With the consolidation of banks and the general shift away from branch banking, many small towns are facing a future with fewer banks, fewer local bankers, and perhaps even less access to loans.
Nowhere will the fruits of this problem be exposed more than in Eastern North Carolina in the next year.
It is almost always the case that when a bank is bought that its new owner decides to consolidate. Sometimes the logic is that there are duplicative functions between the new owners and their new purchase. Back office functions, which RBC has been handling out of Wilson, seem at risk. For its part, PNC told analysts that they will wrench $340 million in cost-savings from the deal. That intention could include job cuts.
Community folk feel the pain of a merger when branches are closed. This is particularly true in small towns. Banking in small towns is often driven by relationships. Some small bankers say that they don't even check credit scores when they write mortgage loans. Local banks know the small businesses in their areas. Besides, there just aren't that many banking options in some small towns. If your branch closes, it might mean that you need to drive 30 miles. When your local bank is purchased by a national bank from a thousand miles away, a community stands to lose more than just convenience. They lose access to credit.
Last month, PNC Bank agreed to pay $3.45 billion for the North American division of RBC Centura. RBC has had a big presence in Eastern North Carolina, owing to its roots as People's Bank of Rocky Mount, North Carolina.
Rocky Mount straddles parts of Nash and Edgecombe Counties. In Nash, RBC has 8 full service retail branches. RBC
holds more than 42 percent of bank deposits in the county. No other bank has more than 13 percent of the market. The national banks are notably absent. There are no Bank of America branches in the county and just two Wachovia locations. RBC is also the largest bank, by deposits, next door: it has 34 percent of deposits in Edgecombe County, North Carolina. There are only two banks in Bertie County, North Carolina - RBC and Southern Bank & Trust.
The Federal Reserve worries when any bank has more than 10 percent of the deposits in a community. Until recently, the law used to say that a bank needed to shed branches if a merger or acquisitino would give it more than the percentage of deposits in a city. That rule has become a forgotten principle after the bank meltdown. Now the Big Four each have more than 10 percent of the deposits across the country.
The presence of the big banks withers in some rural areas. In Eastern North Carolina, BB&T and RBC are the large national banks. Bank of America has never built out a large set of branches in the area. Even Wachovia is a relatively small player. First Citizens, a closely held bank in Raleigh, has used its longtime relationship with farming and subsequent acquisitions to gain a large presence as well.
This means that RBC is very important in Eastern North Carolina. Media reports from Raleigh have talked about the potential loss of jobs in RBC's capital markets division in Raleigh but much less about the loss of basic branches in the rural East. Yet there are many counties where that is exactly the problem. In the following North Carolina counties, RBC has more than twenty percent of all deposits:
- Anson (20.9 percent)
- Bertie (20.5 percent)
- Chowan (28.1 percent)
- Dare (27.5 percent)
- Edgecombe ( 34.3 percent)
- Gates (25.4 percent)
- Halifax (24.5 percent)
- Hertford (43.2 percent). There are only two other bank branches in all of Hertford County. This is a thinly populated area, but it is one of the largest by physical size.
- Nash: (42.4 percent)
- Northampton (55 percent)
- Perquimans (62 percent)
- Washington: (23.1 percent)
With the exception of Anson County, every one of these places is located east of I-95. With the exception of Dare County, each is very poor. RBC Centura stayed where others left, and for that, they deserve some credit. Eastern North Carolina's economy is fragile. Most of the private employment in the area comes from some kind of resource extraction - farming, mining, and timber.
If there is going to be a challenge from the community about PNC's new buy, then Eastern North Carolina is probably going to be a part of that voice.