Finance blog


The Pack

August 20, 2020

The other day I was reading an article that referenced Rudyard Kipling's famous poem entitled the "The Law of the Jungle" and it really struck a chord with me. This may sound strange, but it reminded me of community banking. Here's the quote that really grabbed my heart:

"NOW this is the Law of the Jungle - as old and as true as the sky;

And the Wolf that shall keep it may prosper, but the Wolf that shall break it must die.

As the creeper that girdles the tree-trunk, the law runneth forward and back-

For the strength of the Pack is the Wolf, and the strength of the Wolf is the Pack"

Here is a link to the whole poem. It's worth reading.

That's just the first two stanzas, but you get the idea. So powerful. It reminds me of the Yellowstone elk I've seen that travel in huge herds to protect themselves from the very wolves described above. It also makes me think of the way community financial institutions really must behave during these crazy times: not as a herd, but as a pack. I get it—there is competition for everything from loans, to deposits, to employees—just as the wolves within a pack compete. Believe me, I love competition. It's critical to sharpen your business in an arena, and excellence should be rewarded. In times of plenty, the weak need to be culled (through mergers, please!). That has been happening for decades, and I think it is a healthy process. When I started working in the industry in 1995, there were over 10,000 commercial banks in the United States. As of the end of 2019, there were only 5,177. I love community banks. They are the lifeblood of so many communities, but the sands are shifting under their feet. For example, I have discussed in earlier posts the reality that providing customers an online experience is no longer an option for community banks. When I talk to younger people, I always ask them what they think of banking (weird, I know, but I actually do it. I'm just a generally curious person). Many of them have never been in a branch. Sure, they remember going to a bank with their Mom or Dad way back when, maybe getting a lollipop or a lifesaver from the teller. But as for themselves—no bank, no branch, nothing. It's all online.

Now, this may change as they get older and need a mortgage or a business loan, but then again, it may not. Those sands are shifting quickly.

According to KomandoTech:

  • USA online banking statistics show that 80% of Americans would rather bank digitally than visit a brick-and-mortar branch.
  • According to 2018 mobile and online banking worldwide statistics, the number of people who use mobile banking exceeded the number of those who bank using computers two years "ahead of schedule."
  • During 2020, the annual value of digital payments is expected to reach $726 billion.
  • The volume of payment transactions via wearable technology is projected to be worth $500 billion before the start of 2021.

For the full article (with additional interesting data), go to

This may date me slightly, but the idea of doing a banking transaction via wearable technology has never even crossed my mind! I do know how to pay for my Subway sandwich order ahead of time on my phone, but that's about as sophisticated as I've gotten.

So, how does this state of affairs tie into the idea of the wolf pack?

The analogy is not perfect but stick with me. I think healthy competition among community banks and credit unions makes us all better. However, there are times to fight for food among the pack, and there are times to hunt together to help feed the whole pack (really, read the whole poem, it breaks that down!). A cool and crazy thing about wolf packs is that they only have successful kills somewhere between 3-14% of the time. They may go for up to 20 days without any successful hunts. The whole pack will suffer, but they will also pull together. Eventually, when they catch something, they may eat up to 20 lbs. of meat apiece! It takes a wolf several days to even digest that, but for me, that sounds like a normal grill session!

But! The pack always takes care of its pups and weaker members first. The alpha male and female enforce this rule fiercely. Isn't that amazing? I always think of wolves as these incredibly dangerous animals, yet they take care of the weak and young first. The fact that the leaders of the pack take care of the whole pack in times of stress is very powerful, while in better times, these same leaders let the members of the pack compete.

I'm happy to say that I see evidence that community financial institutions are acting in a similar way today, in what we would all call a time of stress. Let's first be really honest with ourselves. We are not going to beat Chase, Wells, or Bank of America at some things. For example, they probably have more people on their technology teams than most community banks have total employees. But our industry—the community industry—is nimble. It can, when necessary, act like a pack.

One place I've seen this is in the issuance and purchase of sub-debt throughout the "pack". This is happening across the country and has not been coordinated or organized, yet happen it does: community banks supporting each other through sub-debt investment. I asked a couple of the investment bankers at our firm for their thoughts on the topic and here is what they had to say:

"In these unique times, issuing sub debt enhances capital at a time of great uncertainty—no one has ever been criticized for having too much capital during times of great uncertainty, or great stress. At the same time, by investing in the sub-debt of other conservative banks, the interest paid on that sub-debt stays within the community industry, at a time when good yielding assets are hard to find and net interest margin is under pressure" - Gary Svec

"Capital is always at its least expensive, and easiest to get, when you don't need it." - Matt Shields

I think pack support can go much farther than these financial transactions, though. We are in a time of great stress and pressure. Some of us may feel like we are on the 20th day of the hunt, and we need help moving forward. I've talked to plenty of people in the industry who just feel like it's time to give up.

Don't quit. Don't give up. For those of you who feel like you have figured out some ways to navigate these crazy times—lift up the pack! I can't pretend to have all of the answers, but I do know that the community banking pack is strong. This isn't the first tough run for the pack: remember 2007-2010? There were tough times in the 80s and 90s as well.

Remember: The strength of the pack is the wolf and the strength of the wolf is the pack!

Final, final thought: My heart is breaking for San Francisco, Seattle & Portland. I love those cities. May they again know peace.

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