The changing face of community banking in Napa.
With the recent $156 million sale of Napa’s venerable 22-year-old Vintage Bank to Umpqua Bank, five-year-old Napa Community Bank is now the “oldest” community bank in town. Two others: Charter Oaks Bank and Bank of Napa, while newer, contend they’re the “real” community banks in Napa because of Napa Community Bank’s affiliation with Capitol Bancorp in Michigan. But what exactly is a community bank? How do these “community” banks (including Umpqua, which says it, too, is a community bank) differentiate themselves and draw depositors and loan customers?
What is a community bank?
“You could probably have a multitude of different definitions of a community bank, but mine is a bank that’s owned, managed and operated within the confines of its geographic territory—usually, that’s no larger than a county,” says Tom LeMasters, executive vice president and chief financial officer for Bank of Napa. “Our board of directors, like those of most local community banks, is made up of people from the community. We have Napa businesspeople who sit on our board and know Napa, know the players within the community and know the economics. Those are the folks who make the decisions. We’re not headquartered in North Carolina.”
Since it opened in August 2006, the single-location Bank of Napa is the newest entrant into Napa’s community-banking scene. The latest financial report for the bank (Dec. 31, 2006) was $6.6 million in total deposits with total loans at $1.1 million.
“I think the level of services [of a community bank] from a business standpoint can’t be matched by the big banks,” says LeMasters, a lifelong resident of Napa, who’s been in community banking for 20 years. “That personal service is tough for them to compete with. They tend to be a mile wide and an inch deep, where we’re an inch wide and a mile deep. From a community standpoint, I think what community banks do for their region is, in many ways, unmatched. Aside from the banking services and products we offer to local businesspeople, community banks tend to be a great resource because of the employee commitment to living and working in their hometown, the fact that they’re engaged in nonprofits and the level and support that community bank boards and senior bank management give to their towns.”
Bank of Napa has a staff of 15, but more hiring is likely when Vintage Bank becomes part of Umpqua Bank, staff positions are duplicated and Vintage employees are laid off.
Why did Bank of Napa organizers feel it was time to open another community bank in Napa? “Our organizers, many of whom are now serving on our board of directors, are businesspeople who were frustrated with the level of banking services in our community. That was the first impetus. The second was when we put pencil to paper to look at the market. Napa County’s population and size ranks in the bottom one-third relative to the rest of the state. But when you look at the amount of deposits and wealth of the county, it’s well into the top one-third. Needless to say, we’re fortunate to live and work in the Napa Valley because of the economic climate.”
Another view
Charter Oak Bank, with branches in Napa and St. Helena, opened in December 2004. Its president and CEO is Brian Kelly. He and his family have lived in Napa since 1979; his wife was raised there.
Kelly agrees that local employees, a local board and local shareholders help define a community bank—and he adds a few more ingredients: “Where are the loan decisions made?” he asks. “Over a certain dollar amount, does it have to go to headquarters in another state for approval? [At Charter Oak Bank] people who live and work here make all our decisions. They can make very fast decisions because they’re here.
“Another fun thing about a community bank is that we can tailor products to meet clients’ needs. We don’t have to pull a product off the shelf or convince someone in San Francisco that a customer needs this or that. If someone needs a particular type of loan that doesn’t fit the box, we don’t need to follow the box necessarily. We can fit the needs of the borrower if it’s obviously the right risk to the bank. We can look at the borrower and say, ‘Here’s another way to approach this.’”
Kelly says his staff of 25 will soon increase. “We’ve been growing, and we’re gearing up this year for the local changes in the banking industry, so we’re adding staff. Since Vintage was bought by Umpqua, we’re anticipating an increased customer base because community bank customers prefer to bank locally.”
As of December 31, 2006, total Charter Oaks assets were $77.8 million, a quarterly increase of $23.7 million and an increase of $43.1 million beyond total assets in 2005.
With all the banking choices in Napa, why was the growth so dramatic? “We have a very knowledgeable group,” says Kelly. “I’ve been banking in the Napa Valley since 1979. My chief credit officer, Mike Ledwich, was born here and has 20-plus years banking in the valley. We have a management team that understands the valley, knows the people and has a history of providing the quality service people seek. Also, a community bank offers fewer turnovers and the ability to get to know its clients.
“Our bank offers quick, tailored decisions made by knowledgeable people who’ve lived in the community. We have more than 200 years’ combined experience banking in the valley. We have a team that’s been here with other banks. They’ve performed, know the clients and have that history. So when people have a need, they don’t call an 800 number in San Francisco, they call here directly and ask us to help. People are always going to have issues; it would be foolish to think they won’t. What we have to ask is how quickly we can resolve them.”
Napa’s “oldest” community bank
An affiliate of Capitol Bancorp, which is based in Lansing, Michigan, Napa Community Bank has more than $100 million in assets—and sometimes draws the ire of other community banks for its out-of-state affiliations.
“I keep reading we’re not a true community bank,” says Dennis Pedisich, president and CEO. “I don’t know how much more true we can be. We’re an independent community bank. What’s key in defining a community bank is a local board of directors with local decision making and, most important, whether the dollars invested in that bank stay in the community. We have autonomy to make the decisions as to what we’re going to do in our community.
“We’ve worked hard to prove we’re truly a community bank. ‘Community’ is part of our name. Our slogan is ‘putting community back into banking,’ and we take great pride in giving back—in a big way—to this community. I look at Capitol Bancorp as a strength. It gives us a platform we wouldn’t have otherwise.”
Napa Community Bank has close to 3,500 accounts—and one location.
