Mega Banks vs. Community Banks

by Dave Kepler

There have been many articles written extolling the virtues or warning of issues with both Mega Banks and Community Banks. The truth of the matter is that both are likely capable of meeting your needs.  Community Banks with $2 billion or more in assets typically have the lending capacity to finance all but a few very large businesses that want to borrow $25 million or more. In this case, it is sometimes more efficient to seek that level of financing from a Mega Bank, however, these larger transactions are also often funded by “club groups” of community banks.

Having personally worked in commercial banking for more than 40 years for both Community Banks and Mega Banks, I can attest that there are certain specialized products that the larger banks can provide that community banks do not. These include Foreign Exchange, International Trade Letters of Credit, sophisticated Treasury Desks, Merger & Acquisition advisory services, and Capital Markets products like complex derivatives, private placements, and private equity sourcing.

However, the reality is that the great majority of the business customers in the Lehigh Valley market simply do not need most, if any, of the sophisticated products previously mentioned. Customers of the banks who do provide those services end up bearing some of the cost of supporting the overhead related to these advanced services. It is easy to see this is the case by the generally higher price they pay for deposit, cash management, credit, and other services that they do utilize. Have you checked your bank fees lately?
Products and pricing are two differentiators, however, to me, the biggest differentiator – and maybe the most important to a prospect or customer – is the institutional character of the bank.  What does this mean?  To me, it means taking many factors into account:

  • How are the customers treated?
  • How personal is the service?
  • Who advocates for the banking relationship within the institution?
  • What kind of stability do the employees have in their position?
  • How are the employees treated?
  • Where are the TRUE decision and policy makers located?

Mega Banks may have terrific employees but those same employees have little, if any, effect on policy, process or pricing.  It comes down from on-high, wherever that might be – New York City, Charlotte, San Francisco, Minneapolis, or some other far away city. Is their management familiar with all parts of our local area? They may know parts of Philadelphia County but do they even know where Bucks County or the Lehigh Valley is located? Doubtful. Have they ever been here? Doubtful.  Do they really care about what is going on in our communities? Doubtful.

I don’t say this with a disparaging intent. It is simply the way it is. Keep these questions in mind when you are looking for a banking partner. Univest has been serving the local community for 140 years and remains committed to developing and maintaining long-term relationships. The objective at Univest is to create customers for life by meeting all of their financial needs.

Univest Bank and Trust Co. is Member FDIC, Equal Opportunity and SBA Preferred Lender.

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