The family-owned and family-run bank seems like the ultimate in community banking.

"I bank at Smith Bank" or "I've been banking with the Jones family all my life, and so did my father" are typical comments in many communities where a grandfather or even great-grandfather started a bank and son after son took up the mantle.

But all is not sweetness and light in the family bank tradition, even though it has great deal to offer.

One problem is that people in town expect the banker to always say yes. "Your father served my father," is the line. "How can you turn me down now?"

I remember talking to a small group in one town where the banker was bragging about his family tradition. One customer piped up that he too had a family banking tradition. "I am a third-generation check kiter."

A more serious question for a family bank, though, is whether the new generation wants to work at it.

When I was an undergraduate, a speaker at college told us: "Half of you in this room are Republicans because your fathers are Republicans. And half of you are Democrats because your fathers are Republicans."

Among my proudest achievement as a teacher has been talking students out of being accountants or lawyers or bankers just because their fathers were.

"It's awful," parents tell me. "My son became a chef (or whatever) instead of going into banking."

"Is he happy?" I ask.

"Absolutely."

"Then why are you moaning?" I say. "You should be cheering."

When it is a family business, however, taking a different path is harder to do - even if your heart isn't in becoming a bank president.

And following in your father's footsteps is also not easy. I know.

My father was one of the most famous bank economists of his day. Every time I did something right, people would say, "What do you expect from Marcus Nadler's son, with all the help he has received." And when things went wrong, the comment would be, "Wow, you let your father down."

Maybe it's the problem of following your dad that has made so many second- and third-generation bankers take chances to show their independence - chances that in a number of cases have seriously damaged their banks, or killed them.

But what if you basically inherit a bank presidency and really want the job? How do you learn to do it well?

There are three basic training grounds, and each has its drawbacks:

Your own bank. Being trained there limits the opportunities for growth.

All too often a young heir apparent is trained by putting him under Gridley, a greybeard with 40 years' experience. Unfortunately, many Gridleys actually have one year's experience 40 times. Under them the new banker learns the adage "never do something the first time."

Being trained by your dad the CEO has similar pitfalls.

Money-center banks. Heirs apparent used to have this second route available - working for the family bank's correspondent bank. The money- center would be delighted to take the CEO's son aboard for several years and teach him banking. It knew this would cement the relationship with the family bank, insuring correspondent business for years ahead.

But many money-centers are now giving up correspondent business, because the balances have been reduced sharply now that respondents' required reserves must be kept with the Fed. As a result, correspondent balances must come from money that otherwise could be lent or invested.

Banker schools. There are complaints that they treat all students alike.

What's wrong with that? The gripe is that those who'll wind up running their family banks don't get the instruction and insight they'll need - that instead they learn what a lending officer in a larger regional needs to know, or a branch manager of a major bank.

This, some critics say, is why the major banking schools are not drawing the students they used to. Ignoring their own marketing courses, the schools fail to segment the markets for their programs.

Despite these problems, the family-run bank is not dead. But like other traditions that have made community banking unique, it is becoming less of a force. And the urge to merge is only one reason.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at Rutgers University Graduate School of Management.

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