Academic journal article ABA Banking Journal

Watch out for the Little Guys

Academic journal article ABA Banking Journal

Watch out for the Little Guys

Article excerpt

THERE'S A TENDENCY IN SOME circles to adopt a tone of condescension in speaking about community banks; the equivalent of the owner of a big dog patting a little dog on the head, saying, "There's a nice a little dog."

Nice little dog, my foot. Ever seen a Jack Russell terrier? They'll take on a Great Dane!

So it is with community banks. They're sometimes painted with the brush of motherhood and apple pie, but behind that quaint facade many of them are savvy, profit-minded, aggressive business people. They do, for the most part, focus on Main Street, wherever that happens to be, lend to local businesses and embed themselves in the fabric of their communities. It's good, smart business to do so, and it's often a personal preference, as well. But community banks don't need altruism to justify their existence.

As Arthur Johnson, incoming chairman of the ABA, observes in the cover story (p. 20), big banks have advantages of scale in providing low-cost transactions, but that very scale hinders them in the area where community banks shine--individual attention.

Johnson's bank, United Bank of Michigan, Grand Rapids, is a good example of the vitality and relevance of community banks. Our cover profile of him is in part a case study of how a business can adapt to changes in its market and in its industry. Having known and interviewed many community bankers over several decades, Johnson, in our view, is not an aberration. He is simply a prime example of a practical, observant banker who knows his market, his industry, and his institution's abilities, and does a good job of keeping them in sync. …

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