Small-Town Banks Use Innovative Mergers to Survive
Titus, Nancy Raiden, THE JOURNAL RECORD
Fierce competition from a variety of financial service providers makes it ever more difficult for the small bank in Oklahoma and elsewhere to survive and thrive.
One method of combating that problem has been mergers done in innovative ways that allow owners to gain economies of scale while preserving their position in their communities.
C. Kendric Fergeson, an Altus banker who is chairman of the American Bankers Association's Community Bankers Council, explained.
"I have several friends who have done that. Maybe three people each have $100 million banks, and they combine them into one $300 million bank. That lets them take advantage of technology and increased buying power."
Another merger he described involved only the holding company. The owners of the two member banks continued to own their banks separately as before, but the new combined holding company allowed them to save money by having one data processing system and one auditing group.
He noted that small banks in Oklahoma also have moved to purchase small banks in both Texas and Kansas.
Keeping up with regulation is one reason for moves like that.
"You have to get to a sufficient size to have a full-time person to only deal with compliance or regulation."
He estimated that the National Bank of Commerce in Altus which he serves as chairman would need to grow to $250 million in assets before he could justify a full-time compliance position. The bank has about $90 million in assets.
"You have to be able to spread the cost out. A larger bank can handle it a little easier. Now we have a branch manager or head teller who acts as compliance officer. They can only halfway do either job. And there are a lot of regulatory worries because there are civil money penalties. You don't take regulations lightly."
Added to the regulatory pressure is the competitive pressure from financial providers like insurance companies, securities dealers, General Motors Corp., Ford Motor Co. and Sears Roebuck Co.
"It grinds on you," he said. "So that when somebody offers to buy, you listen to them."
Fergeson began his one-year term as chairman of the Community Bankers Council in November. The council represents banks with assets of $500 million or less, roughly 85 percent to 90 percent of all banks in the country.
Interest in the group has increased this year, as evidenced by a 55 percent jump in the number of chief executive officers who attended its annual conference in February. Fergeson said a marketing effort to get the managers to come had hoped to add about 15 percent.
"It tells me that banking is much better. It tells me that attitudes and moods and earnings are better."
Fergeson is also the immediate past chairman of the Oklahoma Bankers Association.
Also on the minds of the nation's community bankers is the current discussion about consolidating federal banking regulators into a "super regulator."
The idea raises their blood pressure because it calls into question whether banks will continue to have a "meaningful choice" in their charters, which now can be issued by the federal or state governments.
"It's a high priority for them."
The concern is that too much power in the hands of too few, or even one, is too scary.
"A super regulator would dominate you. You would have to do whatever that regulator wants. As well-meaning as that person might be today, tomorrow it could be a problem person. We don't want all that power vested in one."
Fergeson, who got his start in the industry in 1971 with Liberty Bank and Trust Co. of Oklahoma City NA, said he feels there will always be a need for community banks no matter the consolidation in the industry.
"Small banks have been the leaders in starting new business."
For example, it was a small bank that loaned the money for a new computer company that began as a home-based business. …