The Importance of Small & Medium-Sized Banks
Providing the financial infrastructure for many U.S. consumers
As my wife, kids and I drove across rural Wisconsin on our journey to go look at a new pet, there was a commonality about each community that we kept noticing. Every small community that we traveled through, whether it was unpopulated, or had a few hundred or thousand people in population, had in addition to a bar and/or diner, was a bank. It seemed no matter how small or quickly you passed through a community, there was a bank there.
This made me think back to growing up in my hometown in Wisconsin, which is a population of 1,200. There were two banks in town and they’re still there today, even though there isn’t a single stoplight for over ten miles.
Banks are the financial infrastructure of communities across the country. Small businesses and the people who reside in these communities rely on their local banks to provide the flow of finances in their area.
If a business takes in cash for payments, they need to take it to a local bank to deposit those funds. People need to make deposits and withdrawls. It’s where both businesses and consumers go for loans and credit access. It makes sense as you drive through smaller populated communities why they have a bank. It’s a necessity to maintain their financial infrastructure and the convenience, versus having to drive many miles to the next closest town.
Do you or people you know bank at a small community bank or credit union? How many of you have relationships with the local bankers, tellers and loan officers? It’s a relationship based business, just as people have with their financial advisor, insurance agent and accountant.
Not everyone lives in an app filled online only world. Many parts of the country don’t even have consistent internet connectivity. They still rely on relationship based business. A banking relationship to many is one of their most important business relationships.
The ongoing banking crisis which is straining some small and mid-sized banks shines a light on how reliant much of the U.S. consumer is on them.
Just how important are the small and medium-sized banks to the U.S. financial infrastructure by the numbers?
Here is what Jan Hatzius’s team at Goldman Sachs recently published in a report on small and medium-sized banks from the Financial Times.
US policymakers have taken aggressive steps to shore up the financial system, but concerns about stress at some banks persists. Ongoing pressure could cause smaller banks to become more conservative about lending in order to preserve liquidity in case they need to meet depositor withdrawals, and a tightening in lending standards could weigh on aggregate demand.
Small and medium-sized banks play an important role in the US economy. Banks with less than $250bn in assets account for roughly 50% of US commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending.
50% of all commercial and industrial lending is done by small and medium-sized banks.
60% of total residential lending is done by small and medium-sized banks.
80% of total commercial real estate lending is done by small and medium-sized banks.
45% of total consumer loans are done by small and medium-sized banks.
The Coffee Table ☕
I read a post of Ryan Holiday’s again for a third time. How The Struggles Of Opening A Small Town Bookstore Made Me A Better Writer. Then I watched a short video that he made called, I Opened A Bookstore In A Pandemic. It’s a fascinating story from an already famous writer who used his life savings to try something everyone told him was a terrible idea. For all the crazy ideas that bring risk and difficulty also brings the possibility of achieving something successful that changes lives.
There aren’t many pens that someone has and uses for over 20 years. I still have a red and blue Lamy safari pen which I bought together in 2003. I love to buy and try nice pens. But Lamy pens which are made in Germany, are still my favorite. I prefer to use black ballpoint pens. Here are my two favorite Lamy style pens.
Life is too short to write with an ugly pen.
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