August 15, 2000

Small banks winning back customers; Community bankers say personal attention key

By Herb Booth

As the banking industry consolidates and large banks become even larger, community banks are enjoying a resurgence, according to a new report by a community banking association.

Locally, community bankers say they're enjoying a surge in customers, loans and deposits, attracting patrons with a more personalized feel.

"They don't want big banks," said Marshall Sutton, president of Grand Prairie State Bank. "They want personalized service."

Since the 1970s, the number of banks nationwide has fallen more than 40 percent, according to the Independent Community Bankers of America, a Washington-based association of smaller banks.

Over the past few years, for example, FleetBoston acquired BankBoston for $ 13 billion, Bank of America acquired NationsBank, and Wells Fargo merged with Norwest Bank.

Today, there are about 11,000 banks in the nation, and analysts predict mergers will cut that number in half over the next decade.

Some customers fear the continued consolidation of banks will lead to higher fees.

"Fleet is setting the standard on fees," said Bruce Marks, a leader of the Fleet Accountability Project, a neighborhood group that holds regular demonstrations outside Fleet banks. "And people are outraged. What worries me is if someday all of the banks are going to move up to meet that standard."

A survey released last week by Moebs Services Inc., a Lake Bluff, Ill.-based economic research firm, showed a nationwide pattern of steadily rising bank fees. It dates back into the 1980s as banks increasingly "unbundled" services that were once routinely provided at no charge, according to a story by The Washington Post.

But in the midst of merger-mania, the community banking association also discovered that more than 200 local banks have formed in the past year. And some consumers are moving their money to smaller institutions with fewer fees, free checking services and a more personalized feel.

"Community banks used to have trouble competing," said Greg McBride, a financial analyst for Bankrate.com, a Florida-based consumer banking Web site. "But when there is a great deal of consolidation, consumers tend to gravitate back to what's familiar, and that's their community banks."

For Grand Prairie State Bank, the trend is tangible. Mr. Sutton said as of June 30, 1999, the bank had about $ 38 million in deposits compared to June 30, 2000, deposits of nearly $ 45 million. Mr. Sutton said loans also have grown from nearly $ 17.3 million to about $ 23.3 million.

Bill Dunaway, a senior vice president with Arlington National Bank, said the bank also has seen more customers, higher deposits and additional loans.

"I think people see large banks as institutions that don't care," Mr. Dunaway said. "They want to talk to someone on the phone. The larger banks have become so automated."

Bill Moser, president of Independent National Bank in Grand Prairie, said people are fed up with the "McDonald's" way of banking.

"You've seen it here in Grand Prairie," Mr. Moser said. "They'll have the cattle ropes up, guiding people around at lunch time. Then, you finally get to someone, and they can't answer your question."

Mr. Moser said part of the population is simply fed up with the way big banks treat customers.

"There's a certain segment that just takes it," Mr. Moser said. "That segment is getting smaller."

The Grand Prairie banker also said community banks function as incubators for entrepreneurial start-up companies - loans that bigger banks typically don't provide, Mr. Moser said.

Mr. Moser said assets there have more than doubled in the four years he's been at the helm. Those assets, he said, have increased from about $ 45 million to about $ 110 million.

The strong economy also plays a part in community bank's economic good fortune, he added.

Tom Cravens, president of Northwest National Bank, said the number of customers there have increased, too. He agreed that customer service is the largest reason for the good business.

Mr. Cravens said another indication is that Mercantile, a Fort Worth community bank, announced last year it's opening a branch in North Arlington by the end of this year.

But for some people, bigger is better, insists Jim Schepker, a spokesman for FleetBoston Financial Corp., now the nation's eighth largest financial holding company.

"There is a myth that gets played out that big banks are indifferent and small banks are caring," Mr. Schepker said. "The reality is that customers make their choices based on value, and we would not be so big if we were not providing values to our customers."

There are no hard numbers available on how many people have switched from a larger bank to a local bank, but Mr. Schepker said Fleet has experienced only "normal attrition" since its merger with BankBoston.

The same is true at Citizens Bank, now the second largest bank in New England after merging last year with USTrust, said spokesman Brad Minnick. Earnings were up 12 percent in the last six months, he said.

"Customers want convenience banking," he said. "They want to do their banking 24 hours a day at a stable institution, and that's what we are."

That's what keeps Thomas Newton, of Boston, with Fleet.

He can find Fleet ATMs on almost every corner.

"With Fleet, I don't have to go very far. It makes more sense."

This article is reprinted here for non-commercial, educational, fair use purposes only.