President Lincoln next to an image of a check from the 1800s

President Lincoln Could Have Banked Here

The past couple of weeks we have been concentrating on banks and credit unions that are struggling. Between that, and the new mega-merger announcement between BB&T and SunTrust (February 7th) that we will get into later, we thought this was a good time to celebrate traditional, community banks that have stood the test of time.

The banks listed on page 7 and on the Supplement to this week’s issue each have a minimum of 150 years experience serving their respective communities. Each is timeless in its commitment yet innovative in approach. Instead of trying to be the biggest, they are happier serving their customers in their corner of the country.

Not surprisingly, the majority of these seasoned banks are recommended by Bauer (rated either 5-Stars or 4-Stars). You have to be strong to stand this test of time. A few are rated 3½ and 3-Stars but none are rated lower than 3-Stars.

The largest bank on the list is 4-Star Apple Bank for Savings out of Manhasset, NY. With $13.6 billion in assets and 80 branch locations it is on the larger side for a community bank, yet it is all about community and has been since 1863. From Staten Island to White Plains, Apple Bank is New York’s community bank.

Conversely, there are twelve banks listed that have less than $100 million in assets proving they don’t have to grow out to grow old. 5-Star Root River State Bank, Chatfield, MN, for example bills itself as “Your Community Bank for Generations”. And it is. Established in 1856, its ten employees have over 240 years of combined experience in Chatfield, which has a population of less than 3,000 people. “All we have to sell is service”, says, Charles M. Johnson, the president of the bank.

Then, somewhere in the middle you can find 4-Star Jefferson Security Bank out of Shepherdstown, WV. Jefferson Security is one of 20 banks celebrating its 150th anniversary this year. Not only is it the oldest bank headquartered in the Mountain State, it is also a great example of a community bank. To celebrate its milestone, Jefferson Security Bank is giving back to the local community with 150 days of random acts of kindness as well encouraging kindness and generosity through the community. The 150 days began before Christmas with 150 toys donated to local charities for children in need during the holidays. It will continue until the culmination on May 19th, Jefferson’s 150th anniversary.

Jefferson Security Bank grew from just $1,750 when it first opened its doors in 1869 to over $300 million in assets today. And it did so organically, becoming a financial partner with its customers, offering the products they needed while maintaining disciplined underwriting standards. That dedication remains a constant through its six branches today. In fact, Jefferson closed out 2018 with an all-time earnings record. That’s how a community bank does it.

That’s not how the Big Boys grow. Getting back to the merger between BB&T and SunTrust—a $28 billion merger: As of September 30, 2018 data, BB&T Corporation is the 16th largest holding company in the U.S., most of its assets are at 5-Star Branch Banking & Trust Company, Winston-Salem, NC (also known as BB&T); SunTrust Banks, Inc. is the 17th largest with most of its assets at 5-Star SunTrust Bank, Atlanta, GA.

The combination, if approved, will create the 6th largest U.S. bank with $442 billion in assets serving roughly 10 million households. That’s a far cry from a community bank, yet, both of these banks had humble beginnings. BB&T was originally chartered in Wilson, NC in 1872 and SunTrust has called Atlanta home since its inception in 1891. Throughout the years both have been acquirers but BB&T was a much more active purchaser than SunTrust.

As they stand now, the two banks have substantial branch overlap. What is expected is that they will trim back duplicate branches (and the costs associated with them) and invest that saving in technology. Big Banks require big data. Also, both BB&T and SunTrust are approaching the $250 billion threshold that propels them into the arena with the Big Banks that will require higher capital levels. By combining the two companies, the CEOs (Kelly King at BB&T and Bill Rogers at SunTrust) decided they will meet/exceed that threshold together.

This merger is about efficiency and technology. On the human side, however, we can expect substantial job losses. Then there is the cultural aspect. These banks have very different corporate cultures and marrying the two may not be so easy. This is where the line will be drawn. While technically a merger of equals, in reality BB&T has the upper hand.