Community Owned Banks—Key Factor for Agurb® Success

“Small businesses with fewer than 500 employees account for approximately three-quarters of all new jobs created every year in this country,” was said by the Vice Chairman Reich of the FDIC recently in testimony before the US Senate. He went onto say, “The data indicates that community banks with less than $1 billion in assets, which hold only 14 percent of industry assets, account for 45 percent of all loans to small businesses and farms.”

One of the key factors that I look at in every agurb® that I visit, is the ownership of local financial institutions in the community. I’m found it to be a critical, determining factor between that teeter-totter of failure and success. Often, it is the local banker who is willing to financially back the entrepreneur starting a new business or the farmer expanding their operation that can help take a town to new levels of economic performance.

Oftentimes a banker will make a loan to a new entrepreneur, not based upon their net worth or collateral, but because they have seen them grow up in the town. They’ve observed how they’ve handled adversity, their integrity and general approach to life. It’s called “Character” and it used to be one of the most important, if not MOST important, criteria that a banker used to make a loan. Many small town bankers still do, but someone who is grading a loan proposal from an ivory tower for their branch bank can’t ever get a feel for that important C word.

Reich went onto say, “The loss of community institutions can result in losses in civic leadership, charitable contributions, and local investment in school and other municipal debt. I have a real concern that the volume and complexity of existing banking regulations, coupled with new laws and regulations, are increasingly posing a threat to the survival of our community banks.”