Pub. 2 2014 Issue 1

www.uba.org 18 C ommunity celebrations, county fairs, fireworks in the park, the customary ice cream cone from the local ice cream shop—these are all components of a community that endear people to their hometowns. For many people across the county, their community bank goes hand- in-hand with that endearment. The part a community bank plays in a local economy goes much deeper than mere endearment. In most cases, they are essential to the economic well-being and livelihood of the hometowns. However, recent changes in a difficult economic environment threaten many community banks. Increased costs due to new regulations, operating expenses and compressed-net-interest margins are here to stay. In the long run, it’s a matter of survival. This model of community bank- ing is not only important to customers, it’s important to the health of the national economy. Community banks are established to serve the needs of local businesses and fami- lies. They operate as independent banks, making decisions locally according to the culture and necessities of the community. They are full of tradition, heritage and strong independence, qualities communi- ty-bank customers appreciate. According to the Independent Community Bankers of America, community banks represent 98 percent of all U.S. banks. They fund nearly 60 percent of loans to small businesses, although they compose just 10 percent of the nation’s banking assets. This just goes to show that com- munity banks play an essential role in the financial condition of our nation’s com- munities. The banks accept deposits from local customers, then loan that money out to local borrowers ensuring local funds get reinvested back into local economies. The relationship-based approach of com- munity banks gives them an edge over big banks. Robert deYoung, senior economist and economic advisor at the Federal Re- serve Bank of Chicago, points out that “… small businesses received more and better soft information when their banks were relatively small and when they worked with the same loan officer for a long time.” For example, these loan officers are able to make recommendations on the reli- ability of individual businesspeople in the community. With low rates of turnover, community banks continue to provide con- sistent high-touch, personal service. Despite community bankers’ commitment to their communities, they realize that there is a minimum asset size that they must reach in order to survive. Mergers of like-minded community banks to build market share or expand into near- by markets make sense in today’s world. Because of this, there is an upward trend of mergers and acquisitions of commu- nity banks in the $1 - $10 billion range. Richard Beard, president and CEO of People’s Utah Bancorp, says increasing cost and regulatory strangulation may cause some of the older banks to sell out as consolidation in the industry continues, but 100-year-old Bank of American Fork and 108-year-old Lewiston State Bank want to preserve the community banking experience. “There are a lot of community bankers in the country that are tired and fearful of increasing regulatory burdens,” Beard said. “We’d wanted to figure out a way to help community banks come together and preserve what is good about that system.” People’s Utah Bancorp and Lewiston Bancorp Unite to Preserve Community-Bank Independence By Anthony J. Hall, Chairman of the Board, UBA and President/CEO, Lewiston State Bank