Making “cents” of community banking

The relationship between business and banking is most certainly grounded in the numbers.  Business loans, lines of credit, deposits, withdrawals, all play daily roles in the necessary transactional partnership.

But the interaction between the small business owner and the local, community bank has been one keenly interlaced with each other’s mutual success.  Amidst the turmoil of the past several years, it has been the smaller community banks that have maintained their roots in relationship-banking, particularly in support of small business.

What is a community bank?  The FDIC readily defines it as a bank with assets not greater than $1 billion and that which serves a particular community defined within the scope of a county, or small regional geographic area.

In total, community banks represent 96.8 percent of all banks with over $3.9 trillion in combined assets.  According to the Independent Community Bankers of America (ICBA), even though community banks have only 20 percent of all bank assets, and hold less than 20 percent of total deposits (FDIC), they make almost 60% of small business loans.  In a recent poll, Forbes asked small business owners about their banking relationship and 53 percent responded that their primary bank, including for loans, was a community bank.

While larger, national banks may have the resources to support loans to growing businesses, they don’t always spread the wealth as readily.  Earlier this year, the Federal Reserve Bank issued a Small Business Credit Survey report which stated, “Small banks extended at least some of the financing requested to 76 percent of applicants.  Large banks approved 58 percent of applicants.”

The report further identified community banks as the “lender of choice” for small businesses.

“Seventy-five percent of independent businesses that used community banks report they were satisfied with their overall experience, compared with 56 percent for credit unions and 51 percent for large banks,” the report concluded.

“Numbers don’t always tell the story,” says Danny Gilliland, market president of Gateway Bank here in Gainesville, “and people who don’t know you are not going to make those decisions based on relationships but on what a spreadsheet says.”

Gateway Bank currently operates branches in Gainesville, Ocala and Alachua and provides local businesses multiple business checking and savings options, money market investment services, commercial lending along with full internet banking conveniences.

Mr. Gilliland further outlined the knowledge of local markets and trends as key pieces of information critical to determining loan qualifications for a small business.  “That’s just something the bigger banks have gone away from.  We are about the relationship with the customer.”

Consider that most community banks are small businesses themselves.  The US Small Business Association defines a small business as one with less than 500 employees.  The average community bank?  Forty-one employees with $204 million in assets. Community banks simply cannot thrive unless the community it serves thrives as well.

Community banks provide a person, not an 800 number when working with customers. According to the Federal Reserve’s 2016 Community Banking Report, “Close relationships between businesses and banks also are suggested by the frequency with which community bankers meet with, provide advice to or otherwise monitor small business borrowers.”

In 1993, Ray and Gail Lytle opened Gainesville Harley-Davidson with a 5,000 square foot building located off I-75.  Today, the family-owned and operated business is thriving in their 25,000 square foot dealership just a short distance from the original home.

According to Kevin Lytle, owner and general manager of Gainesville Harley-Davidson, the business initially had a relationship with a larger bank, but after it had been sold multiple times, they made a change to Gateway Bank. “The people in the bank know my name, I know them,” says Lytle.  “I deal directly with the decision makers and those decisions are made quickly. As a business owner, if I need to get something done, it is handled immediately, where with a corporate bank you talk first with a machine.”

The amount community banks loan to small businesses is also significant.  In 2015, the average balance for small business loans made by community banks was $96,000, with the average balance for larger banks at only $17,000.

With 51,000 locations across the country, community banks employ over 700,000 people.  And according to ICBA, small business loans by community banks have helped create two out of every three jobs nationwide.

Community banks and small business certainly appear to form a profitable relationship as Gainesville grows.

By Kathryn Pizzurro

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