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The Honolulu Advertiser
Posted on: Thursday, May 31, 2007

Living in rural areas can have downside: no full-service bank

By Leah Rupp
(Jackson, Miss.) Clarion-Ledger

With less traffic and more space to spread out, living in less-populated areas has its advantages, some rural residents and elected officials say. Easy access to full-service banking isn't always one of them, though.

Dealing with high ATM fees from other banks or driving long distances to get to a branch can wear on a customer's patience and hinder a small town's ability to handle daily transactions or foster economic growth.

"A bank in any town is going to be one of the most important economic tools you have," said Pontotoc, Miss., Mayor Bill Rutledge, president of the Mississippi Municipal League. "It's a partnership in growth, one of the first things a new business looks for."

Edwards, Miss., Mayor R.L. Perkins and other residents have blamed a lack of new businesses partly on the 1,443-resident town's limited-service bank, which is drive-through only.

"You have to get in line in your car and sometimes wait for hours just to get a quick $20," resident Charles Rather said. "Plus, what kind of business owner is going to come to Edwards when he has to sit in his car in line every time he needs to go to the bank?"

Across the nation, more than 28 million residents have no relationship with a bank, according to the Federal Deposit Insurance Corp., and about 44.7 million have a very limited relationship with one.

Many are concentrated in areas that are more rural, lower-income or have a higher percentage of minorities, said Lee Bowman, the FDIC's national coordinator for community affairs.

Operating on a cash-only basis becomes the convenience that replaces a savings or checking account, which encourages consumers to plan ahead for emergencies, Bowman said. In these instances, making it through the month often means heading to a check-cash store or payday lender.

"At one of these places, they may get charged 300 percent instead of 12 percent on a loan," Bowman said. "With that, you can get caught in an endless cycle of debt. You pay them and pay them and pay them — it never goes away."

There are about 1,000 banks or bank branches across Mississippi, state Banking Commissioner John Allison said, though most of those are concentrated in metro areas.

"If a bank has gone through all the studies and they feel like they can serve in an area, they apply for that area — that's a business decision," Allison said. "You have to have a customer base to support the facility."

Mary Sutton Ajoku, mayor of Cruger, Miss., population 449, said that although she understands why banks don't locate in very small towns, running a town without a bank for simple transactions such as court fees is difficult.

"If you need some cash ... you have to get in your car," Ajoku said. "It's a real inconvenience."

Tapping the unbanked and underserved can be beneficial for a financial institution, though, Bowman said. More than $1.1 trillion in annual income is generated annually by the underserved population in the United States, nearly $510 billion of that from consumers who are not associated with a bank in any way.

Jimmy Bryant, manager of the Regions branch in Terry, Miss., agrees. With a population of only about 600 people, the town has still managed to keep two full-service banks.

"This gives everybody an economic hub to do business," Bryant said.