Having a strong mobile banking platform that delivers services to customers whenever and wherever they need it is considered a necessity for banks operating in today's competitive financial services landscape.
Bank of Bird-in-Hand's mobile banking operation not only includes a digital app but a literal fleet of banks on wheels, and stands as one example of the innovative ways lenders serve the largest Amish settlement in the U.S.
"Anytime you have to hitch the horse up and get in the buggy and drive it, it's a production," said Lori Maley, CEO of the Lancaster County, Pennsylvania-based community bank, on the transportation method of choice for most Amish, who largely eschew modern technology, such as electricity, automobiles and telephones. "We've created this opportunity for the Amish, so they don't necessarily have to drive into our branch offices. It's a little bit more convenient for some of them if it's closer, and we've tried to strategically put them where we have customers and shareholders."
The bank has invested $1 million in four 29-foot-long mobile banking units, Maley said.
Bank of Bird-in-Hand's first "gelt bus," or "money bus," debuted in 2018. The bank added two more last October, and plans to add a fourth this month.
The buses go to 16 locations in the county, Monday through Friday, and serve as an extension of the bank’s three bricks-and-mortar branches. The buses provide ATMs, a walk-up customer-service window and the ability to open accounts and conduct transactions in areas where Amish people live and do business.
"As a community bank, we go to the point of contact," said Bill O’Brien, chief lending officer and one of the bank’s founders.
A community backstop
Bank of Bird-in-Hand launched in December 2013, the first de novo in the U.S. to launch after Dodd-Frank legislation passed in 2010. The community bank, which started with $17 million in initial capital, reported $532 million in assets at the end of 2020.
The bank has performed well in the years since its inception, even amid the coronavirus pandemic, Maley said, adding that its loan quality has held strong.
"The examiners are always telling you, 'What's the worst-case scenario?' Well, I think we've kind of seen it," she said. "Even though other banks may have had a problem with loan quality in their portfolios, this bank hasn't."
O’Brien's more than three decades providing loans in the region has earned him the nickname "gelt chappie" or "money man" among the Amish.
"In this county, there are 29 banks, but only a couple of them actually have the products that this area really needs," he said. "This area will always need a community bank."
Banking the Amish is a competitive business, said O’Brien, who estimates that 65% to 70% of Bank of Bird-in-Hand’s customers are either Amish or Old Order Mennonites, a religious group with similar values.
"It's a hard-working market — a people-that-pay-their-bills market," he said, adding that historically, the Amish are known for their frugality, which translates to few write-offs on loans.
This approach to money, coupled with an Amish trustee system that appoints community leaders to help families in the event of financial difficulty, makes them ideal borrowers for banks, said Erik Wesner, author of the 2010 book, Success Made Simple: An Inside Look at Why Amish Businesses Thrive.
"The community-backed element reinforces the idea of the Amish as attractive customers for some of these banks," said Wesner, who also runs a website, amishamerica.com. "In terms of reliability in paying off loans, the community-backed element is almost like a backstop. Even if the individual family loan has issues, there's a community behind it. The Amish have a culture of mutual aid to begin with."
Tom Jordan, market president for regional lender Univest, which has five branches in Lancaster County, said his company has never lost money lending in its community.
O’Brien said he, too, has never had loan losses on Amish loans, but said he knows of a handful of deals at other banks that have had charge-offs.
"You don't have a lot of loss, so you have more profit over time," O’Brien said. "I would rather have a high-quality loan portfolio than trying to have a bigger margin and maybe take more risk. I think this portfolio that we have in particular would be better than about anything else on the community banking scale."
Banks that wish to do business with the Amish have found unique ways to adapt to the community’s idiosyncrasies, which for some can include a lack of photo identification.
Many Amish refrain from posing for photos, an act some believe promotes individualism and pride, which run counter to their religious beliefs, according to a blog post on Wesner’s amishamerica.com. This can become an issue for an Amish person who wants to open an account at a bank whose customer identification process involves some form of a photo ID.
