When I'm asked about the future of the community bank, I don't draw on my work as a banking teacher and writer. Rather I think of my father, Marcus Nadler, who said, "What you fear most never happens; something else does," and the tenet of my wife, Beverly, "There are three sides to every story-your side, my side, and the truth."
In this regard, the popular view today is that community banking is dying.
See, for example, the article in the latest TWA flight magazine by Jack Schreiber, president of First Banks Inc., the largest privately owned bank in the St. Louis area.
Mr. Schreiber says that over the next five years we will see 60 large banks controlling more than 80% of the nation's bank assets. The reasons: Technological advances have made it worthwhile to combine banks into larger units for efficiency, and legislation such as the Riegle-Neal Interstate Branching and Efficiency Act has knocked down barriers to interstate expansion.
As a result, Mr. Schreiber warns, we are seeing declines in service. Large banks are collecting deposits in one state and lending them in another, he said. And, he said, there's a sharp decline in the credit made available to small business, as the giant banks concentrate on major loans.
But here is where the advice of my father and my wife starts to take over. Community bankers know that these dire predictions of the death of local banking have not come true.
The public has rebelled against the giants who feel that an 800 number can replace a human platform officer and who play musical chairs with the few people that the depositor and borrower do see.
Many large banks snatch defeat from the jaws of victory with computer glitches and the unwillingness of top management to empower contact people to correct errors and handle reasonable requests quickly.
Here's an example:
A real estate agent who used a bank that had recently been bought out asked for a $400,000 bridge loan for four days for a client. The new management of the bank she had dealt with for decades offered a minimum quote of $4,000 for the loan.
She rejected the terms and moved her account.
So for now, it would appear that the community banks are winning. Those that compete against institutions that have been bought find that winning over accounts is pretty easy.
But will the pendulum swing again? Can community banks remain complacent? Look for the possibility of a sharp comeback by the giants, which could validate Mr. Schreiber's fears.
Money-center and superregional bank officers are not stupid. They are working day and night to cure their terrible service images and restore empowerment down the line.
As the public gets used to new names, they accept them and often think of them with the same closeness they had for the former local bank.
And in some cases the community bankers may wake up to find that there was method in the madness of the giant competitors.
We all know that 10% of depositors and borrowers provide 90% of a bank's profits. Maybe the policies of the giants are designed to push out the 90% and keep the 10%.
Complacency by one competitor, large or small, is a great motivator of change.
