Kathy Finn writes of “merger mania,” a condition that has been diagnosed by the consultant class often in the community banking world, each time with the dire warning that community financial institutions are certain to disappear. Interestingly, while the consultants seem to come and go (and many of Louisiana’s larger banks, as well), it is the community banks that are still here.
In fact, on the list of Louisiana banks with assets under $200 million displayed in the article, more than half were chartered before the onset of the stock market crash of 1929, and an astounding 31 are more than 100 years old. These venerable institutions have survived depressions, recessions, world wars, oil busts, real estate busts and civil unrest, not to mention Huey Long, Earl Long and Edwin Edwards.
Perhaps Finn would have gained a different perspective on the future of Louisiana’s community banks if she had questioned some actual community bankers. “Merger specialists”may be familiar with the Wall Street definition of success, but they know nothing of the entrepreneurial spirit of Louisiana’s community bankers.
It is true that community banks face many daunting challenges in the current environment. At one extreme are credit unions that claim to return a massive tax advantage to their so-called “members”through better rates and customer service, but in reality they deploy their unfair taxpayer-provided subsidy in gaining market share. While community banks are forced to increase our compliance departments, credit unions pour their tax savings into the marketing departments and feed their voracious appetite for real estate for branch expansion.
At the other extreme are a handful of systemically dangerous institutions that control nearly half of our nation’s banking assets, taking outsized risks, safe in the knowledge that a monumental miscalculation will be covered by the taxpayers because they have achieved that magical status of too big to fail.
This group of reckless behemoths is responsible for much of the regulatory burden that community banks struggle under daily. Rules intended to rein in Wall Street many times fall hardest on the innocent institutions on Main Street.
Despite these formative challenges, many community bankers are fiercely independent fighters and plan to stay that way, even though the playing field is decidedly tilted against us. Community banks remain the most trusted segment of the financial services industry, we make nearly 60 percent of the nation’s small-business loans and we are a respected force in the halls of Congress.
Shareholders of community banks have their own private capital at stake, unlike tax-subsidized credit unions, and community bank shareholders are under no illusions that reckless decisions will be covered by taxpayer bailouts.
What the consultants, Wall Street analysts and transaction-based bankers will never understand is that community bankers not only have a financial investment in our home towns but an emotional one, as well. We will never consider our banks or our communities to be “too small to thrive”— not as long as there are community financial institutions with the primary purpose of seeing the people and businesses of those communities succeed.