When Jerry Layman first became affiliated with Farmers & Merchants Bank, he had no idea that the Spokane institution one day would have $305 million in assetsor about $297 million more than when he began doing legal work for the bank.


Layman, who became legal counsel for Farmers & Merchants in 1961, five years after he graduated from Gonzaga Law School, says the banks growth path became evident in the late 1960s, when it adopted its warm-heart logo and customer-service culture. In 1974, Layman became the banks president, a position that he retained until last October.


Farmers & Merchants, which notched $4.4 million in earnings last year, employs about 136 people today and plans to add another nine by the end of this year, Layman says. The bank, which posted the most of deposits in Spokane County by locally-owned banks at year-end, currently has $270 million in deposits, almost the same amount in loans, and a loan-to-deposit ratio of 99.7 percent, which Layman says is close to ideal.


Two years after he became the banks legal counsel, in 1963, Layman jumped at the opportunity to become a major shareholder, and three years later, the bank asked him and a few key clients to serve on the board of directors, Layman says.


Learning the ropes in the banking business provided a challenge for Layman. He had taken a few finance classes in college, but still had to learn about credit, marketing, and other banking affairs, although he didnt handle day-to-day responsibilities at the bank, he says. Rather, he also continued to practice law.


Several years after he became the banks president, Farmers & Merchants enjoyed a growth spurt and opened its first facility downtown, Layman says.


When you set yourself goals for growth, you think youre just dreaming, he says. But then you wake up and realize youve reached them.


The bank continued to open more branches in the Spokane area, and its customer base increased, Layman says. It now operates 16 branches in the Spokane area, half of which are located in grocery stores.


The bank decided to open its grocery-store branches because of their convenience for customers, even though other banks had abandoned such operations after finding them expensive to maintain, Layman says.


Farmers & Merchants also decided to stay open on Saturdays and extend weekday hours to make banking more convenient for people who work from 8 a.m. to 5 p.m. during the week, he says.


Farmers & Merchants customer-friendly services have prompted many people to become customers, Layman asserts. For example, his neighbor, who was using another bank, decided to move to Farmers & Merchants after Layman obtained travelers checks for him on a Sunday, when most banks were closed, Layman says.


Its a relational bank, not a transactional bank, he says. Thats how it gets repeat business from customers.


Laymans longtime friend and former fellow board member, the late August Klaue, emphasized commitment to service while he served as Farmers & Merchants chairman for many years, Layman says.


He would always say, The trouble with banks is theyre run by bankers, Layman says. We need to treat people as they want to be treated.


Klaue, who died in 2002, helped Farmers & Merchants remain dedicated to its mission of service, Layman says. Klaues son, David, and Laymans son, John R., joined the banks staff about 20 years ago, and still work for the bank as chairman and vice chairman, respectively, although Jerry Layman says he shares the latter position with his son.


Another Farmers & Merchants board member, Ric Odegard, helped the bank expand upon its potential for growth when he got involved with the institution in the late 1990s after retiring from Seafirst Bank, Layman says. He says Odegard brought Farmers & Merchants up to speed on modern systems of management training and suggested the bank open more branches to maintain its growth.


Though Farmers & Merchants has grown, it also has suffered through difficult times, mostly due to events such as the Y2K computer-related scare and the Sept. 11 terrorist attacks, which hurt many banks, Layman says. Because Farmers & Merchants had diversified its risks, those events and other setbacks didnt cripple its profits, he says.


Modest beginnings


Farmers & Merchants began life with one branch in the small community of Rockford in 1906. When Layman got involved with the bank, it was operating that branch and one other, in the Spokane Valley, and employed about 30 people, Layman says. He says that at the time, the banks early-morning board meetings were unsophisticated, since it had no agenda or formal budget to follow.


Farmers & Merchants also lacked the technology of todays banks, Layman says.


There wasnt even a typewriter at Farmers & Merchants, he says. Now, everyone at a desk is hooked up to some sort of computer system.


The advent of computers brought significant change to the banking industry, since bank transactions now are handled electronically and dont require as much paper or time to process, Layman says. He adds that computers have helped simplify banking and keep operation costs manageable.


Other technological advances such as cell phones, e-mail, and the Internet also have made banking more efficient and convenient, Layman says. Though services such as online banking make record-keeping easier for customers, Layman doubts that the percentage of people who balance their checkbooks regularly is any greater than it was before the Internet became available.


The use of credit and debit cards also has become more commonplace since Layman began in banking, he says. When he started practicing law, he recalls that businesspeople who traveled used American Express cards, while most other people wrote checks for purchases. Then, as other credit-card companies began to advertise more, consumers began using credit cards for convenience more often, he says.


Debit cards failed to gain popularity the first time national banks began offering them about 20 years ago, but the idea of using one card instead of writing numerous checks resurfaced and slowly garnered interest as more people started using the cards consistently, Layman says.


As technology and credit and debit cards made banking easier for customers, banks became more impersonalespecially big banks at which many customers dont have anyone they regard as a financial adviser, Layman says. That aloofness has helped small community banks such as Farmers & Merchants find a niche, he asserts.


Competing against a bigger bank isnt difficult, he says. You just cater to people as individuals instead of en masse.


Increased regulations


Changes in banking regulations have made operations more costly and complex for all banks, Layman says.


Federal legislation requires banks to report abnormal activities and to keep records in efforts to stop money laundering, drug trafficking, and terrorist financial networks, he says. The banks reports make it more difficult for criminals to move money around, he says.


Stipulations under the Patriot Act of 2001 and other requirements, though well-intended, put pressure on banks to spend extra time and money and require them to ask customers detailed questions, which they sometimes resent, Layman says.


Its a burden banks have to bear, he says.


Layman also had to learn how to juggle his bank work with the demands of his law practice, which required him to make adjustments to his and to rely on understanding from his wife, Jackie, he says. Since his responsibilities at Farmers & Merchants didnt require him to be at the bank all day, he was able to make time for his legal clients and court appearances, he says.


He found that his two careers overlapped, since his knowledge of the law helped him in banking, and his banking experience enhanced his ability to advise his legal clients.


Layman enjoyed balancing both careers, but decided to cut back his commitments at Farmers & Merchants last year. He says hes excited to see what his successor, John Wagner, who, like Odegard, worked at Seafirst and later as president of Bank of Americas Eastern Washington region, will do as he serves as president.


Layman, though still serving on the banks board, says hell spend some of his extra time doing more fishing, but he plans to stay active in both his careers as long as he remains healthy.


Over time, he expects that more community banks will move toward consolidation, and that competition will become tougher among those remaining banks.


To survive, theyll need to focus on customer service and new strategies, such as a shared credit system, in which they honor each others credit cards, he says.


Farmers & Merchants hasnt sought to merge with larger banks, but instead expects to expand here and in other regions, including the Tri-Cities, North Idaho, and Boise, Layman says.


The bank recently opened a branch on Hastings Road near the Wandermere Mall, and plans to open another branch this year at a strip mall thats planned on Sullivan Road in Spokane Valley. The bank will be the anchor tenant for the mall, which currently is out for bid, Layman says.


Layman says he attributes the banks continued growth to its commitment fulfilling customers needs in a sales-oriented business.


He says Farmers & Merchants has recognized that times have changed since the day of the stereotypical bank clerk sporting a green visor sitting at a counter behind prison-like bars that separate him from the customers, as portrayed in old movies.


Back then, bankers thought they were doing a good deed when they gave a customer a loan, instead of realizing that the customer fuels the banks business, Layman says.


We dont want to make the customer feel like hes getting a favor, he says. We appreciate the transaction, too.