Top photo: Jackson Walton (left) with his mentor Molly Rapert (right).

For decades, community banks have boosted the economic health of small and rural towns that are often underserved by larger financial institutions. According to a 2022 data snapshot published by the Consumer Financial Protections Bureau, these banks hold the majority of banking deposits in rural U.S. counties. Besides lending key support to emerging small businesses and farms, these banks also foster personal relationships with local customers who might otherwise lack access to banking.

In the past few decades, however, the number of community banks in the U.S. has rapidly declined. While 292 banks were based in Arkansas in 1995, 82 remained in 2023, according to the Federal Deposit Insurance Corporation. When these intuitions leave areas, many are left without the financial resources needed to grow wealth or start a business.

Finance and political science major Jackson Walton hails from Trumann, Arkansas, a town of 7,300 that is serviced entirely by community banks. Growing up here and seeing the role community banks played inspired him to research the challenges affecting them for his honors thesis.

“I’ve seen them work in our schools and the community in general: they support festivals and our high school,” he noted. “I know these banks are important for small towns, and I know that these banks are dwindling.”

Walton explored the serious effect the decline in community banks has had on rural financial health. Relationship banking, where individuals might know their hometown’s lender, is no longer as prominent as it once was. According to Walton, the whole local economy is impacted by areas losing this economic centerpiece.

“You might have been right on the line for getting a home mortgage or a business loan—something that could quite literally revolutionize your life, your town’s life, your state’s life, even,” he explained, emphasizing that lenders’ personal connections to town life might allow them to see the value of taking a chance on borrowers. “Now, it can be very tough for economic activity to spur growth, and that’s huge because these small towns are likely already struggling financially.”

Walton’s thesis also examines how a lack of access can create a lack of financial literacy in rural areas. Without personal banking relationships, he believes individuals might be less likely to seek out guidance on how to start saving or to apply for a loan. This can have a cyclical effect in many small communities across Arkansas and beyond.

Walton’s interest in studying community banks began interning for two summers with Southern Bancorp, a Community Development Financial Institution designed to help underserved communities that might lack access to banking. He was particularly inspired by the organization’s various outreach programs to educate residents about banking concepts and tools.

During his internship, Walton also had the chance to present some of recommendations on expanding the organization’s financial education strategies to the executive team.

“Jackson did a great job with his presentation and highlighted several ways to increase awareness and accessibility to our customers,” noted Kara Stockwell, director of organizational development at Southern Bancorp who oversaw his internship. “His presentation changed how we look at financial education. A few of his ideas are being implemented.”

To complete his thesis research, Walton used his contacts with Southern Bancorp and other connections to the community banking system that he previously had. He also forged new connections with the help of his thesis advisor Molly Rapert, associate professor of marketing. He conducted in-depth interviews with bank executives, managers and employees working in eastern, central and northwest Arkansas, as well as parts of Missouri. This provided a picture of community banking today and the challenges it faces.

“Getting to hear their side of the story was really insightful,” Walton recalled. “I learned a ton from them. It was a lot of work but rewarding work.”

Across the interviews, experts noted the threats community banks currently face from declining rural populations and larger banks whose resources allow them to fill in service or technology gaps. Succession planning, the process by which banks pass on leadership roles when executives retire or leave the business, also appears as an obstacle for community banks, which might be family-owned.

“The fate of a lot of these small banks is that they lose someone at the helm, and they either are forced to sell—because they didn’t have a good succession plan—or they’re required to shutter doors,” Walton said, underscoring the impact a leadership loss can have on smaller operations.

To adapt to these challenges, Walton found that bankers are working to grow technology access for consumers and roll out new digital tools. Greater collaboration between community banks is also a possibility. He explained that while one bank might not meet the needs of a customer, another bank might.

“For the greater good of their clients, [banks could] be willing to send someone from [their] bank to another that might better suit them, rather than just turning them away,” Walton noted.

To others, Walton’s thoughtful research speaks volumes to his conscientious nature and compassion for others.

“His research choice perfectly mirrors his approach to life, one which is grounded in serving others and intentionally investing in your community,” highlighted Rapert.

Moving forward, Walton is staying in Arkansas and joining Walmart’s accounting and finance team. Throughout his career, he hopes to stay connected to the world of financial policy where the drive for action can bring tangible results to areas reliant on community banks. Witnessing the positive change banks can have locally through his research has inspired Walton to carry this intention forward.

“I’ve learned how big of an impact you can have in banking, and I want to have an impact in my life on whatever I choose,” he noted. “I know this field has much more impact to be made than I even thought possible.”