I am sure most of us must have heard or read about some of theUS’ biggest banks, such as JPMorgan Chase, Morgan Stanley, Citigroup, Wells Fargo, and the Bank of America.
But what about the smallest?Can you guess which is the smallest American bank? Most of us won't know it, right?
Bank With No Fees, No Website & No ATM
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Well, the answer is a more than 100-year-old bank with no ATM, no website, and no transaction fees, and its name is Kentland Federal Savings and Loan.
With just $3 million in assets, Kentland Federal Savings and Loan is the smallest member of the Independent Community Bankers of America (ICBA), a trade organisation for small banks.
The Federal Deposit Insurance Corp. has been able to verify that, yes,Kentland Federal Savings and Loan does indeedhave the smallest asset base of any federally insured bank in the country, thus making it the smallest American bank.
If you are curious enough to search about it on the internet, ensure that you do not end up mixing it up with or confusing it with another bank that goes by a similar name, Kentland Bank.
Inside America’s Smallest Bank
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Beyond its small size, Kentland Federal Savings and Loan is unusual in other ways. It has just one location, i.e., Kentland, Indiana; noATMs; no transaction fees; and no website.
There are basically two things you can do as a customer of the bank: obtain a home mortgage, open a savings account, or open a CD (certificate of deposit).And when you do either, it will all be, quite literally, paperwork. The bank’s CEO, James A. Sammons, who belongs to the fourth generation of his family to run the 100-plus-year-old bank and is its only full-time employee, confides that he’s a bittech-averse. "Computers are great when they work," says the 55-year-old, laughing, as per the Bloomberg report.
Thebank has only 2 employees, one being CEO Sammons himself and the other a part-time teller named Michelle Alexander. She is the only other employee of the bank and usually arrives by 9:00 a.m. Much of the work at the bank is done by hand. Alexander, too, uses a traditional coding machine to write checks.
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Early Years
The bank was founded in 1920 by current CEO Sammons’s great-grandfather, and its only branch is still at the same location (Indiana).Sammons, like at least two of his forebears, has served in city government. This nexus of power and trust has been key to the bank’s longevity. "We were the only institution that didn’t close during the stock exchange debacle in the late 1920s," he says. "People felt secure that their money wasn’t going anywhere."
Banks such as Kentland Savings that have managed to stay independent after many decades of industry consolidation were born in a completely different regulatory era.
From the perspective of Kentland Savings, regulations that define "small or midsize" as $50 billion and under miss it completely. "Here recently, we went through an exam," CEO Sammons says. "The powers that be are concerned about our capital growth—they deem us ‘too small to survive.’" It seems that regulators are concerned about his bank’s eroding asset base. There are currently only 40 or so mortgages outstanding, and as customers pass away, the stock is not being replenished with loans to youngsters, who tend to have no particular affinity for in-person banking.
CEO Sammons fairly believes that his way of doing business might end with him.He has four sons (including a set of triplets), and none are drawn to the family business.“When I am finished—whether it’s [regulators] pressuring us to be absorbed or me walking away—we will have to be acquired,” he says, as per the report.
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Part of the reason is that hisbankoperates on paper-thin profit margins. There are two other banks in town, and CEO Sammons says that whilehe’s able to draw local customers with slightly better rates on savings accounts and mortgages, Kentland Savings has no other source of income. That’s because Kentland doesn’t have fees.No ATM fees; no wire fees; no transaction fees of any kind. "That’s not what we’re about. That would be undermining what we believe in," Sammons says.
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Where The Bank’s Advantage Lies
As per Sammons,his bank’s competitive advantage lies in the realm of the social.
Half of his customers, he says, deliver their mortgage checks in person as a way to "have something to do"—without getting too sentimental, it’s about the human relationships enabled by a financial institution that’s fiercely committed to staying offline as much as possible."
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“We pride ourselves in the fact that when someone calls here, they will get me or the part-time worker,” he says. “You aren’t going to go through automation.” Strangely, for a banker, he doesn’t seem terribly concerned about money. Because his income depends on a small number of customers, and a declining one at that, the “bad years” have begun adding up. He can’t afford to keep going without growing, but that is a trade-off to which he’s resigned. “For someone in a safe town, with a rural population, well,” he says, “that’s just the opportunity cost that you have to pay.”
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