Community Service

It’s rightly said that the SMB market, which employs a majority of the American workforce, is often overlooked in the national business discourse. Similarly, community banks and credit unions are too often neglected in the mainstream dialog over the financial services industry. This is a glaring oversight: these sectors not only play a critical role in the daily lives of many Americans, but also offer a fresh and distinct picture of the economy at large. Some recent stories, still more the exception than the rule, prove the point.

First, SNL Financial is out with its annual list of the nation’s best-performing community banks, and true to form, there are some very interesting angles. For example, Atlanta-based State Bank Financial Corp. (the holding company behind State Bank & Trust) ranks No. 1 among banks on the larger end of the spectrum, between $500 million and $5 billion in assets for 2011. This would seem to be an unlikely location for a success story of this caliber—Georgia has suffered through nearly 80 bank failures since the market tanked in 2008. However, SBFC has since acquired a dozen of those fallen competitors and assiduously built up a strong, and now market-leading, portfolio.

Coming in second is American First National Holdings of Houston, which has a very different story to tell. Founded by six entrepreneurs barely 15 years ago, it is focused on the Asian American market. And then there’s Citizens National Bank of Bossier City, La., launched in 1985 by a small group of local businesspeople who saw the need for a locally owned and managed bank that could provide modern banking services “without the cold and impersonal delivery. . .so prevalent in today’s financial institutions.”

The entire list exhibits this kind of national diversity. Texas has the highest number of ranked banks, with 12 entries in the top 100. California comes in second with nine, followed by Virginia and Pennsylvania with eight each.

SNL casts a separate look at banks with assets of less than $500 million, and here too there are pleasant surprises. Topping the list of community banks in this category is Amerasia Bank, located in Flushing, N.Y. That’s literally a stone’s throw away from Wall Street and its conglomerates. Launched less than 25 years ago, the bank has earned recognition from financial rating companies.

Meanwhile, The Street offers a different perspective on this very issue by pointing out that long-term growth investors would do well to “look beyond the largest bank holding companies and consider profitable, growing community banks.” The simple, underlying reason: While the multinationals get all the attention, it’s their smaller counterparts, working at the community level, that have more room to grow.

For the record, most of the largest banks are healthier now than they were even a few years ago: All but four of 19 major institutions got a boost last week after the Federal Reserve, reporting on rigorous stress tests conducted over the past few months, determined them strong enough to survive another harsh downturn. J.P. Morgan Chase and Wells Fargo, among others, got the thumbs-up; Citicorp did not, and the market seems to reacting accordingly.

The reality is that community banks play a critical role important in the daily economy, just like their much larger counterparts. However they get much less attention in the process, unless there’s a scandal, or something of political significance, such as last year’s much-heralded Bank Transfer Day.

But for the most part, community banks do what they do quietly—serve with dedication and innovation, effectively using the technologies and tools most needed to survive and thrive. For that, they deserve far greater recognition than they typically get.