This is a pretty dark view of the community banking industry, published in the American Banker newspaper on June 19. The author cites several factors which may limit the growth — and even contribute to the demise — of community banks.
Cam Fine of the Independent Community Bankers of America followed up quickly with this response. And yesterday, the American Banker published this response from Marty Madden, an EVP at a bank in LaGrange, Ill.
I have been writing about banking since the mid-1980s. Ever since I wrote my first story, I have been hearing from experts that the community banking industry is on the verge of extinction. It is easy to get swept up in the emotion of the current crisis. Certainly if you had talked to an ag banker in 1987, he was likely to tell you that things didn’t look good. Similarly, if you talked to a banker heavy into real estate lending in 2009, he or she might also have had a pessimistic view.
Someone once said that the only way we lose is if we quit. There is a lot of wisdom in that statement. Certainly, if you give up on your bank when times get tough, it isn’t likely to survive. But if you remain determined to stick it out, you may make it. In some cases, of course, the bank still fails or gets sold but if the bank lacks committed management it has no chance of succeeding on its own.
In all small businesses when times get tough, it forces the business owner and manager to take a hard look at his or her own processes, employment practices, marketing and product offerings. This kind of scrutiny, which rarely happens when things are going well, is essential to the long-term survival of any organization. Because markets change, organizations have to change too. Challenging times are often a signal that your company, bank, firm or organization needs to change — usually only modestly, but sometimes substantially. Good mangers recognize what kinds of changes are needed sooner than poor managers.
Community banks will survive as an industry because there are too many small businesses that rely on them for their own survival. Community banks serve the small business sector in a way the very large banks simply cannot. As long as people have entrepreneurial drive, there will be small businesses and, therefore, community banks.
At the same time, significant market forces are working to commoditize all products and homogenize every sales experience. This is not what people want. Customers want to be treated as humans; most don’t want every sales experience to be reduced to a transaction. Community banks have long been good at relationships. The good banks connect with people, and that’s becoming a more valuable skill every day.
Small business entrepreneurship guarantees the survival of the community banking industry and the relationship skills of community bankers position the industry for a bright future.