I was recently invited to join a retreat of the directors of a $300 million-asset mutual savings bank that has been in business since just after the Civil War.
The bank has always performed well -- surviving the panics of 1893 and 1907 as well as the Great Depression -- and has top Community Reinvestment Act ratings from the examiners for compliance, safety, and soundness. Its deposit and fee-income growth has been strong since it initiated a free-checking program in October 2001.
The directors do not want the bank to go public; they would rather stress local service and community strength than please Wall Street.
Yet they know that growth will be slow, since the bank is in a shrinking area. Businesses are closing and young people are leaving for college and not coming back, so there is little justification to expand by building branches.
Directors proposed buying a rival savings bank that had done a first-step conversion, and their plan was to convert it back to mutual status. But the offer was turned down, because the other bank's board wanted it to stay independent.
The CEO is philosophical about this setback. "We would have been able to generate great economies of scale," he said. "But the merging of two separate cultures would have been difficult." His first objective is to maintain his bank's strength in its communities.
The retreat was organized to discuss what had to be done to keep the bank healthy and the staff's morale high. Many of the ideas we discussed would be applicable to other community banks, whether mutual- or stockholder-owned.
First we agreed that the bank must make sure its employees are adequately compensated and trained. To accomplish this, it has decided that every new staff member must take the American Institute for Banking's Principles of Banking course. …