An Inside Look at a Community Bank – Part 1

With roughly $85 million in assets, Willamette Community Bank, based in Albany, Oregon, is a bit smaller than some banks — and a whole lot smaller if you stand it next to a Goliath like, say, Capital One, which boasts more than $120 billion in assets.

But that’s largely by design: As the name itself suggests, community banks don’t operate with the same charter as national (or international) institutions. They stay local — and that can be a good thing for local businesses. Willamette had more than $27 million in small business loans on its books at the end September. And the bank has extended nearly $7 million in credit to small businesses to date in 2010.

Dave Wood is CEO of Willamette Community Bank. I asked him for his insight into community banks, what makes them different, and how they can be a smart fit for small businesses. Read on for part one of our Q&A. In part two (coming later today), you’ll get Wood’s outlook and opinions on the economy, the state of small business lending, and the elements of a successful loan application. He’ll even share two critical mistakes that some business owners make when applying for credit.

How does a community bank differ from other financial institutions?

Typically, community banks are more conservative in how they run their business affairs. Why?  Capital is finite. We do not have “too big to fail” backing from the U.S. Government nor access to capital markets. Community banks tend to be more closely connected to the communities they serve, and character still counts in loans we make and determining whether we will be paid back. Big banks use scoring models that cannot measure character, integrity, or the worth of a person. We tend to have values that a growing number of people want to see:  Honesty, caring, character, a genuine interest in our customers. We have the ability to make decisions locally.

So why should a new or growing small business consider a community bank?

We are the best source of growth capital for businesses. Big banks are still comforted by being “too big to fail.” Customers are attracted to community banks that did not take funds from the Troubled Asset Relief Fund (TARP). We did not take TARP and advised all shareholders of this fact. People consider us more trustworthy as a result. Customers are abandoning big banks over high interest rates especially on credit cards, checking account fees, overdraft fees. They are tired of calling 1-800-Who-Cares, only to experience cold and impersonal service. Economics 101: Capital goes where it is wanted and appreciated.

Click to read part two of this story

About Kevin Casey

Kevin Casey is a regular contributor here, at InformationWeek and elsewhere. Find him on Twitter @kevinrcasey.
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