Observers who fear for the future of the community bank should visit my class at Rutgers University when I bring in guests who tell my PhD and MBA students how the "real world" works.

Recently, one of my old friends and a former student, Gerry Lipkin, chief executive officer of the $4.5 billion Valley National Bank of New Jersey, was there to talk about what makes the medium-size bank thrive.

A student who formerly worked for one of Valley's competitors came up to me after class and said: "I always wondered why we kept dropping in earnings while Valley rose. Now I know."

The answer, at least from my viewpoint - hard work, an open environment, and thinking about what the customers really want.

Gerry told the class: "I work a half-day - 7 a.m. to 7 p.m. ... something that today's MBA student often finds shocking in a world where few want to enter a training program unless they call it 'pre-presidential orientation.'"

His open-door policy and long hours seem to pay off, as when recently he got a call from a teller at 7:01 a.m. saying that her branch's ATM machine had been broken for over a week.

"That's why I answer my own phone at any time I'm in the office - I learn what's going on and can do something about problems."

"How do you survive against the giants you compete with?" Gerry asked.

"I see customers who want to see me within 24 hours, weekends included.

"If someone wants a mortgage for his son, I invite both of them to my office, and I take them to the mortgage officer with a request that they get royal treatment. It takes two minutes, but it does make friends that the big banks never can make that way."

Other ideas Gerry gave our class that might interest community bankers:

"I like to have a board whose members own a lot of our stock. This makes them care more about where we are going. And I want board members who are not on a lot of other boards, so they can concentrate on the responsibility they have to the Valley.

"Since every bank has to charge about the same for credit and services, we have to concentrate on cost control for our profitability."

What does this involve? Gerry provided some examples:

*"Property taxes on branches - we appeal on every one. The lawyers who do this work are paid on a contingent basis based on what they save us, so it costs nothing. We usually save something on almost every building we have by doing this."

*"We make arrangements with a major newspaper to put our ads in on a standby basis. They run when they have space to fill at the last minute. This policy, plus only buying space in the portion of the paper that comes from New York to our readers in New Jersey, saves us a fortune on ad costs and gives us the same clout."

*"We give money to about 600 charities and turn down another 600 - based on where we feel our dollars will do the most good. But we do expect that the charities we support will use our bank for their business."

This last example reminded me of the bank that used to pay vendors for major items, such as office equipment, not with a check but by placing the payment directly in a deposit account in the bank - under the assumption that if the bank was the vendor's customer and gave them business, they could also give the bank business.

Other thoughts from Gerry:

*"Spending money on the Internet today is not worthwhile, as it will be a good number of years before as much as 5% of depositors will want to use it. By that time the development costs would have been covered by others."

*"Mutual funds just rob the bank of cheap long-term deposits - including passbook deposits, which many customers still love - for a one-time commission. And the bank is blamed if something goes wrong, no matter the protestation that this is a separate investment vehicle from a bank deposit."

Valley's latest developments include a free affinity credit card for South Orange, N.J., that gives the rebate to the community instead of giving bonuses like airline miles to cardholders.

It also is developing a Customer Service Center, so that calls for routine and more complex requests are handled at a central location and branch officers do not have to interrupt what they are doing to handle these calls.

The centers also serve as supplemental training grounds for employees who have finished the bank's yearlong training program and are ready for full-time activity.

So Valley thrives. And Gerry's pride and joy is to have lending officers who can turn down a request and still make the customer say "thank you" because the officer has shown him that the loan didn't make sense.

This, to Valley, is community banking. And it is why I feel that community banking will not go the way of the passenger pigeon, the buggy whip, or the rotary dial telephone.

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