banks that try to mimic big banks' balance sheets.

"I am worried bankers are making destructive short-term decisions because of concerns from Wall Street," she said. Before you make a move to boost your fee income, "think about the fees you are charging."

Ms. Bush, senior vice president of Ryan, Beck & Co., cited as an example charging customers $1 for using a generic deposit slip instead of one with the customer's name printed on it.

"Those sorts of fees just alienate customers," she said. "Consider whether that fee dollar you get is going to cause you a lost customer."

Still, Ms. Bush said she sees a bright future for community banks.

She said that, contrary to the opinions expressed by executives at some large banks, small institutions can compete. The key is to provide better service.

"It is time for the banking industry to return to some time-honored truisms, such as that customer service and customer trust are important avenues to success," she said. "And community banks have a clear advantage forging relationships with customers."

Her remarks disputed statements made in recent months by some big-bank chief executives.

Last December, for example, First Union Corp. chairman Edward E. Crutchfield told a Bank Administration Institute conference that traditional banks are a "declining, dying, going-away business."

In January U.S. Bancorp president John F. Grundhofer predicted the number of small banks in California would dwindle as big banks steal their business.

Big-bank executives "have a vested interest in saying, 'If you are not big, you are not real,'" Ms. Bush said. "But it is not true. It is something that investment bankers and some CEOs have foisted on an unsuspecting public."

Not surprisingly, community bankers present at the conference agreed they can succeed against larger foes.

"We can fight large banks by focusing in on the people and places we know best," said George E. Dunkel, president of $40 million-asset Community Bank of Sullivan County, Monticello, N.Y.

"There are still plenty of people that want a banker who knows them by their first name."

The merger wave that has taken out many of their peers does not mean all community banks are doomed to follow, bankers insisted. If anything, it has helped them compete.

"The consolidation has made us more distinctive," said James J. Byrnes, president and CEO of Tompkins County Trust Co., Ithaca, N.Y. "In our case, we are the only local bank left serving our community now."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.