Academic journal article ABA Banking Journal

Community Banks - Alive or Dying?

Academic journal article ABA Banking Journal

Community Banks - Alive or Dying?

Article excerpt

The simple, direct answer to that question is, "They are alive." More than alive, in fact, most of them are very healthy at present. But a concern underlies this prosperity: Too many bankers are worrying themselves sick about real and imagined threats to a healthy future.

What are the "real" factors ? The No. 1 threat is the attitude of you, the CEO, or principal owner. If you're tired--let alone defeated--then sell, merge, or quit.

On the other hand, if you're simply not sure about the future, do some probing. Join a peer group--learn what others are doing. Take an active interest in the Community Bankers Council of the ABA. Consider an employee stock ownership plan. Talk with the dean of the college of business at a nearby university. Ask for help and advice from your correspondent. Consultants can help, too--for a price, of course.

Caution: once some of these doors are opened--particularly those related to selling--rumors begin spreading. The banking grapevine produces juice faster than any Napa vineyard. So stress confidentiality in your conversations.

Other "real" factors to consider:

1. Assess your true market area and your share of it over the last ten years;

2. Analyze the vigor of your area-- look at consumer demographics and commercial/agricultural strengths;

3. Gauge your competition: who? how much? can you equal or beat it?

4. Examine your administrative burden--are you as careful about controlling your own internal red tape as you are about regulatory red tape ? (Take a look especially at all those computer-generated reports);

5. Review succession plans--are family members or others interested and capable of taking over? and

6. Consider the ability and longevity of your current staff.

Those are some basics that need clarification before decisions are made about your bank's future.

But too many bankers are looking at shadows and giving them more substance than they merit. These are the "imagined" threats. One example I hear from time to time is that "the regulators/examiners [or some other party] have a hidden agenda to force small banks out of business." That is, of course, unreal and not true.

Another grumble: "Nobody really understands us or helps us." This plaint usually is directed at associations. When I ask, "How many letters, phone calls, or fax messages have you sent to your associations this year? …

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