For $6 billion-asset Univest, one solution involves bank employees becoming part-time genealogists.
In addition to verifying identity by a Social Security card, birth certificate or IRS form, perhaps Univest’s most unique method of customer identification is through the use of an Amish directory.
Amish directories list the names, birth dates, relationships, church leadership positions and occupations of members of Amish settlements in a region. The books, which can be found at local Amish bookstores, show the lineage of Amish families and are updated every three or four years, said Jordan, who led National Penn Bank’s consumer and commercial banking operations in Lancaster County before joining Univest in 2016.
"With the book, we can identify who you are, where you live and who your parents were, and we have regulatory approval to be able to properly identify clients using those directories," he said.
Laurent Pelletier, vice president and commercial branch manager at M&T Bank, said the regional lender’s four branches in Lancaster County will accept a letter from an Amish bishop confirming the client’s name and personal information such as address and date of birth.
"The trend these days is for the younger Amish to have state ID forms, but the older ones do not," said Pelletier, who estimates 60% to 65% of his branch’s customers are Amish.
"I’ve learned through the years that the Amish are not any different than the [non-Amish]," Pelletier said. "They have the same needs. There are people outside of the Amish community that choose not to use online banking or mobile banking, and so, in that sense, it's not any different."
When Pelletier first arrived at M&T’s Intercourse branch, which he has managed for the past 16 years, he initially pushed back on efforts to get more Amish customers to adopt the bank’s digital platforms, he said.
"My boss would tell me, 'Everybody needs to have an online account.' The reality is, today my younger Amish customers and the business owners will use the technology that's available and that is online banking and mobile banking," he said. "On the commercial side or business banking side, they use certain services that we offer them to do their banking from their office."
Increasing adoption of certain technologies by the Amish represents an economic transformation in the community, Wesner said.
"The Amish have really undergone, over the past decades, a shift into business that's sort of changed some of their finances and economics," he said. "There's definitely more cash flow and liquid assets within the Amish now than there was 20 to 30 years ago."
Rising land prices have contributed to an increased shift among the Amish from farming to business as a way of life, Wesner said.
"Back in the day, the goal or mark of a successful father was to buy a farm for each of his sons, and that’s impossible nowadays," said Benuel Riehl, a 55-year-old Amish resident of Lancaster County, who recently sold his deli business. Riehl said he can remember, in the 1970s, when his uncle stopped bidding on a 100-acre farm because the price reached $100,000.
"Nowadays, that farm would be two-and-a-half million in just 50 years," he said.
The shift toward business has led more Amish to use computers and mobile phones to conduct business, Jordan said.
"We still do have some very conservative older customers who just want to use the branch, period, to transact their business and do it by checks and paper and people, not by technology," he said. "It's not swinging broadly yet, but definitely more so than five years ago, and absolutely more than 10 years ago."
To accommodate the bank’s more traditional clients, Univest has a bank-by-mail service, where customers can mail deposits to the branch.
"We also use a courier service where we go out to the farms and pick up deposits. It’s just another means that we'll use to help them transact business," he said.
Univest’s main business dealings for its Amish clients include farm acquisition financing, construction loans, permit and equipment financing and residential mortgages, Jordan said.
"What we do on the residential mortgage side is unique because they don't always have full electric in their homes," he said.
An Amish home today may have more electricity than in decades past, but still less than the average American home, Jordan said.
"It's not saleable on the secondary market, so you have to create a product that has to comply with all the fair lending rules, regulations and the [Consumer Financial Protection Bureau]," he said. "Then you can portfolio those loans, you keep them on your books rather than selling them off in the secondary market."
Generally, Jordan said regulators have been willing to work with banks that serve the Amish segment, and have been largely accepting of their unique approach to accommodating the community.
"I haven't found many people who — from regulators, internal auditors to external auditors — aren't intrigued by this," he said. "Most of them are nostalgically curious. ... This is a unique subset of our culture and these people live among us, but they live very differently than us. A lot of them have more natural curiosity than a risk curiosity."
