Small Town Banks II

National Farmer’s Bank at Broadway and Cedar Street in  Owatonna, Minnesota, designed in 1908 by Louis Sullivan. A national architectural treasure, it has been called the most beautiful bank in America.

We continue the article on small town banks—how they are vanishing as the services these small towns once provided the big cities dry up due to globalization, making it harder and harder to conduct profitable business in these towns.

By RUTH SIMON and COULTER JONES  Dec. 25, 2017  for The Wall Street Journal

The Gap’s Effect

Around Roxobel, population 220, and other parts of rural northeastern North Carolina, the banking gap is hurting business. Three months after PNC closed a bank branch in Colerain, population 187, Tommy Davis closed his Nationwide Insurance office there. Losing the bank branch meant he had to drive 25 minutes each way daily to make deposits. And he lost foot traffic from people who once dropped by on their way to and from the bank.

“It’s really like a death sentence for a small town because the bank is the center of all activity,” says Mr. Davis, who owned the Colerain location for 20 years. He moved the business to Windsor, a larger town 25 miles away.

Twelve miles north of Roxobel in Woodland, population 729, Sharon Ramsey closed the DeJireh Grill because, she says, she couldn’t get bank financing. At first, she says, the restaurant “was turning a profit, but it was just enough to stay open.”

She was told she didn’t have enough credit history to qualify for a loan, Ms. Ramsey says. She closed DeJireh in 2013 after three years to focus on her variety store in nearby Conway, which lost its only bank branch several years ago.

Southern closed its Woodland branch three years ago. Then the local grocery store shut down. The loss of both means “most people drive through here” without stopping, says Joe Lassiter, owner of Lassiter’s Used Cars. He keeps no more than 10 cars on his lot, down from about 20 before.


Barbara Outland, owner of Grapevine Cafe down the street, drives 11 miles to Murfreesboro, N.C., to get change and make deposits. Ms. Outland, 71, says that as defense against any thieves eyeing that cash she locks up at night with a .38 Smith & Wesson revolver “in my hand, in plain view for all to see.”

Woodland Mayor Kenneth Manuel says Southern rejected the town’s request for an ATM, saying it needed 4,000 transactions a month to justify one.

Southern Senior Vice President John Heeden declines to comment on Woodland. “It is never easy to make such decisions that impact our friends and neighbors in these close-knit communities,” he says, “and Southern Bank certainly takes these decisions very seriously.”

The bank, with $2.6 billion in assets, was started by local investors in 1901 as Bank of Mount Olive. It has 61 branches, including the only bank in Woodland’s Northampton County. Southern says that 36 of its branches are in towns with populations under 6,000 and that in most areas where the bank has closed branches, there is another bank fairly close. “Southern Bank embraces its ongoing commitment to serve rural communities that are overlooked by many of our larger competitors,” Mr. Heeden says.

In considering closures, he says, “profitability and market dynamics are primary drivers, along with other factors that can vary over time and by market.”

Interior of National Farmer’s Bank by Louis Sullivan

Economic Ills

Rural communities in parts of the U.S. have become less attractive to local banks because they are suffering from a variety of economic ills that have taken a toll on business activity and new business formation.

Weak school systems have made many rural communities less attractive to employers, says Peter Skillern, executive director of Reinvestment Partners, a nonprofit based in Durham, N.C., that works with rural communities.

Dollar stores and big-box retailers drained customers from some local shops. The financial crisis left some residents with battered credit and collateral. Populations dropped as youth moved out.

These communities have been hurt by declines in the textile and furniture industries, consolidation in agriculture and decreased government support for tobacco. Average annual employment in North Carolina’s 80 rural counties fell 6% between 2007 and 2016, according to the Raleigh-based NC Rural Center, compared with a gain of 11% in its six urban counties.

“It would be great if there were branches and people in all these rural communities,” says Kel Landis, former CEO of RBC Centura, which once owned the rural North Carolina bank locations purchased by PNC in 2012. “But I do understand, as a former banker, the economics. If you have a place that used to be thriving, but the downtown has closed up, having a branch there is a money-losing proposition.”

To be continued

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