“Our goals include good, strong, steady growth and employee retention, which is key to our success. I don’t see us having five, three or even two branches. With technology today, a lot of times a brick-and-mortar doesn’t make sense. There’s strength in having your entire team in one location. What I’ve seen with the other banks is the ability to give their staff the autonomy to do their jobs becomes more difficult—as you spread out, it’s harder to find enough qualified people.”
Umpqua: not just a river in Oregon
With assets of roughly $7.4 billion, Umpqua is the big kid on the block. With the acquisition of Vintage Bank and its six Napa Valley locations, it will have 70 locations in California—yet still considers itself a “community” bank.
“Umpqua is absolutely a community bank,” says Bill Fike, president of Umpqua Bank California. “I came into banking in 1970, and I’ve been with community banking since 1976. To my mind, community banking is where you make decisions locally; you give local people the ability to make judgments and take actions on behalf of the customers. It may or may not be similar to the branch or the store in an adjacent county or city. Every branch manager—or store manager, we refer to them as stores—has a degree of autonomy that’s probably unparalleled with other banks as far as decision making, steps and actions they can take to satisfy customers’ needs. We want to create a unique customer experience in every location. And the only way we can do that is to let people make those decisions locally. We encourage that and spend a lot of time training and empowering our staff.”
Why did Umpqua choose Napa and Vintage Bank?
“Napa is an area that’s very close-knit and that’s what we’re about. We want to be part of that community. I knew [Vintage Bank] was looking for a partner that wouldn’t try to undo what it’s spent 20 years doing, but instead accentuate it; it was a very natural fit.
“From a strategic standpoint, Umpqua has always been interested in partnering with really strong banks. What we’re really acquiring are the people, the talent that has the community ties and customer connections. We’re not coming into town and replacing existing staff with our own people; we’re merging with the bank because of the people who are there.
“It’s our expectation that what the community and customer base of Napa will see are the same friendly faces and service they’ve had at Vintage, but with a little stronger product line and lending limit because of our size, and a little more community support because of our resource and staffing bases.”
Terry Robinson, president and CEO of North Bay Bancorp, the holding company for Vintage and its sister bank, Solano Bank, says the purchase by Umpqua will give Bancorp’s shareholders more liquidity.
“It’s at the size where it has total sustainability,” says Robinson, who came to Vintage in 1988 and plans to retire after helping with the transition. “Independent community banks always run the potential of being sold at some point, because the directors have a fiduciary responsibility to look out for the shareholders. There almost always comes a point when it’s hard to justify remaining independent, and we felt we were at that point with the industry facing some challenges. If you look on the horizon, Umpqua will be in this market after this transaction is complete.”
Robinson is emphatic that Umpqua will be a community bank. “The biggest concern I’ve heard from customers is that now decisions will be made in Portland. They won’t. Umpqua recognizes that every market is different, and it gives the people in every single store the ability to do what they need to do to attract business and take care of clients. I admire Umpqua because to do that, you have to lean against the wind, in terms of the natural forces that push you toward behaving like a big bank as you get larger. Umpqua’s done a commendable job swimming upstream. I’ve known it a number of years and, in the past few months, I’ve been working with its people. It’s not just talk, it’s real. The people there believe in it.”
In the community for the community
The common thread in the community bank’s mantra, no matter its size, is service to the community. Each of Napa’s community banks has ways in which it gives back to the community.
Several open their boardrooms to nonprofit groups who need a place to meet. The Bank of Napa and Umpqua both have educational and social programs for seniors. Most of the banks encourage employees to volunteer in the community.
“We decided we could make a difference by focusing our community efforts primarily on youth and education,” says Fike of Umpqua Bank. “In the Connect Program, we encourage each of our associates to spend up to 40 hours a year volunteering during the workweek and we pay them their wage. Last year, bank-wide, we paid our associates for about 15,000 hours of volunteering. We’re really proud of it, because our associates embrace it and it works for everybody.”
At some banks, volunteerism is part of the culture. “We encourage all employees to be involved in the community in the area of their choice, and we discuss this during the interview process,” says Kelly of Charter Oak Bank. “When I last counted, we had 28 employees and board members who were involved with more than 50 communuity organizations including 13 board memberships. Our employees get involved. For instance, our customer service representatives—the tellers—pulled everyone together for Rebuilding Together last year, and they’re looking into Habitat for Humanity and Relay for Life this year.
“Employees can be involved in their church, their school, foundations, service clubs, Family Services, Vintners Health Center, Land Trust, St. Helena Foundation, or a variety of different organizations—but it all comes back to giving back. That’s what we’re about.”
It must be working. Charter Oak Bank received the Napa Chamber of Commerce Family Friendly Business of the Year in 2005 and was named one of the top places to work in the North Bay in Fall 2006 by North Bay Business Journal, one of only three businesses from Napa.
Life cycle
Is there a normal life cycle for a community bank? In Napa, previous community banks have lasted about two decades before being purchased by larger entities: Napa Valley Bank was about 25 years, Napa National was 18 and Vintage Bank was 22.
“It doesn’t need to be that way,” says LeMasters of Bank of Napa. “I would point to Sonoma Valley Bank, Exchange Bank and Mechanics Bank, although they’re now tending to be more regional banks. But it’s not inevitable that they’ll be bought out. It just seems that after about 20 years, those original founding directors get tired and want to sell. Maybe they have estate issues and they want their stock to be more liquid. Oftentimes it tends to manifest itself in terms of sale.”
In that case, Bank of Napa, Charter Oak Bank and Napa Community Bank will have a few decades before they have to start looking over their shoulders.
