Why do banks want to do business in Lancaster County?

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That’s because I’ve done it about a thousand times in the last few weeks as the market disruption caused by all the bank mergers and acquisitions has left my head, and the heads of most people who follow the industry, spinning.

Hopefully no one remembers this, but a year or so ago when all these bank acquisitions were being announced, I was introduced to the term “market disruption.” I (wrongly and stupidly) surmised this market disruption wouldn’t be that big of a deal. No, really, I did, I’ll even link to it and you can see how silly I am! Go ahead, I don’t mind.

Back now? Cool.

My theory of “How much money is really out there?” was flawed from the start because I took it as a simple formula of laziness. In today’s world, do people really want to switch banks when there isn’t much difference? I didn’t think so.

But what I forgot to put into the equation was “How much does that new bank even want your business?”

As someone told me this week, what happens when an Amish family goes in for a “plain sect” business loan, a loan to start a business in the mainstream business world? It’s commonplace in Lancaster County, but when the call for approval goes to BB&T’s headquarters in North Carolina, there is a good chance they don’t know what the Lancaster office is talking about.

“It’s a battle you never have to fight with a community bank,” that person told me. And it’s just one of the many hypothetical and “what ifs” that can come up.

The people presence matters

Which is part of another reason why market disruption has been so fervent: agricultural lending. Look at the community banks moving in on Lancaster County, and they’re more than happy to say the opportunity for ag lending is what’s pushing them. Centric Bank, First Citizens Community Bank and Bank of Bird-in-Hand all pointed directly at the hole in ag lending that pushed them to expand in the county.

But you can’t just jump into a market willy-nilly.

That’s why the banks that have moved in aren’t just establishing physical presence in the county, but people presence as well.

Souderton-based Univest Corp. of Pennsylvania hired a 14-person lending team formerly with BB&T. Orrstown Bank of Shippensburg snatched up long-time banking executive David Hornberger to lead its Lancaster County lending efforts. Centric and First Citizens also added long-time, well-known Lancaster County talent to lead their lending efforts, especially on the ag lending side.

Those people likely wouldn’t have been available if BB&T or First National Bank of Pennsylvania didn’t come around and jettison some of the on-board talent when they bought Susquehanna, National Penn and Metro Bank, sending hundreds into the available workforce.

Univest officials specifically said they wouldn’t have come to Lancaster County if the team they scooped up wasn’t available. It more than likely wouldn’t have been available if BB&T didn’t come knocking on Lancaster County’s door.

This confluence of effects — available lending opportunities and a slew of available, high-end talent — has fueled the market disruption I questioned would ever happen.

Well, it happened.

And as another person told me last week, the ongoing expense of regulation is just going to keep on squeezing the bottom lines of smaller banks and force banks to decide whether they want to stay in the game. Some won’t. So as bad as market disruption is now, it doesn’t look like it’s over, not at all.