NorthBay biz looks back on the last 35 years of local banking—despite the industry’s ups and downs, local banks have remained a powerful ally for North Bay communities.
Exchange Bank
Established: 1890
Number of employees: 425
Number of branches: 19
Assets: Approximately $1.6 billion
Although Exchange Bank was started almost 120 years ago by father and son Manville and Frank Doyle—when our community looked vastly different than it does today—it’s changed surprisingly little in terms of its core mission and values.
“As local businessmen, they [Manville and Frank Doyle] both appreciated having local people who were able to make local decisions, especially on important matters of banking,” explains Bill Schrader, president, who’s been with the bank since 1978. “What I think they were looking for was a focused, community-minded banking alternative for families, farmers and businesses that was far more responsive than what they felt they could have expected from larger institutions that were headquartered outside of Sonoma County. It’s interesting that after 120 years, that’s frankly still our focus and strength today—we’re locally owned, locally operated. I think we provide a very attractive fit for our customers here in Sonoma County. We know their needs as small businesses and how they compete with the giants, because as a relatively small, nimble financial institution, we have to compete with the financial giants every day as well.”
The bank even uses an acronym to signify its commitment to the community: The 3Ts, which stands for time, talent and treasury.
“We’re involved in probably more leadership roles in nonprofits than any other business establishment in Sonoma County,” says Schrader. “That’s a history that goes way back to Frank Doyle, the original founder of the Santa Rosa Chamber of Commerce.”
Of course, while Exchange Bank’s core commitment to the community it serves hasn’t changed much, the community itself—and the banking industry in general—certainly has, especially in the last few decades.
“The late ’70s was a time of hyper inflation,” recalls Schrader. “Interest rates were rising at historically high levels. Mortgage rates were 10 percent back then and were on their way up to ultimately peaking at 15 percent. Construction and development were our most predominant industries, although HP was probably our single largest employer outside of the public sector. We as a bank were very much involved in lending to contractors and developers. There were more contractors and developers operating in the county back then. It was also the era just prior to deregulation. Interest rates you could pay on deposits were controlled by regulation. So it was a world that was less complex, and the products and services in banks were simpler.”
It certainly was a simpler time 35 years ago, with a minimal menu of products, fixed rate mortgages and complex services like remote deposit capture, online banking and home equity lines of credit still yet-to-be-launched. But with less complexity also comes less choices, and given Exchange Bank’s commitment to serving its customers, adding these products and services was a natural evolution for us.
“At the same time, the similarities are such that we continue to serve our customers and continue to stay knowledgeable as to what their needs are, and try to adjust our delivery systems to respond to those needs.”
One of the biggest changes over the last three decades, however, that’s posed both some of the best advances as well as the bank’s biggest challenges, has been the advances in technology.
“Apart from working through the hyper inflation of the ’80s and deregulation, I think the single greatest challenge we’ve faced—and continue to face in business—is investing in the right technology,” says Schrader. “The speed of new advances and the cost of technology is such that you have to make the right decisions. Businesses, now more than ever, have to operate with narrower margins. So you have to run faster, harder and longer to maintain excellence. I think technology is one of the most challenging areas that’s existed in the last two decades.”
Because the rise in technology has made business in general—and banking is certainly no exception—more intensely competitive, finding the right niche has become that much more important. Even with online banking and banking through ATMs, the need for high touch service hasn’t gone out of style. Customers are still looking for that personal contact in addition to convenience and flexibility.
“We knew that, in a world that was going through these tough corrections within the economy and dealing with narrow margins, we had to look at ways to do things a little better,” says Schrader. “Tomorrow we’ll have to do them a little bit better than we did them today. And so convenience and flexibility were always an important consideration 35 years ago—it’s still important for us to recognize that. We serve the customers, and we serve their definition of convenience and flexibility, not ours.”
Bank of Marin
Established: 1989
Number of employees: 200
Number of branches: 13 branches in Marin and Sonoma counties, plus one loan production office in San Francisco
Assets: $1+ billion
When Bank of Marin first opened its doors on January 23, 1990 (the bank was incorporated in August 1989), it did so with branches in Corte Madera and San Rafael and dreams of becoming the premier bank in Marin through providing legendary service. In less than 20 years, it’s grown to 13 branches, offering a broad range of deposit products, commercial and personal loans, cash management solutions, private banking and wealth management services. Obviously, legendary service resonates well with local customers.
