Small Town Banks III

People’s Federal Savings and Loan on the corner of South Ohio Street and East Court Street across from the Spot restaurant in Sidney, Ohio by Louis Sullivan

The last chapter of this essay on the disappearance of small town banks today brought about by the new dependence of nearby big cities on other major world cities rather than on them.

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

Another headache for bankers in rural areas, says Jerry Rexroad, CEO of Carolina Financial Corp. , is that “it’s very hard to find highly competent commercial loan officers who want to live in these small towns and can produce an adequate amount of production.” He said rural businesses often have less sophisticated reporting systems that make their finances tougher to analyze.

Carolina Financial, of Charleston, S.C., in November acquired First South Bank, of Washington, N.C. “The smaller towns are really more for deposit-gathering that gives you funds to lend to larger towns,” says Nick Nicholson, chief credit officer First South Bank.

Carolina Financial’s Mr. Rexroad says it is “equally committed to growing our market share in rural and urban markets,” and recently assigned senior loan officers to help cover rural areas.

Small-town businesses say bank pullbacks weaken local economies further.

PNC installed an ATM 6 miles from Woodland in Rich Square, population 884, when it closed its branch there in 2016, leaving the area without a bank branch for the first time since 1902.

“It’s hard to get a business to come in” when there is no bank to cash workers’ paychecks, says Rich Square Town Commissioner Reginald White. Rich Square has a barber shop, grocery, hardware store, pharmacy, post office and three restaurants. But the storefronts on one side of Main Street are vacant.

Horace Robinson, owner of Upper Cutz Barber Shop on Main Street, makes weekly deposits at the ATM. When he needs change, he unlocks his soda machine or one of the shop’s arcade games rather than drive to a PNC branch 17 miles away.

A PNC spokeswoman says the bank, “continuously evaluates its branch network to assure we are meeting customer needs in a cost effective way.” Customers, she says, “are banking very differently today” with online and mobile channels and ATMs.

After deciding to close the Rich Square branch, PNC “contacted 15 banks, in some cases multiple times,” in an unsuccessful effort to find another financial institution to take it over, she says. PNC donated the branch to the community, installed a full-service ATM and made other investments, she says.

The interior of People’s federal Savings and Loan by Louis Sullivan

Ms. Baker, the peanut-business owner, says 45 years ago, when her mother moved her ceramics classes from home to a storefront, a local banker took a personal interest in the business and gave her a loan.

In Ms. Baker’s 15,000-square-foot operation, workers make peanut brittle and water-blanch and fry peanuts, then season them or cover them in chocolate. It employs up to 18 during peak season.

When she sought a loan to expand into a new building, she figured the family’s decades-old relationship with Southern would help get her one. Instead, she says, a banker at Southern “told me I should close the business down” or operate it just during the busy Christmas season. PNC, she says, told her there wasn’t enough foot traffic to support a store.

She received a loan from Carolina Small Business, a nonprofit lender a two-hours’ drive away in Raleigh. It offers financing, education and training to small businesses but doesn’t collect deposits or offer checking accounts, wire transfers and other traditional banking services.

Because it takes so long to get to the closest PNC branch, where she does her business, Ms. Baker sometimes makes deposits at a Southern branch about 8 miles down the road. Doing business with two banks, “you end up having double fees.”

Simple transactions require more planning. Employees must leave earlier to cash their paychecks, says Ms. Baker, who plans to add automatic deposit next year. When the peanut business runs out of change, Ms. Baker and employees go through their pocketbooks.

Moving to a town with more foot traffic might have made sense, but her business “was like that last thing in our town,” she says, and “I didn’t want to take it away.”

A shuttered storefront in Rich Square, N.C. Photo: Veasey Conway for The Wall Street Journal

This concludes the three-part article on Small Town Banks.

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