The Continued Strength of Community Banks

One of the most recent developments to come out of the banking industry were the recent layoffs conducted by Wells Fargo, the fourth largest lender in the United States. Announced last month, Wells Fargo laid off more than 200 employees mostly focused within their agriculture loan divisions in states such as North and South Dakota. According to people with direct knowledge on the matter, Wells Fargo has cut the commercial loan division of their lending portfolio by 25%. This comes as a blow to the farmers in North and South Dakota who were relying on Wells Fargo to meet their lending needs.

 This is a trend continuation of mega banks removing themselves from rural communities and being replaced by local institutions. Between June 2017 and June 2018, the mega banks have reduced the number of branches in local communities by 384. This decline in mega bank branches can make it that much harder for rural residents to receive loans. However, community banks have added over 700 branches in the communities they serve. With the mega banks pulling out of local communities, the local institutions are stepping up and filling the gap for those with lending needs.

During the financial crisis of 2008 the same mega banks were closing their doors to small businesses and residents. All while community banks continued to work and serve their already established communities. This brings us back to why this trend is occurring, it comes down to relationships. The relationship between a community banker and their customer will always be stronger than a customer support phone number from a mega bank. The value that is placed in knowing your community banker is what has been key in the continued presence of community bankers in local regions. Hopefully, this trend can continue and community banks can help those who have not been given what they were promised by their mega bank counterparts. 

Sources:  

1. https://www.icba.org/news/blog-details/main-street-matters---advocacy/2019/11/01/megabanks-continue-exiting-local-communities?utm_source=informz&utm_medium=email&utm_campaign=informz&_zs=SucBb&_zl=O4Ip1
2. https://www.reuters.com/article/us-wells-fargo-layoffs-exclusive/exclusive-wells-fargo-lays-off-more-than-200-business-bankers-in-u-s-sources-idUSKBN1X42EV