“Legendary service is really being available to our customers for their requests, whatever they need,” says Russ Colombo, president and CEO. “To us, it really is what drives the bank every day, because without that level of service, we’re no different than any other bank.”
In his 34 years of banking experience, Colombo has seen many trends and changes in the industry, but the current economy has been one of the most significant. However, despite the challenges, Bank of Marin has not only survived, but is thriving and continues to meet its plans and goals.
“The banks that have stuck to their local markets have survived the best,” explains Colombo. “Bigger isn’t better. We’ve avoided the problems so many banks have encountered [subprime mortgages, uncontrolled construction, too rapid growth]. The bank has achieved its growth plans and they continue today. We’re performing well despite the difficult economy. We apply conservative fundamentals, stick to relationship lending and have a strong commitment to the communities we serve.”
Bank of Marin has reached $1 billion in assets, received the BauerFinancial (an organization that’s been reporting on and analyzing the performance of U.S. banks and credit unions since 1983) five-star rating for 41 consecutive quarters, and was recognized by Sandler O’Neill + Partners LP, a New York investment banking firm, as one of 30 “2009 Sm-All Stars” in September 2009 (Sandler O’Neill evaluated all 509 publicly traded banks with a market capitalization of less than $2 billion).
So how has Bank of Marin sustained growth and profitability? By sticking to the fundamentals.
“Commitment to the communities we serve” is more than just a public relations statement. Bank of Marin is known for its support of local nonprofit organizations through financial contributions and employee volunteerism. The bank contributes to more than 250 local nonprofit organizations, while employees and the board of directors volunteer close to 7,000 hours a year and are represented on nearly 70 boards in Marin and Sonoma counties.
It will be this commitment to the community, and its mission of legendary service, that will keep the bank going strong in the future—no matter what’s happening in the macroeconomic environment.
Westamerica Bank
Established: 1983
Number of employees: 1,200 total, up to 70 employees in Napa County
Number of branches: 99 total, seven branches in Napa County
Assets: $5 billion as of September 30, 2009
Westamerica Bank has the unique position of being the only bank in Napa County that’s both a local community bank and one that’s been around for longer than just a few years. It first had a presence in Napa County when Westamerica merged with Napa Valley Bank in 1993, although the bank itself has a history much longer than that. The bank operates under a charter initially granted to Cloverdae Banking and Commercial Company (CBCC) in 1884; CBCC ultimately merged with five other North Bay banks in 1983 to form Westamerica.
Robert Thorson, chief financial officer, has been with the company for more than 20 years. He recalls some turbulent times during the last couple of decades, but retains his belief that there will always be a place for community banks—no matter what’s going on in the macroeconomic environment or within the banking industry.
“Banks struggled in the mid-’80s and then again in the recession in the 1990s,” says Thorson. “From that point forward, there’s been a lot of new banks—Napa Valley has had quite a few new banks start up. I think there’s always going to be a place in [the banking] business for small businesses that prefer banking with community banks like Westamerica. There’s always going to be the much larger banks that are everywhere. But what community banks can offer is one person who serves all the needs of the small businessperson. The analogy is, ‘If you bank at Westamerica, there’s one business card in your Rolodex.’ If you were to bank at a big bank, you’d probably have three or four. We just think the delivery of our service to our customers is a stronger relationship because one person can handle all of your needs. I think that’s why community banks continue to exist.”
Operating independently of what other major banks might be doing has occasionally posed a challenge, especially considering the conservative nature with which Westamerica has traditionally conducted business.
“Westamerica is a very conservatively run bank,” explains Thorson. “The good part about that is our loan underwriting, being as conservative as it is, has always resulted in Westamerica having much, much lower loan losses than the average bank. When the economy is growing and the banking industry is showing quite an impressive loan growth statistic, Westamerica hasn’t had such high growth in its loan portfolio.
“Sometimes we get criticized because we’re not growing as fast as other banks. Our growth is muted because of our conservative loan underwriting practices. But of course when recessions have happened, Westamerica’s loan losses have been much lower than the rest of the industry and our shareholders have appreciated that our stock price hasn’t descended and our depositers have felt very safe because Westamerica has remained a healthy institution. Depositers haven’t had to worry about the safety of their money in the bank. The challenge really has been to stick to our principles and our core operating fundamentals of running a conservative bank, regardless of what other banks are doing.”
