Rural America Turning to Grocers, High-Fee ATMs as Banks Leave

Michael Sasso

(Bloomberg) -- Fifty years ago Allendale, South Carolina, was a bustling community catering to New Yorkers driving to Florida. These days the tiny town makes the nightly news for drive-by shootings -- and caught the attention of federal regulators after it lost half of its bank branches.The lack of financial institutions is a major challenge facing smaller towns, where more than 1,500 bank branches closed between 2012 and 2017, according to a recent Federal Reserve report. The loss of a simple credit union in Allendale speaks to deeper issues plaguing many rural communities, which are falling increasingly far behind cities even as America’s economy soars.

An hour south of Augusta, Georgia, Allendale seems lost in time. People here speak about its heyday, the 1960s, as if it were yesterday. Those once-thriving motels along U.S. Highway 301 are now hulks of broken glass, peeling paint and overgrown weeds. The arrival of Interstate 95 about 35 miles to the east began a decades-long slide for the town, as motorists could bypass the community.

The town got a rare reprieve from negative news earlier this month, as Democratic presidential contender Pete Buttigieg swung by to build support in a county that is 74% African American.

Luring McDonald’s

Lee Harley-Fitts, a 60-something town councilwoman, has modest wants for herself and the roughly 9,000 people in surrounding Allendale County, where the median household income is $23,000 a year and 30% of the population is below the poverty line. People are excited about a coming Dollar Tree store, she says, while luring a McDonald’s is still a dream.

That’s why local town and county officials, including the school superintendent, all rallied recently to try preserve something as seemingly mundane as a small credit union.

Town and county leaders caught wind earlier this year that one of just two financial institutions in the area, North Augusta-based SRP Federal Credit Union, was considering moving to another small town 30 miles north called Williston. SRP’s Allendale branch wasn’t much -- a portable building with a few parking spots and a cash machine. But the impoverished community valued its low fees, and with Social Security benefits now transmitted electronically, many people visited to take out cash loaded onto their benefit cards.

“I would wager that some of their people would have been unbanked before they established a branch here,” says Wilbur Cave, who heads a local nonprofit that develops affordable housing.

Representatives of SRP didn’t respond to multiple messages from Bloomberg News.

‘Deeply Affected’

The Federal Reserve’s November report notes that roughly 800 rural counties lost 1,533 bank branches in the five years ended 2017, or 14% of their total. Urban counties lost a more modest 9% of their branches as people migrate to online banking, because of industry consolidation and other reasons.

Allendale County is among 44 “deeply affected” counties that lost at least half of their branches, according to the report, which focuses exclusively on banks as opposed to credit unions like SRP. Allendale had lost a small community bank in 2014 after it failed, leaving it with a single traditional bank, called Palmetto State, as well as with SRP.

One proposal made by regulators last week to boost the flow the credit to poorer communities by updating the 1970s Community Reinvestment Act. Under the measure, lenders could see an increase in the $250 billion they have to spend annually to meet U.S. requirements for doing business in lower-income areas.

Distressed about losing yet another institution, town and county leaders here say they lobbied SRP’s executives to stay by meeting with credit union officials and by offering them a more desirable location in a better part of Allendale.

Ultimately, SRP pulled out of Allendale County in May, according to a local news report, creating one more hardship in a town with plenty already.

Relying on Grocer

Allendale’s mayor and a councilwoman say they met with an SRP official who was concerned about crime in the area, dissatisfied with the branch’s location and worried about employees’ safety. Bill Robinson, a county councilman, said weak business at the site was a problem. Ultimately, the parties couldn’t agree on a new location.

News reports in the past year include the drive-by shooting of a 3-year-old girl inside a home and the murder of a transgender woman. A couple weeks ago, a wayward bullet pierced a window in Robinson’s home, although he thinks the community’s small size magnifies its gun problem.

Locals say they still appreciate the one bank left, Palmetto, but the credit union was especially willing to make loans to low-income people and required only a $200 balance on some checking accounts to avoid charges. Nowadays, locals are relying more on the town’s lone grocery store, buying a pack of Doublemint gum and seeking big sums of cash back.

Owner Wayne Brown figures he’s losing money on the small purchases, as the debit transaction fees sometimes outweigh the sale he’s making. More people, too, are taking out as much cash as they can from their Social Security debit cards, he said.

Many in rural communities rely also on private ATMs in convenience stores, although most don’t allow for deposits and the withdrawal fees combined with any bank charges are a “meaningful cost burden,” the Federal Reserve report says.

State of Emergency

The loss of financial institutions is just one of many hardships the town is dealing with. In 2017, student test scores in Allendale County were so low that South Carolina’s education superintendent declared a state of emergency and seized control of the school district. In October, one of its biggest employers, paper products giant Georgia-Pacific LLC, idled an Allendale plant that employed about 140 people.

“When you hear that your school district is not performing, and that it’s the poorest county in South Carolina -- that prohibits business from coming to your community,” says Allendale County superintendent, Margaret Gilmore. “I’ve even spoken to Walmart to see if we could get a Walmart in the community.”

Meantime, community leaders speak of the progress they’re making on other fronts including a beautification project that will add turn lanes and new landscaping along a stretch of U.S. 301 through town.

“I have a grandson who is an emerging scholar, and he will be going to Clemson when he graduates,” says, Harley-Fitts, the Allendale councilwoman. “These kids are excellent, but nobody talks about that. If we could just make something happen that people would be excited about, just having a McDonald’s. Kids love McDonald’s.”

To contact the reporter on this story: Michael Sasso in Atlanta at msasso9@bloomberg.net

To contact the editors responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net, Anita Sharpe

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