A few years ago, it was easy to write off the community bank as a relic, a quaint reminder of an age when you actually needed to visit a branch to manage your money.
Who needed a local banker when a mortgage broker could easily connect you with financing from some faraway lender?
Like many of you, I suspect, I haven’t set foot in my bank since the 1990s. But in the last couple of weeks, as I’ve read about desperate people unable to find someone at their giant mortgage companies able to help them with their troubled mortgages and seen the photos of people lining up in front of IndyMac, I’ve started to wonder if I have the whole thing backward.
PHOTO: NY TIMES NEWS SERVICE
Surely, there must be some worth in working with someone nearby who tries to make prudent loans within the community, someone who can bend the rules to get you out of trouble or keep you from making a mess of your finances in the first place. Shouldn’t local bankers be shouting this from the rooftops right about now?
So I set out to find that kind of banker. I was looking for someone with a close relationship with customers who also knows that blithely offering meager savings rates won’t cut it these days.
I found him in Easton, Maryland, on the Eastern Shore of Chesapeake Bay, and I asked him this: What, if anything, can a community bank do for someone that other financial institutions can’t?
The lobby of Easton Bank & Trust, a 15-year-old community bank, is a full-service operation, with an old-fashioned popcorn machine, magazines for children and work from local artists on display. The vault, with safety deposit boxes inside, is visible to customers, and the tellers do not sit behind glass partitions.
Not 20 paces from the bank’s lobby is the open office door of Easton’s president, Michael Menzies, a banker out of central casting with a firm handshake, perfectly parted hair, a gray pinstripe suit and black wingtip shoes.
Menzies puts his home telephone number on his business card, which is as good a symbol as any of how far he goes to promote the things that make his bank different.
“We have nothing at all as a competitive advantage other than our service and our people and their ability to identify needs and create solutions,” he said.
Here’s how that happens on the mortgage side of the business. Easton keeps about US$10 million of residential mortgages on its own books instead of selling them off to Fannie Mae or Freddie Mac. These loans are often made to borrowers who wouldn’t be able to get a loan elsewhere.
“These are loans with challenged credit, but where we know why the credit is challenged,” Menzies said. “Health, divorce, a lost job. Stuff happens. But we know the people, we know they’re honest and we know the families.”
The bank writes these loans and then tries to refinance them a few years later when the borrowers have improved their financial situation.
In recent years, Easton has also been performing a sort of tough love restructuring service for the increasing number of people aged 25 to 40 who have huge amounts of credit card debt. The bank will offer a home equity loan if possible, but it also extends five-year personal loans with strict conditions attached, including no new card debt.
“If you miss a beat, I’ll call your mother,” Menzies said.
It’s a joke. Kind of. He does often know the mothers of the debtors, and the fact that everyone sees one another around the town of about 15,000 probably does add some implicit pressure to make good on the loan.
Last weekend, Menzies steeled himself for questions from account holders on Monday about the stability of his own bank and what small banks were doing to protect themselves in the current environment. His answer?
“The first loss we take here is my personal loss,” he said. “It’s my personal equity in the bank, my personal reputation in a community I’ve lived in most of my life. I’m not just dealing with other people’s money, so it’s a whole different level of responsibility,” he said.
That response is far different from the sorts of things big banks were saying this week about the health of their institutions. And if your banker doesn’t take the current crisis personally, perhaps it’s time to find another one.
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