Friday, December 23, 2011

A Bank Even I Could Like

Long time readers of this blog know I am not a fan of banks in general.  But I concede the occasional exception.  Here is one.
Cattaraugus, N.Y.
As winter approached, a retired secretary here named Carol Bonner was putting snow tires on her car when she noticed that her back-right rim was bent. Ms. Bonner took the car to Otto’s Auto Body Shop and got bad news: the work was going to run her $244 — more than half of her $417 monthly pension check.

Without a credit card or enough saved up to replace the rim herself, Ms. Bonner, who is 61 and cares for her sister Jane, who is disabled, did the only thing she could do: she went down to the Bank of Cattaraugus and took out a $300 loan. The bank, in a reversal of the usual process, had bailed her out before. A few years ago, when Ms. Bonner fell behind on her property taxes and was forced to sell her home, the bank’s president, Patrick J. Cullen, who held the mortgage on the house, had his son Thomas buy it. Thomas Cullen, who lives in Chicago, never intended to live there. Ms. Bonner and her sister were able to stay as renters.

“The whole thing was incredible,” Ms. Bonner said the other day, a single pine branch hanging in her living room in lieu of a full Christmas tree, which she could not afford. “I just didn’t realize there were people like that in the world, people who would help you.

“Especially,” she said, “a banker.”

This has not exactly been a time of great love for bankers. Amid the continuing foreclosure crisis and Occupy Wall Street’s campaign against “the 1 percent,” it is easy to forget that not all banks are complicated giants, trading in derivatives and re-hypothecating valueless collateral. The Bank of Cattaraugus, for example, is by asset size the state’s smallest bank (one branch, eight employees, no credit default swaps) and yet it plays an outsize role in this hilly village an hour south of Buffalo: housing its deposits, lending to its neediest inhabitants and recently granting forbearance on a mortgage when the borrower, a bus mechanic, temporarily lost his job after shooting off his finger while holstering his gun.

If it sounds old-fashioned, it is. It’s not the kind of bank you’ll find anymore in New York City, where multiple branches and capitalizations counted in 10 figures are the norm. With $12 million in total assets, the Bank of Cattaraugus is a microbank, well below the $10 billion ceiling that defines small banks. It exists in a seemingly different universe from the mammoth banks-turned-financial-services-conglomerates, like Citigroup ($1.9 trillion in assets) or JPMorgan Chase ($2.25 trillion).

With obvious exceptions, business at the Bank of Cattaraugus hasn’t changed much since 1882, when 20 prominent residents — among them a Civil War surgeon and a cousin of Davy Crockett — established the bank to safeguard townsfolk’s money and to finance local commerce.

In its 130-year history, the bank has rarely booked a profit for itself in excess of $50,000. Last year, Mr. Cullen said, it made $5,000. He and his officers are industry anomalies: bankers who avoid high-risk and high-growth tactics in order to reinvest in their community’s economy.

“My examiners always ask me, ‘When are you going to grow?’ ” said Mr. Cullen, a Cattaraugus native who is 64 and has the prosperous stoutness of a storybook banker. “But where is it written I have to grow? We take care of our customers. The truth is we probably couldn’t grow too much in a town like this.”

While it faces many of the same regulations that govern larger banks, it operates according to an antiquated theory of the business: that a bank should be a utility, like the power company, and serve as a broker between savers and borrowers in its community.
Read the rest here.

I wonder if they open accounts for non-residents.


Eurasleep said...

Small-town private banks like this used to be the norm in the America I grew up in. Nowadays, they've been absorbed by or run out of town by the megabanks. As with pretty much everything in the US, when you cede your local interests to outsiders who do not know you or care about you (e.g. WalMart), your future options get rather grim.

Visibilium said...

The commercial banking industry isn't too hard to understand. The big money in banking is with corporate customers, and the big banks cater to them. Those banks may offer the latest bells and whistles to small retail clients, but those features come with a monetary cost and a certain amount of operational indifference.

The banking customers who prefer a more personalized approach or don't need the services that the larger banks provide will patronize small banks. Small banks serve niche markets. That big banks are always looking to buy out small banks simply means those formerly small banks will eventually cease offering the niche features that attracted their customers in the first place.

Some of us with complex needs prefer not to take sides in the large bank vs. small bank non-issue, but utilize both for particular requirements.