BankThink

Stepping in where banks are pulling back

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There’s no more quintessential image of Main Street USA than the corner store and the local credit union or small bank. These financial institutions are where relationships are built, businesses are launched and dreams are realized.

Unfortunately, many communities across America are faced with the uncertainty of losing their financial institution. For many rural and working-class towns, this is about more than losing a business. When their local bank closes, the community loses a critical pillar and a resource for building financial success from the kitchen table or the boardroom.

The numbers are grim. Since 2004, more than 4,700 bank branches have closed, and with these closures people have lost access to accounts, loans, advice — and the jobs and security these institutions provide.

Banks close for many reasons; and to be fair, the consolidation trend in the credit union system is similar. But, now more than in the past, one of those reasons small banks are closing is that the local banker just wants to move on, retire and start a new chapter in life.

Ryan Donovan, chief advocacy officer of the Credit Union National Association

As leading members of their communities, these bankers take their duty to community seriously, understanding the impact on neighbors and friends if the institution is shuttered, which is why more look for a partner to buy the bank’s assets and continue to serve the community they’ve called home all these years. Especially in instances where the alternative would be to close shop and add one more dot to the national map of local bank deserts.

It’s no wonder, then, that so many community bankers have been reaching out to credit unions to sell their banks’ assets. This allows their customers retain a local financial partner and reap the benefits that credit unions provide — better loans, fewer fees and the understanding that the members, not bank shareholders, are the center of the business. Selling the bank to a Wall Street bank rather than a credit union would basically be turning over the keys to a stranger with very different motives.

What’s more, local bankers who have sold to credit unions value the continuity they can count on, recognizing that unlike the megabanks, credit unions have a commendable track record of retaining staff from local banks. Taking care of the local bank employees might not matter to an out of town bank, but it matters to the local bank CEO who knows his or her employees and will continue to see them around town.

Unlike large banks, credit unions have a proven track record of opening and retaining local branches, too. During that same 15-year window during which thousands of bank branches closed, credit unions have opened more than 1,500 branches. Had these branches not opened, people in these communities might have been forced to travel a town or two over to do business they used to do right down the street.

We understand that these decisions are also about money, and this is yet another reason local banks are well-served in selling to credit unions. For the bankers deciding to sell their institution, the cash that a credit union brings to the table is often more appealing than the stock offered by another bank, which often comes with restrictions about when and how much can be sold at one time. For a banker looking to get out of the business, cash is almost always king.

Ensuring continued service to the customers, employment to the staff, and commitment to community is precisely what credit unions should do when a local bank is ready to close shop. Expanding opportunities for more Americans to access safe and affordable financial services from a not-for-profit cooperative is the definition of fulfilling the credit union mission — to promote thrift and provide access to credit for provident purposes.

Yet credit unions’ success has always been the obsession of the banking industry, with misinformation campaigns and thinly disguised efforts to undermine our members’ work in these communities. And their trade associations have become unglued at the prospect of their members selling assets to credit unions.

Sure, we understand that our model is different: we return value to our members while banks — big and small — are tethered to the interests of their shareholders. That’s their model, and we have ours. Our people-helping-people model will always put members and communities first. It’s why credit unions are advancing communities and empowering financial well-being.

Americans have seen and experienced enough to know that there’s a real value to having a financial institution, like a credit union, in their backyard looking out for them rather than Wall Street. That’s the essence of the mission that Congress bestowed on us many years ago, and it’s why 115 million Americans trust us with the decisions in life that matter most.

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