Rural banking and you: 6 reasons to keep it local / by Annette Tait

Small town and community banks are fabulous! 

In these days of bank consolidations, many of our neighborhood and small town banks are going away -- disappearing quickly into the world of anonymous, faceless, and dispassionate corporate-ness.

This in itself is tough on rural customers. As our local financial institutions become absorbed by larger banks, our small town branches are closing. And many of us already drive 20-30 miles one way just to get to the bank.

First State Bank in Mercer, N.D., circa 1930.

First State Bank in Mercer, N.D., circa 1930.

We know that it’s a numbers game, and that the parent bank, like any business, needs to satisfy its investors and make a profit. We also know that it’s not personal, per se. It’s not like they know us. 

We all know we can bank online, but it’s so impersonal. We need that personal relationship with our bankers -- it’s important for so many reasons.

For one, our local bankers are anything but anonymous, faceless entities.  These folks serve on committees and boards, volunteer in the community, and so much more.

Secondly, most local lenders will tell you that they have served multiple generations of the same families and plan to well into the future.  They know us. And our folks. And our grandparents, uncles, cousins, kids, and dogs. 

And we know them. We know their kids, their golf scores, what they donated to the silent auction, and favorite tractor color.

Local bankers are a part of the community, serving on boards and committees, and participating in local events.

Local bankers are a part of the community, serving on boards and committees, and participating in local events.

Which brings us to reason No.3: We know that our local bankers know a business on Main Street is a good business, and that an empty building has no value.  We know that, for the health of the community, they will do their best to help us become entrepreneurs, farmers, and business owners, or pursue other dreams.

Fourth, our local banks understand that approving that loan for the café is still a win, even if the building isn’t worth the cost of equipment as collateral.  They understand that equipment costs the same whether you buy it in Denver or Timbuctoo. They also understand that it will take longer to pay off that same equipment in a small town because the customer base is much smaller. But they will still do their best to give the loan.

Fifth, we know we can call our banker any time or chat with him at the grocery store. We rarely need appointments, and often share a table with them.  We also love that when we’re at a farm auction and overshoot our bid, we can usually just call the bank and the money will be there. No questions.

Reason No. 6: At the same time we also know our banker will hold us accountable. And that he won’t pull any punches. If he thinks we’re headed for trouble, he’ll tell us. Flat out, with no beating around the bush.

Since the beginning, rural and small town bankers have stood right beside us, through the good times and bad

Most smaller banks or local branches will tell you that they’ve had the same families for multiple generations. Now, I am sure that’s true of the giant megabanks, too -- but we still believe the bulk of those big bank customers do not actually know their banker, and their bankers don’t know them.

If you don’t know each other, how can you build the kind of relationship that makes things happen? You can’t.

There is virtually no change in performance percentile relative to the size of the bank. Source: Continuity, "Small banks can't survive and other community banking myths," 2014.

There is virtually no change in performance percentile relative to the size of the bank. Source: Continuity, "Small banks can't survive and other community banking myths," 2014.

So, what’s the good news? The state of small town banks isn’t nearly as full of doom and gloom as the big banks would like us to think. According to the FDIC, “the projected decline of the community banking sector has been significantly overstated. Community banks have, in fact, remained highly resilient amid the long-term trend of banking industry consolidation.” (“Community Banks Remain Resilient Amid Industry Consolidation,” 2014)

What’s important to remember is that banks are also businesses. And, like other businesses, they have to use business strategies to stay healthy. According to regulatory technology solutions company Continuity, “Small banks, like all small businesses, need to be smarter, faster and more effective than their larger competitors.”  (“Small banks can't survive, and other community banking myths,” 2014).

Sound familiar? Like any other financial decision you make, look for a proven vendor with a solid reputation -- one that can provide the products and services you need. And that vendor may be located right there on Main Street.

Don’t be an account number on a ledger sheet. Be a face with a name. Work with a local banker who has your -- and your community’s -- best interests at heart.