Banking on Small Economies of Scale How the Personal Touch Helps One-Branch Community Banks Thrive in an Era of Mega-Mergers

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At the Roxbury Highland Bank of Jamaica Plain - a brick building with a chimney and flowers out front - the sole ATM isn't a big draw.

Tellers greet most customers by name. In fact, employees go to depositors' weddings, graduations, and birthdays. "We just don't want to miss them," says Jannette Ferstler, a teller who's watched several of her customers walk down the aisle.

Roxbury Highland is a Boston-area bank with a mere $23 million in assets and a total of nine employees. (By comparison, 170,860 will work for the newly combined Nationsbank and BankAmerica.) But what's perhaps surprising in an era of mega-mergers is that small banks like Roxbury Highland aren't an endangered species. Their best asset is the friendly, personal touch many customers relish. While big banks are merging to create economies of scale, cutting costs by doing everything in bulk, many community banks are also succeeding because of the economy of their scale. "There's never been a better time for community banks," says Charles Meiburg, a professor at the Darden School of Business at the University of Virginia in Charlottesville. In fact, 200 of these small banks were chartered last year, up from 157 in 1996 and 111 in 1995, according to the American Bankers Association in Washington. And at many small banks - including Roxbury Highland - business often picks up in the wake of big mergers. "People don't like the idea of that small-town relationship being taken away," says Roxbury Highland president Lennart Plahn. (Customers call him Lenny. And he often pitches in by helping open new accounts or counting cash in the back.) His bank is oozing with small-town charm. This spring, for instance, it asked a local artist to decorate the glass walls in the lobby. They're now covered with pastel-colored painted flowers. Every year - usually on Father's Day - the bank sponsors a kite outing at a local park. It sponsors a little-league team. And its foundation gives away $10,000 annually to community causes. In small banks or large, tellers aren't highly paid workers and they often don't stay long. Mr. Plahn attributes the longevity of his tellers to the full medical benefits the bank provides. As for minority lending - which some critics say big banks fail to do enough of - Roxbury Highland "has always done it - it's part of our business," Plahn says. (With a 45-percent-Hispanic customer base, it can't afford not to. …

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