This challenge has also resulted in some of the bank’s greatest achievements—namely, retaining a healthy loan portfolio and strong capital levels, especially these days.
“One thing our CEO has said is, ‘Someone looking from the outside at Westamerica shouldn’t recognize whether we’re in a growth phase of the economy or in a recession,’” says Thorson. “And, in a way, we operate to maintain stability in both our profits and in the quality of our loans.”
One of the biggest changes and trends Thorson has witnessed over the last couple decades, which he also believes will continue to drive changes moving forward in the future, is the advent of electronic delivery of products and services.
“It’s changed so much,” says Thorson. “The physical location of a branch is becoming less and less important as people can conduct banking from their computers, cell phones, or by waving their Visa cards in front of scanners to pay for a transaction. Thinking about it from a customer perspective, the convenience of having electronic delivery of products and services has probably been the biggest change we’ve seen over the past decade.”
Redwood Credit Union
Established: 1950
Number of employees: 340
Number of branches: 15 branches throughout the North Bay and San Francisco
Assets: $1.7+ billion
Redwood Credit Union, a full-service financial institution, has been assisting consumers and small business owners with achieving their financial goals and dreams since 1950, when the financial cooperative was created by a group of County of Sonoma employees to help each other with a safe and convenient means of saving as well as to provide each other with affordable loans.
Unlike financial institutions whose purpose is to create profit for stockholders, being a not-for-profit financial cooperative means Redwood Credit Union’s focus is to simply serve its members; any “profits” are returned to members through better rates, fewer and lower fees and enhanced services.
Even though the credit union’s focus may differ from a traditional bank, some of the challenges and historical economic factors have affected them similarly.
Brett Martinez, president and CEO, has been working in the credit union industry for 24 years, and recalls what was happening eight years ago as he relocated to the North Bay from Southern California.
“In 2002 in this area, unemployment rose to 4.3 percent—in today’s perspective, that seems pretty low, but it was hard to find employees” says Martinez. “Interest rates were low, there was a lot of refinancing in the mortgage industry and housng values were going up substantially. There were what we call ‘flights of safety’—a lot of people in 2001 and 2002 were pulling their money out of the stock market and putting it into traditional financial institutions. Credit unions, specifically, saw pretty substantial growth during that time.”
Martinez also recalls some of the credit union’s plans and goals around that time. Several new services had been introduced, including loans and full deposit products for small businesses, investments, insurance services and an auto brokering service. Part of his mission was to get these additions streamlined into the main line of products.
“[Our goals] were also to expand our branch network,” he recalls. “Today, we have 15. We had six branches when I arrived, so we’ve grown our branch network and also moved some to better locations and upgraded some. It was really getting a broader footprint with the branch network, more ATMs, more branches for our members to access.”
Even though Redwood Credit Union achieved the goals it set out to accomplish over the past decade, the current recession is by far the biggest challenge the organization has seen since its inception almost 60 years ago. “This is the toughest time since the Great Depression,” says Martinez. “So the economy we’re dealing with today is by far the biggest obstacle and the toughest challenge that we as an organization and we as an industry have faced.”
Another main challenge since it started has been simply understanding, on the part of the consumer, what a credit union really is and has to offer.
“This isn’t anything new, this is an ongoing issue,” explains Martinez. “There’s a lack of understanding and awareness of what a credit union is. It’s the industry’s biggest problem. We’re not here to make a profit off of people. The environment we’re in right now is happening for a lot of reasons, lack of education [being one of them]. Lack of education means you’re more vulnerable to being preyed upon—and, unfortunately, there are a lot of people in this world that take advantage of others and try to get the most out of them. I don’t know when people forgot some basic principles of doing business with somebody that you can trust, but evidently they did, because a lot of people were taken advantage of. They say when you go through so much pain you hopefully learn something from it, and I hope people learn it’s important to do business with people you can trust.”
A brighter tomorrow
When looking at the success of some of our local community banks and credit unions despite current economic realities, it appears people are indeed learning from the past—valuing close personal relationships with their banks, saving more and borrowing less. Many businesses can not only learn from the past, but also look at all the financial institutions interviewed for this article as prime examples of how to successfully conduct business—maintaining close relationships, getting involved in one’s community and sticking to core principles of steady, conservative growth. With these fundamentals firmly in place, our local community financial institutions can look forward to at least another 35 years of growth and prosperity.