Winning the approval of regulators hasn’t always been an easy feat, O’Brien said.
Early on, Bank of Bird-in-Hand worked to conform to Federal Deposit Insurance Corp. (FDIC) guidelines while still trying to match their products — with some compromise — to what the Amish need.
While the FDIC has worked with the bank and recognized the area’s need for the specialized community banking services that Bank of Bird-in-Hand provides, the regulator has been slow to approve flood insurance provided by mutual aid societies, O’Brien said.
The Amish don’t buy commercial insurance and instead pay into their internal self-insurance network called Amish Aid.
While the Office of the Comptroller of the Currency (OCC) and the Farm Credit Bureau accept Amish Aid, the FDIC said in 2019 it would do so on a case-by-case basis.
"We're at the point now where it's hurting some of them," O’Brien said. "We have meetings set up with the FDIC. I think they want to work with us, but it's taking a long time. It’s costing some of our customers money, it's cost us time, and it's cost us a little bit of reputational risk."
With a customer base that leans on in-person banking, banks in Lancaster County have to weigh the economics of building permanent branches versus bringing services to their customers.
A spokesperson for M&T said the bank has no plans to close nor open additional branches in Lancaster County, while Maley said Bank of Bird-in-Hand has identified several strategic locations where it would consider adding a brick-and-mortar presence.
"With all of the upheaval in the market and the push for other banks closing locations, we may have the option of looking at several key locations for us in existing buildings without the need for new branch construction," she said.
Univest has considered adding a mobile bank operation similar to that of Bank of Bird-in-Hand’s, as a way to extend its services in the community, but for now, it relies on the success of its courier services, Jordan said.
"There are some security issues that go along with it that are real," he said. "We have to make sure that we're protecting our shareholders, our depositors and our employees."
Jordan said expanding Univest's branch presence in Lancaster County doesn’t make economic sense at the moment.
"They want the branches, but they don't leave a pile of deposits in the branch," he said. "And from a banking perspective, that's our business. We'll make money on those deposits from lending them out to somebody else who needs it."
At a time when the nation’s smallest banks are facing tremendous pressure to invest more capital in their digital offerings to fulfill customer expectations and compete with the billion-dollar budgets of Wall Street banks, they’ve often relied on deep knowledge of the communities they serve and the value they place on customer relationships as points of strength that set them apart.
For the banks in Lancaster County that serve Amish clientele, "relationship banking" is not just another buzzword, it’s their bread and butter. And it helps them serve a traditionalist group that doesn’t demand the same digital offerings most Americans have come to expect from their financial service providers.
"Relationship banking — that's a term that gets thrown around a lot," Jordan said. "This is, sitting at the kitchen table with two or three generations, talking about farm transitions, building a home or moving the business to the second or third generation — whatever it may be. ... We had a gentleman retire this year, who was serving his third generation of families. You just don't see that much anymore."
Serving the Amish isn't for every bank, nor does the work suit every banker, Jordan said.
"It's a limited pool of clients. There's just not enough business to go around for everybody to do it and quite honestly, for some of the bigger banks, it's just not worth it," he said. "There's not that density of opportunity for them to create unique policies, procedures, products or accommodations for that segment."
Bankers that are used to corresponding with customers via email or phone may not be cut out for the amount of face time the role requires, Jordan said.
"As bankers, we have to be mobile. ... You have to be willing to go see them as necessary," said O’Brien, who added that, in many farm visits, business dealings have taken place on picnic tables outdoors.
"There's a lot of things you have to do that are unique, and not every banker wants to do that. But the bankers we have that do it, love it," Jordan said. "You work with one generation and then the next generation — there's an upside for the bankers who choose to work with this community. They have relationship commitment, which is hard to come by these days.
"It's a real feel-good, make-a-difference kind of relationship banking for them," he said.