What's Going On?

What's Going On?

“What’s Going On?” is a new feature for the Miners Bank web site. It is opinion oriented and will raise questions related to the banking industry and our customer base. We invite your feedback and comments.

George Groves

President & CEO

The Miners Bank 

• What's Happening to Bank Branches?

  Saturday, February 18, 2012

  What’s happening to bank branches?

  In 2009, the number of branches in the US peaked at about 100,000. In 2010, the number dropped by 1% to 99,000. This was the 1st recorded drop in the number of bank branches.

  While banks will continue to open new branches to fill a tactical/geographical void in their delivery system, the absolute number of branches has begun a long term decline.

  It would be easy to argue that the reduction is due to the difficult economic environment and that is clearly an important factor (and you can expect to see the larger banks become even more aggressive in branch closures), but the real reason is a very positive one—customers are rapidly adapting to new technologies and delivery methods.

  Most Americans have access to a personal computer (if not at home, most libraries have them available). Currently about ½ of Americans have a smartphone. With advanced applications and sophisticated security, virtually every activity formerly conducted at the branch can now be conducted remotely, with mobility, and in the time of your choice.

   
  It is not a stretch to say that in the next 15-20 years the smartphone will replace most of the banking transactions currently conducted by check or debit/credit card. The power of these mobile devices gives the consumer greater power than ever in determining how to “bank”

  .
  Some may lament the decline of the physical branch. Many more will welcome the freedom provided by technology and won’t pay to subsidize a branch network. Branches become more strategic to the banks and less tactical to the consumer.

  The branches are declining—long live the branches.

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• 5:1 Investment in Communities

  Tuesday, December 13, 2011

  5:1

  In a recent study conducted by Biz2credit, Banks with assets greater than $10billion approved only 9.2% of Small Business loan applications. The approval rate for community banks for Small Business loans was 45.1%. Yes, the approval rate is almost 5 times higher for the loans!

  Since Small Businesses account for most of the new jobs growth in the US, it’s important to recognize that community banks deliver the goods.

  What explains this disparity? One word—Community. Community banks prosper only if their community does. The incentive is very strong for community banks to spend the time to know the customer, the business plans, the history, etc. because we want new jobs to flourish in the community. We make local decisions based on local knowledge. The larger banks focus much more heavily on numerical analysis (conducted out of the community market) and do not allow as much emphasis on local knowledge for their decisions.

   With all the commotion concerning the “Occupy _____” movement, it is useful to step back and understand the distinction between Wall Street and Main Street.

  Community Banks serve their communities.

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• Debit Cards and Unintended Consequences

  Monday, October 17, 2011

  Debit Cards, or more specifically debit card fees, have been in the news lately headlined by a Bank of America proposal to charge a $5 monthly fee—under certain circumstances.

  It is widely agreed that debit cards are a safe and fast way to access money—even better than their predecessors—the ordinary check. However, there are real costs to provide access for customers in an instant, private, secure and reliable manner.  This 24/7 access is provided anytime anywhere.

  I guess that since a check is a tangible piece of paper, customers can ascribe value/costs to that method. Just because debit cards are electronic doesn’t mean there are no costs. Building and maintaining the infrastructure, computers, telecommunications systems, fraud prevention, staff salaries and benefits, regulatory compliance, etc creates a substantial expense—those expenses need to be covered by income.

  In general terms, it costs about $250 to $300 a year for a bank to operate a checking (debit card) account. The revenues earned by banks on accounts of less than $2,000 simply will not cover those costs.  The fees paid by merchants for debit card services helped pay those costs and subsidized free checking. The government has mandated that those fees are reduced by one half. In another case of unintended consequences, the reduction on the debit card charges to the merchants creates a cost shift to the debit card customer. Merchants win, customers lose. Thanks Uncle Sam.

  It is not clear at this point what the right solution to this congressional cost shift will be. For one it demonstrates that the government should avoid the unintended consequences of mandating terms to the private market as consumers generally lose. I suspect there will be a number of efforts by the banking industry to find the best and most fair solution. The proposal by B of A may not survive in the market place, but a fair allocation of costs for value will be developed.

  Avoid the headlines and search for What’s Going on!

   

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• American Community Banking

  Friday, September 23, 2011

  I just returned from a short vacation in a European country.  Typically European, in which the federal government plays an oversized role in the lives of the citizens of that country.

  I spent some time observing the banking industry (busman’s  holiday?).
  

  There are far fewer banks.  There is less competition.  The banks are very security conscious.  The banks are even more regulated than in the US. Marketing of bank products and services is usually limited to in-branch display (and since the banks are so security conscious, there are not many customers in the lobby).  The customer experience in that country was very different from that offered in the US.
  

  Let’s take a brief look at the American banking industry.  There are currently 7,513 insured banks.  Of these, 6,846 or 91% are banks with an asset size of less than $250 million and can be considered community banks.  Yet, the 9% larger banks have about 90% of the total assets in the industry.  The industry is consolidating at a fairly rapid pace. Using the $100 million banks as an example, in 1990 those banks composed 70% (in number) of all banks; in 2000 they were 55% and 34% in 2010.  During this same time frame, the total of insured institutions has dropped from about 15,000 to the previously mentioned 7,513.  We are losing the community banking segment of the industry.
  

