Are you surprised that the Amish-backed Bank of Bird-in-Hand has (so far) been a success?

According to an article in the Wall Street Journal, the bank has amassed more than $60 million in loans in its first year of business.


Bank of Bird-in-Hand logo

In 2013, Bank of Bird-in-Hand was reported to be the first new US bank since 2010, when the Dodd-Frank financial regulatory law was enacted.

Now in 2015, it’s still the only bank to open since then (though at least one other is planned, in New Hamspshire).

Prior to 2010, around 100 new banks opened every year. Why only one since 2010? Two sides tell two different stories:

Bankers say the drought is a sign of new regulatory requirements in the wake of the financial crisis, which are boosting expenses and discouraging potential startups from even trying. Regulators say the profit squeeze from rock-bottom interest rates is a bigger problem.

The Bank of Bird-in-Hand had significant Amish backing among its investors, and it has a lot of business among the Amish community.

Local Focus

One reason for Bank of Bird-in-Hand’s early success is that it has honed in on a specific, possibly underserved market. The bank’s website states that it “maintains a strong focus on agriculture, small business and consumer banking.”

The WSJ article also suggests that the bank has kept its focus on local needs–smaller loans for farms and businesses:

The bank’s early success suggests there is a place for small lenders, but it is also in a position others would struggle to replicate. More than half of its borrowers are local Amish businesses. That group is known for being financially stable, conservative and disinterested in the types of technology that are threatening typical bank branches.

Instead of planning to cash out with a future merger, Bank of Bird-in-Hand’s board members have thought about the long run, attending FDIC training sessions before the bank opened.

The board has expanded to include banking experts from other parts of Pennsylvania. The original group had a storage-shed maker, accountant, concrete contractor and real-estate lawyer, all local.

Demand for loans has been so great that the bank’s loan officer says that “if there would have been two of me, we could have done more.”

Name change = Opportunity?

One of the most interesting parts of the story was how a name change may have led to Bank of Bird-in-Hand’s founding. This bit is detailed in a piece on the WSJ Moneybeat blog.

In 2012, a local bank called Hometowne Heritage changed its name to National Penn, after its parent company. The change got the attention of local investors, who met and decided to pursue the idea of a new bank.

An accompanying anecdote suggests that the local touch helps. One Amishman recently moved from another bank to the Bank of Bird-in-Hand, saying “I was getting to be just a number” at his previous, larger bank.

Perception starts with the name. On that level it’s easy to see the local appeal of a name like Bank of Bird-in-Hand vs. something called CitiBank or Bank of America or Nations Federal or whatever. And if you’re Amish, knowing that your people are closely involved can only add to the draw.

It sounds like a good customer base has in turn helped Bank of Bird-in-Hand become an unusual success story.

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