Community banks are hopeful on rule changes

NEW YORK - Community banks and small businesses are optimistic about changes the Trump administration and Congress have promised to laws that tightened supervision of the banking industry after the 2008 financial crisis.

The number of small, local banks has declined since the Great Recession, a change that advocates feel was intensified by the paperwork the increased oversight entails. That's disappointing to many small-business owners, who find it easier to form relationships with community bank branch managers and bankers than with those at regional or international banks. A community banker can advise them and steer business their way, for example, connecting a company owner with a new accountant.

"I need someone I can talk to who can understand the dynamics of a small business," says Ken Yager, who owns Newpoint Advisors, a Schaumburg, Ill.-based consulting firm. "With a big bank, you just disappear into an account number."

Jeff Bridgman remembers when his community bank would cover an overdraft for his antiques business, knowing he would have funds in the account within a few days. He had a close relationship with the employees even as the bank went through several mergers over 15 years. But a staff turnover at the bank, now one of the more than 200 branches of Northwest Bank, left him without the attention and support he had in the past.

"I don't know how a bank could help me today, so I don't even consider them as a tool for growth," says Bridgman, whose eponymous company is in York, Pa. "The bank for me today is just a place for money to sit for a couple of days while I write checks."

The United States had 5,521 community banks as of Sept. 30, down more than 25 percent from 7,442 at the end of 2008, when the banking crisis was still in its early days, according to the Independent Community Bankers of America, an industry group. The Federal Deposit Insurance Corp. has reported nearly 500 bank failures since 2009, most of them small banks. Others have merged to cut costs and stay in business, but many have struggled even as the economy has recovered.

Industry groups blame increased regulation, including the Dodd-Frank bill passed by Congress in 2010. Last week, President Trump signed an executive order directing the treasury secretary to review Dodd-Frank and its thousands of regulations. Changes in the law would have to be made by Congress, and House Financial Services Committee Chairman Jeb Hensarling of Texas has proposed modifying portions that affect smaller banks.