  What’s causing this consolidation?  The single most important factor is the change in the business model emanating from new regulatory requirements and laws.  The smaller the institution the larger the proportionate cost.  There are many sides to the larger argument of regulation equals consumer protection.  But, I would argue that if consumers are charged a higher cost or with less choice, the price of regulation has exceeded the benefit.
  

  The point of all this is that we are becoming Europe in which the industry is dominated by the giants. Community banking—in which you know the bankers and the directors-- is dying out.  Pushed out by a regulatory zeal that has yet to prove its benefit.
  

  Do you want America to become Europe?  While it may be fun to bash the banking industry, there are real consequences in reaction to regulation.
  

  That’s what’s going on!
  

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• Funding for Small Businesses !!

  Saturday, August 13, 2011

  What’s Going On? 

  Miners Bank was recently chosen by the US Treasury to receive a $3.5 million investment from the Small Business Lending Fund (SBLF).

  The SBLF was created to help banks provide more lending to small businesses in their market. Overwhelmingly, the new job creation in our country comes from the small business sector.

  Miners Bank was the 21^st bank in the country selected and the only one in our geographic market. The $3.5 million investment will allow Miners Bank to make about $40 million new commercial loans to the locally owned, privately held businesses in the marketplace. Job creation and capital investment in Schuylkill and southern Luzerne counties can benefit.

  The strategic focus for Miners Bank is to provide the products and services—loan and cash management—that these businesses need to grow. Try us out.

  That’s what’s going on.

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• Have you looked at your mortgage lately?

  Monday, August 08, 2011

  What’s Going On? 

  Have you looked at your mortgage lately?

  The mortgage market will not soon return to the crazy days of the mid 2000’s in which neither jobs nor income were required to get a mortgage from some providers. We won’t see that again!

  But, if your income can be proved and you have down payment capability, your mortgage options are very attractive. A 20 year, zero point portfolio loan has an interest rate of 4.9%. A saleable loan for 15 years and no points can be found for 3.75%. Call your Miners Bank branch manager for specifics. The point is you can benefit to purchase a residence or refinance an existing mortgage due to the historically low rates.  Whatever your situation, if you are creditworthy, it may well pay to examine your existing mortgage.

  We also learned during this economic cycle that ownership may not be best for all. But… if you want to own or upgrade, the housing market is full of bargains. Combine that with attractive mortgages, it is a good time to be in the buyers’ market.

  Check it out—that’s what’s going on.

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• What Are They Thinking?

  Tuesday, August 02, 2011

  We’ve just been treated to the political sideshow titled the “Debt Ceiling Crisis”.

  The politicians—all 537  of them- must think we are stupid. Everything from Washington must be a crisis so they can emerge at the 11th hour as heroes for coming up with a solution—regardless of its merit.

  The Debt Ceiling is not the problem.  The problem is the debt and the fact that we borrow forty cents of every dollar we spend. That sounds to me like we need to reduce spending and reduce debt. We have all read about the many ridiculous programs that we support. Why doesn’t common sense prevail and our country’s leadership develop a better set of priorities so we can cut spending? For example, do we really need to know what kind of sun tan oil is best for sea otters? Why can’t the politicians be held to the same standards of accountability that we are as families/individuals with our budgets?

  Our country’s bloated balance sheet with its dangerous reliance on debt is casting a dark shadow on the financial health of the private sector. When you give the private sector certainty and balance, and job creation explodes. History is consistent - certainty equals job growth, while uncertainty equals paralysis.

  Let’s look at the banking industry as an example. I am not going to include the large regional/national/international banks as they can fend for themselves. Let us focus on the community banks. Job creation is driven by “small” businesses. Those small businesses are largely financed by community banks. Therefore one would think that Washington would develop policies that move community banks forward and, with that the small-business customers of those community banks grow and create jobs. To its credit, the Treasury did develop the Small Business Lending Fund (SBLF) to provide more capital to those community banks to lend to job creators. But… it is very undersubscribed. What was a $30 Billion commitment is turning out to be a $10 billion program. Why?—nonsensical rules and skepticism of governmental programs following the heavy handed approach used on the TARP program.

  “Make sure to close the barn door after all the animals are out the door.” This seems to have been the mandate that regulators used to develop policies and regulations after the recent recession. However, it wasn’t lack of policies/regulations that caused the problems. It was lack of enforcement—especially oversight of FNMA and FLMC (aka “Freddie” and “Fannie”) that blew up the mortgage business and brought on the recession. Did the Dodd-Frank bill address this?  No!  Did it (or, will It, since many of the regulations coming from this bill have yet to be formulated) hamper community banks?  Yes.  Did community banks cause the problem?  No!

  As consumers, you no doubt have seen changes in rules at your local bank. Perhaps you’ve seen new fees or restrictions on your activity.  Ninty-nine percent (99%) of these changes come as a reaction to Congressional direction.

  What are they thinking? I, for one, would like more common sense and a lot less political melodrama.

  How about you?

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