"Birth, Growth and Life or Death of Newly Chartered Banks," a recent report from the Federal Reserve Bank of Chicago, includes a fascinating discussion on what helps start-up banks prosper after their initial capital infusions have been drawn down by the normal costs of building a business.

This countervailing force, which even the usually cautious Fed called "impressive," is the speed with which new banks generate fee income.

"The typical de novo bank outstrips the average established bank in fee-based revenues after only three years and outperforms three-quarters of the older banks in this area after about nine years," the report says.

Building fee-based, noncredit income and curbing noncredit expenses are good ways for community banks to build profitability.

Banks have traditionally survived by borrowing short and lending long. But this poses serious risks in a world of volatile interest rates. So accepting spread management - and counting on augmented noncredit income as well as reduced noncredit expenses to widen this spread - has become the key to profitability unencumbered by heavy risk.

Why are new banks so good at generating fees? The Chicago Fed sums it up this way:

"By virtue of their newness, de novo banks may be less constrained by the inertia of existing consumer relationships and existing employee habits. Therefore they may be better able to impose fees on retail customers or to enter into less traditional fee-generating lines of business."

True, the report notes, most new banks are formed in communities where strong business conditions may be conducive to selling fee-based financial services. But that does not entirely explain the start-ups' edge.

More important, the report stresses, are the factors that inhibit established banks from raking in fees.

Problem 1: The bank may have spoiled its customers by charging low fees or none. That makes it hard to add fees or raise them.

Problem 2: Bank employees often ingratiate themselves with customers by waiving or reducing fees.

If your policy is to charge fees, your employees must carry out that policy.

Some banks post weekly lists of employees who have waived bank fees or otherwise put ingratiating themselves to customers ahead of their employer's bottom line. Those whose names appear on the list several weeks in a row can expect serious consequences.

Of course, training customers is more difficult. New fees can be hazardous to customer relationships. Indeed, they are a major reason that customers leave community banks that have been acquired.

But when all is said and done, customers still want and need the personal service a community bank provides, and that should mean more to them than the fact that the fee schedule has been changed.

Service is the strength of the community bank, its reason for existing. Service is the reason that fees can be imposed when necessary.

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