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Shawn Vestal: Small banks don’t deserve knocks

Randy Fewel, President and CEO of Inland Northwest Bank, believes smaller community banks are the best way to bank. He is shown at the administrative offices and the downtown Spokane branch on Thursday. (Christopher Anderson)
Randy Fewel, President and CEO of Inland Northwest Bank, believes smaller community banks are the best way to bank. He is shown at the administrative offices and the downtown Spokane branch on Thursday. (Christopher Anderson)

Randy Fewel’s an awfully nice guy.

For a banker.

Actually, Fewel seems like an awfully nice guy for a guy. A person. A human being.

Fewel, the president and CEO of Inland Northwest Bank, got in touch with me not long ago, after I’d written a column encouraging people to take their money out of banks and take it to credit unions. I engaged in a little bank-bashing, which is a popular – and I think, on balance, fair – pastime these days, given what some of our large financial institutions have done to the economy and the price they have not paid for it.

Fewel didn’t necessarily take issue with what I said about big banks. But he made an excellent case that I’d given small, community banks short shrift. And he provided a lot of food for thought – good, sensible reminders that whenever you start demonizing and simplifying, you’re usually racing past some of the complicating realities. The truth is, the very reasons that one might consider a credit union a good alternative to a big bank apply to small, community-owned banks as well.

“(Small) banks are much more tuned in to their local community than the big banks are,” he said. “We really live and die with small business in Spokane. … The megabanks tend to focus on much bigger businesses than the community banks do. Our average commercial loan is probably about $250,000, and I’m sure the amount at the big mega-bank is much higher than that.”

Fewel says small banks are in a precarious position these days, caught between the lousy economy and an impending wave of new regulation that seems unlikely to address the serious problems in the huge financial institutions while placing extra burdens on banks like INB, Wheatland and others.

You’ve heard of too big to fail?

Fewel is worried about banks that are small enough to fail, and the effect on small businesses in those communities.

“There’ve been 17 banks fail in the state of Washington,” he said. “We’re sixth in the country for failures.”

The shrinkage isn’t happening at the top. Fewel said that 10 years ago, there were more than 8,000 commercial banks in the country; today there are about 6,200.

Of those, about 4,000 have $300 million in assets or less. Some think that about 2,000 banks will go out of business because of regulations coming down as a result of the Dodd-Frank reform act, Fewel said, and those will almost certainly come from the smaller banks. Huge banks, with armies of accountants and lawyers, won’t be the ones that struggle most with the regs that emerge from the 5,000-page Dodd-Frank act; it will be banks like INB, which will likely have to hire a new employee to deal with compliance, he said.

Some of the fallout from the economic meltdown has had the ironic effect of punishing the wrong banks. Fewel gives an example: After the federal bailout of large banks, some customers at small banks decided to move their accounts to the big boys, reasoning that the federal government would never let them fail.

“That’s bothersome, and I think it’s true,” he said. “I don’t think the regulators would allow a B of A, a Chase, a Wells, to fail.”

Fewel is a genial 63-year-old who has been in Spokane for 33 years. He and his ex-wife raised four kids here. He moved here in 1978 to work in his father’s food brokerage business, and quickly decided it wasn’t for him. A West Point grad with an MBA, he went to work for First National Bank in 1981.

Back then, the banking world was a lot different. Old National, a local bank, had the lion’s share of local business. There were several thrifts – institutions that specialized in home loans – around town. As corporate giants have grown and smaller banks have diminished, they have become different creatures, Fewel said.

Remember Bank of America’s debit-card fee fiasco? It spurred public outrage, and added to long-boiling public animosity toward banks. Fewel notes it is the biggest organizations that have hit consumers the hardest for fees; as a percentage of assets, both credit unions and community banks bring in far less than the big boys.

Also, in the nine months leading up to September, the 84 largest banks in the country brought in nearly 40 percent of their revenue from fees. The smallest 651 banks in the country, by contrast, brought in half that.

“Their fee income is so much bigger than the small banks and credit unions,” he said. “They charge fees for all kinds of stuff that community banks and credit unions tend to give away.”

Fewel has been with INB for 17 years, and been the boss for a decade. He remembers getting into banking, in part, because it was a prestigious, positive force in the community. He’s carrying forward in that spirit, though he’s acutely aware of changes in public sentiment. A few years back, he gave a presentation at Rotary titled, “How Bank became a Dirty, Four-Letter Word.”

Ambassadors like Fewel help remind us not to paint everyone with the same brush. But he realizes the battle is a tough one.

“Even my own son!” he said. “We were talking about the debit card fee thing, and he said, ‘Oh, you bankers…’ ”

Shawn Vestal can be reached at (509) 459-5431 or Follow him on Twitter at @vestal13.