Big banks: The age of mergers and takeovers

Vermont Business Magazine, Mar 01, 2005 by Barna, Ed

"If we're not doing a great job serving our customers, we're going to lose market share," Boutin concluded.

"People still expect service, and we look at some of these changes in the competition as perhaps even offering some opportunity for us," said Gibbons at Union Bank. Like Pelletier, he sees an advantage in the kind of seasoned personnel who choose to remain with community banks. Among them, he said, are some who decided early in life to go to the cities, see some of the world, get experience in big companies - then when it's time to raise children, settle down in quality of life places and work for companies like Union Bank.

Another factor making it easier for smaller banks to compete is that banking technology is far more affordable now, Gibbons observed. Along the same lines, sophisticated services can be obtained on a contractual basis without setting up internal departments. In areas like offering ATM's or credit cards, "15 years ago we could never have competed , he said.

The mid-size institutions will be the most vulnerable, Gibbons predicted. They won't be able to do the same kind of commercial lending, and "they can't have the same economics of scale as the behemoths. They're the ones that are going to be acquired."

Flying Below The Radar

Vermont has some banks so small that some out-of-staters are amazed they exist, but they have some unique resources for survival, The kind of people who buy into Wal-Mart's idea that opposition to their stores is just downtown merchants wanting to keep their high-profit margins have a hard time envisioning community loyalty to a bank and bank loyalty to a community, but that sort of reciprocity is real in the Green Mountain State.

Asked if big bank mergers had ever driven customers in the direction of the National Bank of Middlebury, president Kenneth Perine said, "Often." There is "absolutely" a loyalty, particularly among the stockholders, who "really like to see a local institution."

That extends to business relationships as well, Perine said. When some of their commercial customers reach a certain size, "they could be better served at a larger bank, and we communicate that to them." But even after ceasing to be their primary bank, "we ARE the secondary bank for them."

The National Bank of Middlebury is going into its 170th year, "so we believe that our model has been adapted to last over time." A personalized focus has been the key, and if that local interest in personal service goes away, "it will be time for us to change into something else."

The littlest locals aren't immune to raids by bigger banks. In Brandon earlier this year, a Select Board request for proposals for CD rates brought four responses, according to Town Clerk William Dick: the First Brandon National Bank, 1.43 percent; Citizens, 2.08 percent; Banknorth, 2.10 percent; and Chittenden, 2.30 percent. The board split on how to make the decision, torn between their fiduciary responsibility to the taxpayers and their realization that First Brandon, with whom they had done almost all their tax anticipation loans, was a key employer, a factor in the town's downtown revitalization and a source of local loans that would make their investment there have a multiplier effect.