Terry Wiese of The Wiese Co. Inc. laughed when Bank of America asked her about her struggling business last year. The Sherborn company does construction – of course it had a bad year in 2009, she said. But here was her company’s loan officer, Sean F. Flood, e-mailing her with, "There appears to be a fairly significant decline in revenues, particularly year-to-date in 2009. What is the cause(s) of that?"
Wiese’s reaction typifies the current populist impulse to cry foul when giant financial institutions – first given government assistance, now raking in profits – are compared with smaller businesses fighting to survive in a still-weak economy.
In the middle are community banks and credit unions. Small, healthy institutions are basking in a renewed surge of public affection, and business, as consumer anger keeps burning steadily.
Kevin Kiley, executive vice president of the Massachusetts Bankers Association, said he couldn’t speak to any recent flood of new business to local banks, but that the past year has indeed brought “slow and steady” growth in both deposits and loans.
“Whether that’s fueled by frustration or anger at large banks or not, I couldn’t tell you,” he said.
Power To The People
Regardless, Massachusetts banks have long spoken of their opportunities during a time when public ire is against big banks, and that anti-megabank message only seems to have gained steam in 2010, in Massachusetts and beyond.
A state lawmaker in New Mexico recently proposed that the state take its banking contracts away from Bank of America and divide its money management between smaller local banks and credit unions. An Oregon gubernatorial candidate has proposed the same for his state. Liberal media darling Arianna Huffington started a now-famous campaign in January to get U.S. consumers to move money from big institutions to small banks and credit unions.
“People feel empowered by doing this,” said Aleis Stokes, spokeswoman for the Independent Community Bankers of America. The pro small-bank sentiment has been floating around for more than a year now. The first wave of new community bank customers were nervous about big banks’ safety, but later hoards have been propelled by anger.
The continuing recession has only built momentum to that feeling, as customers still blame big banks for helping cause the economic meltdown, she said. This is a way to feel like they’re doing something about it.
“We Don’t Meet With Our Customers”
The Wieses didn’t necessarily want to leave Bank of America, but they soon found it necessary.
Ray Wiese forwarded a series of e-mails with BofA to Banker & Tradesman, documenting the drama: Instead of issuing a line of credit with the usual 1 percent over prime with an annual renewal, Bank of America wouldn’t budge from 7 percent over prime with a four-month repayment period. The Wieses were upset: They had this line since 2005, and although they now were struggling to pay down the principal, they hadn’t missed an interest payment.
They asked to meet with Bank of America’s local representatives in Waltham; Flood replied, “We don’t meet with our customers,” according to the forwarded e-mails.
Bank of America declined to comment on specifics, citing concern for violations of clients’ privacy. But Todd B. Rosin, spokesman, said while the bank understands that its customers need access to credit in the tough economy, BofA also has to manage its own risks.
The Wieses found a different lender, and now sing the praises of Needham Bank, which offered them a line of credit at zero percent over the prime rate with a five-year renewal. After Bank of America’s arms-length business dealings, Wiese said she appreciated the personalized touch of Needham, whose officers met with the Wieses personally.
Community and regional bankers score consistently higher on customer satisfaction surveys, said David VanAmburg, director of the American Consumer Satisfaction Index (ACSI), a California-based research company.
The five major banks – Wells Fargo, Bank of America, JP Morgan Chase, Wachovia and Citigroup – are always behind a sixth category, “All Others,” which encompasses pretty much everyone else. Annually, the ACSI polls 15,000 Americans on a number of categories, including retail, banking and insurance. The company’s 2008 numbers, the most recent year for which statistics are available, showed the regional and community bank category scoring an 80 on a 0-100 satisfaction scale, with the other five mostly in the low 70s.
That’s a big deal, VanAmburg said. “That’s an 8 percent difference, which is a very strong margin,” he said.
The 2009 numbers are due this month, he said, but so far they hold steady with past survey results. Of note in 2008: Credit unions scored even higher than small or regional banks, at 84 points on the scale.
Big Macs, Beware
Community banks and credit unions can derive some satisfaction from knowing they have consumers’ affection, VanAmburg said, but business is business. Many times those enormous, “unfriendly” big banks will stomp the little guy just because the giants can be everywhere and offer convenience.
It’s like comparing a little mom-and-pop pizza shop with McDonald’s, he said. People might love that little pizza place far more than the fast food restaurant, but they’re still probably going to eat at a lot of Big Macs, often because they’re cheap, familiar and ubiquitous. McDonalds is raking in cash, and that pizza shop’s margins are still probably razor-thin.
After all, there’s a reason the hundreds of community banks only register as “other” on the national survey: according to ICBA, half of all deposits are with those five major banks alone.
Still, the current environment is good for healthy banks’ business. Stokes, the ICBA spokeswoman, said neither she nor anyone could tell how long this window would be open, or whether it might lead to a fundamental shift in how Americans relate to financial institutions, one that outlasts even the bad economy.
Despite the ubiquity of big banks, she said, “this has created an opportunity for people to recognize that there are other options.”
