Message from the President
"Little Man" is a country song written and recorded by one of my favorite American country music performers–Alan Jackson. The lyrics of the song tell about how many small businesses have been closed because they could not compete with big "super" stores. Today's news talks about the demise of the small town bank, but not everyone is buying the rhetoric.
The introduction of thousands of pages of new regulations had some industry observers believing that small community banks do not have the personnel or dollars to manage the sheer volume of new rules. Hiring additional personnel or paying an outside expert are viable options, but those observers believe the extra expense will put the "Little Man" in an unprofitable position and cause his demise.
Current banking articles have focused on the fact that the number of U. S. banks has fallen below 7,000 for the first time in modern history. Bank consolidation is rampant across this country. A recently released FDIC study shows that consolidation has most affected the very small financial institutions.
My role as a Dallas Federal Reserve Director includes representing many of the community banks in the eleventh district, which includes all of Texas and parts of Louisiana and New Mexico. I communicate by email with many small banks under $100 million in assets and there is no doubt they are struggling to manage the onslaught of new financial regulations. In fact, I conducted a poll last month and "regulatory burden" was the number one concern keeping them up at night.
But I do not believe they are going to be the "Little Man" in Jackson's song. These small banks are the lifeblood of their communities, and often the only bank in town. They may be forced to consider a merger with another community bank, but don't look for them to disappear. Their doors will remain open and their staff will continue serving their community.
In fact, the FDIC study states: "Our analysis shows that the projected decline of the community banking sector has been significantly overstated."
In addition, banks like HomeTown Bank, with assets between $100 million and $1 billion, actually increased in number from 1985 to 2013. In a press release, FDIC Chairman Martin Gruenberg stated that "The FDIC study clearly demonstrates the strength and resilience of the community bank sector and supports the conclusion that community banks will continue to play a vital role in the financial system of the United States for the foreseeable future."
As I told our shareholders at our recent annual meeting, I am proud to say we continue to operate as an independent community bank. As we approach the milestone of $500 million in assets, we are in a position of strength. We are large enough to take on the new regulations, and we are in strong markets. We know our customers, and our board provides great leadership.
No, we are not the "Little Man." Quite the opposite, as the FDIC Chairman said, we will continue to play a vital role in the financial system of our community.