There has been much discussion and debate recently about the role of community banking in America. Information was recently released from the FDIC that indicated the number of banks has dramatically decreased to 6,891 as of Sept. 30, 2013. Opinions have varied greatly as to whether a reduction in the number of banks is a positive or negative trend for the industry. There also have been various viewpoints on the impact it could have for community banks, given the large number represented in the decline.
Because of our extensive history and partnership with community banks, I would like to take this opportunity to reiterate UMB’s position on this extremely important issue. We absolutely recognize the importance and necessity of community banks and are here to support them.
UMB has been offering correspondent banking services since 1928, and we currently work with more than 1,000 community banks. Because of our relationships and experience in this area, we know firsthand the value community banks provide and the part they play in not only our industry but in their communities, as well.
One extremely significant point that has been missing from this conversation is the nature of the decline and what this means going forward. While the overall decrease in banks is considerable, it is important to note that this trend has greatly slowed over the past few years, leaving a strong, healthy and stable group of community banks that have demonstrated solid performance and growth. This is obviously indicative of positive activity and that credit needs are being effectively managed.
To that point, we understand the critical banking and financial needs community banks address within their communities, and we are firm in our convictions that the community banking model works. Our company has always been an advocate for community banks that serve their local communities, businesses and citizens, often providing services larger banks are unwilling to extend.
Like UMB, community banks make loan decisions on more than a paper application — they take the people into account, as well. Rather than simply using an electronic scoring system that is untouched by human hands, such as the ones large institutions may employ, community banks use relationships to help guide their decisions.
It is behaving like your grandfather’s bank — it is taking the time to really know your customers, which is something our chairman and CEO, Mariner Kemper, frequently says we need to do more of in our industry. He recently shared a story about a trip he took to Abilene, Kan., and that it reminded him just how important these smaller communities are to our economy. Values run deep in these communities, guiding decisions and philosophies that result in sensible and positive outcomes for the local citizens and businesses.
Unfortunately, many have unfairly projected negative depictions of the financial industry. They have errantly grouped all banks into one category and then berated us for the unfortunate decisions made by others. If community banks were in charge, we would not be worrying about values in Washington.
We know banks are the lifeblood of their communities. As such, having community banks solidly positioned with the services required to fulfill their mission of growing and supporting their communities is crucial to the long-term economic health and vitality of their communities. It is also essential for the future of banking — and we will continue to be here to support community banks in their endeavors.
Peter deSilva is president and chief operating officer of UMB Financial Corp., Kansas City.
Copyright (c) January 2014 by BankNews Media