Community Banking: It’s Not Sexy, But It Does Make Sense
Originally published in the St. Louis Business Journals Ask The Expert Column 3.24.23
We have all been following the news regarding Silicon Valley and other banks over the last few weeks. I want to assure you that Midwest BankCentre is in a strong financial position and that your deposits are safe and secure. In fact, community banking is alive and well. Like Midwest BankCentre, the vast majority of community banks have strong balance sheets, including diverse deposit and loan portfolios. Out of necessity, they maintain strong risk management practices and appropriate reserves. And due to strong regulatory oversight, many ensure that their capital levels exceed regulatory requirements. In environments like the one we currently find ourselves in, people work hard to reacquaint themselves with the various banking options. So let me reintroduce you to community banking.
There are almost 5,000 community banks in the US today, representing 97% of all bank charters, while only accounting for 40% of bank branches, 14% of bank deposits and 18% of bank loans, and 13% of bank assets. While community banks account for a relatively small share of total banking activity in the US as a whole, they remain the economic engines of Main Street. Community banks are particularly important in relationship-based and information-intensive banking services. These services are mainly consumed by smaller customers such as small businesses, family farmers, and those who have traditionally been denied access to mainstream financial services. Today, community banks are outsized providers of credit to agricultural and commercial borrowers, including during periods of economic stress when the need for credit is most acute. Community banks provide 36% of all small business loans, which is double their share of the banking industry’s total loans, nearly 80% of all financing to agriculture from the banking sector and more than a third of commercial real-estate loans.
It is the community bankers who live in, practice faith with, and invest in the neighborhoods they serve. They are best positioned to create conditions that ensure access to opportunity for all while balancing out a person’s desire to take on financial risk or debt, with what is prudent for the person, the institution, and community. Community banks view their customers as responsible investors in local communities. They consider people in the context of their environments, striving to understand the whole person and that person’s needs. It is relationship banking at its core.
We strive to get to “yes.” Our promise is to take your deposits and invest them responsibly in all people. At Midwest BankCentre, $95 out of every $100 deposited stays in the St. Louis region to build St. Louis businesses and families. Each of those dollars will circulate throughout the regional economy 6x on average. The economic activity supports local people and businesses. It brings jobs to communities and creates tax revenues that support teachers, new roads, and other essential services.
Basic savings, checking, and loan accounts to local businesses are community banks’ bread and butter. Community banking isn’t sexy – but it IS safe and it IS stable and it DOES make sense. These time-tested tools have been the bedrock of community prosperity since the beginning of banking. Your local community banker likely won’t be talking with you about the latest cryptocurrency or derivative product. But, they will be sitting across from you, looking you in the eye and working hard to help you find the right solutions to help you meet your financial goals.
At Midwest BankCentre, St. Louis has been our home since 1906. We aren’t trying to be the biggest bank, just have the biggest impact on the communities we serve. If this type of stable approach to banking interests you, I encourage you to reach out to me at HeyOrvSTL@MidwestBankCentre.com or any other community bank throughout our region.