West Gate Bank is rehabbing its community
The SoDo neighborhood of Lincoln, Neb., is within blocks of downtown, the state capitol building and the University of Nebraska. Despite its prime location, the housing stock in SoDo (short for South of Downtown) is more than 100 years old, much of it run down. Few properties are owner occupied. Lincoln has a large group of residents who need better housing options.
That’s why Lincoln’s West Gate Bank helped create a program that addresses both problems: It improves the housing in SoDo and opens home ownership opportunities to people who might not otherwise qualify for mortgages.
“This really is about fulfilling our mission,” says Carl Sjulin, the $900 million-asset community bank’s president and CEO.
The program is a collaboration between West Gate Bank, the City of Lincoln and several local nonprofits. The city acquires dilapidated SoDo homes, razes them and builds new single- and multi-family houses on the lots. The single family homes are sold to people who may not be able to afford both a conventional home and the lot, or are ineligible for a traditional mortgage. Instead, the land is held in a trust separate from the house. If the homeowner remains in the home for a certain number of years, ownership of the land vests with the house.
The first such home closed at the end of 2020. “We provided the mortgage financing for a property in SoDo that was 120 years old, had been largely destroyed by fire and had been vacant for more than 10 years,” Sjulin says. “We worked with some nonprofits to create the community land trust that holds the land and partnered to build a new 1,300-square-foot, two-story, four-bedroom home there. Then we provided financing to a first-time homebuyer, a single mom. It was an affordable option for her.”
Now that the first home has been built and sold, West Gate Bank can use the template again and again. “That first one was really a couple of years in the making,” Sjulin says. “There was a long runway in getting all the players huddled together so that we were all on the same page. It took a unique structure, because we had to work out a bifurcated financing structure with the community land trust and the owner. We had to think through title issues, title insurance issues, mortgage issues and other details to make sure we captured those interests appropriately. The runway will be much shorter for subsequent projects.”
There are already four other homes in SoDo being built using the same template, Sjulin says.
“This is an investment in rehabbing housing stock in the neighborhood just adjacent to downtown. We can’t just let it go and expect our downtown to be healthy,” he says. “The reality is, to get a new home built in this neighborhood and get someone from a lower or moderate income into the home takes a completely outside-the-box mortgage. Community banks are well positioned to put together the time, talent and treasure to come up with unique solutions like this.”
Oak Valley Community Bank: Moving mountains for its customers
About 20 years ago, Oak Valley Community Bank got a call from a resort owner in Bridgeport, Calif., asking if the $1.5 billion-asset bank could open a location there. A large national bank had closed its branch in the tourist town, leaving the area without a bank to handle cash services.
Oak Valley Community Bank is located in Oakdale, Calif., which is about 100 miles away from Bridgeport and on the other side of the Sierra Nevada Mountains. But the community bank’s then-CEO recognized the opportunity and opened a branch in Bridgeport.
Two decades on, Bridgeport, a tourist destination, has struggled during the pandemic. Like other communities with tourism-heavy economies, it and nearby towns were slammed particularly hard by COVID-19 and subsequent shutdown orders. They desperately needed financial help. Oak Valley Community Bank, which had since opened two other branches on the eastern side of the Sierras, stepped up and delivered.
“Nobody else was giving PPP [Paycheck Protection Program] loans on that side of the mountain,” says Chris Courtney, the community bank’s current president and CEO. “At first, we talked to just our existing loan customers. Then we realized, ‘You know what, we have the capacity. Let’s do all customers, including deposit customers.’ And, as things went on, we realized we could handle anybody in our footprint who [needed a PPP loan].”
Courtney reports that he and the community bank’s 195 employees worked 45 straight days, often deep into the night, to process PPP loan applications.
“I happened to be the last person to stand up and introduce myself … and when I said I’m the CEO of [the bank], the entire table started clapping.”—Chris Courtney, Oak Valley Community Bank
“I tell our directors that in the four quarters of 2020, our employees worked the equivalent of five quarters,” Courtney says. “And let me assure you, their bonuses reflected it. We might have moved a few employees to the next tax bracket.”
Their efforts led the community bank to service $244 million in PPP loans. Among the recipients was Bob Peters, owner of the Bridgeport Inn, who wrote a note of gratitude: “Our business, the Bridgeport Inn, and many other small businesses in our rural county are the fabric of our communities and source of our financial stability. Almost everyone is in serious financial need. Your attention to our use of the PPP loan program and Oak Valley Community Bank’s quick support of the program for their customers has been remarkable.”
The effect of the loans really hit home when Courtney attended a business executive’s club event in the fall. The 45 attendees went around the table and introduced themselves, and several mentioned that they had received PPP money from Oak Valley Community Bank.
“I happened to be the last person to stand up and introduce myself [from the bank], and when I said I’m the CEO of Oak Valley Community Bank, the entire table started clapping,” he says. “At that point, I realized what we had done.”
PPP highlights community banks’ role
The Paycheck Protection Program (PPP) provided a great opportunity for many community banks to help businesses in their communities survive the COVID-19 crisis. For customers and even noncustomers, the program has highlighted the role community banks play.
“You can only imagine the goodwill we have in the community,” says Chris Courtney, president and CEO of Oak Valley Community Bank in Oakdale, Calif., which serviced $244 million in PPP loans. “People are so appreciative of what we did. It lit up our brand. You couldn’t buy this kind of exposure. I call PPP the marketing opportunity of a lifetime.”
Oak Valley Community Bank’s PPP lending generated good feelings even in communities it typically doesn’t serve. For example, when Courtney learned that the local bank in Lone Pine, Calif., was not participating in the PPP, he extended the community bank’s lending to the remote town in Owens Valley through Eastern Sierra Community Bank, a division of Oak Valley Community Bank. “We decided that since the people of Lone Pine had nowhere to get PPP funds, we would do PPP lending there,” he says. “This wasn’t about trying to open a branch there; it was because we had to help that community.”
First National Bank of Las Animas in Las Animas, Colo., also received overwhelmingly positive response from its PPP lending. The community bank provided $27 million in PPP loans across the seven communities it serves, equivalent to more than 50% of the bank’s capital.
“There was a great deal of appreciation,” says Dale Leighty, CEO and chairman of the board. “They got taken care of. I would say one of the unintended consequences of the PPP program was that it really did strengthen our public relations and our image in our community, since we were able to take care of those things.”
Hyperion Bank: Believing in its customers
Community banks distinguish themselves from big banks by looking beyond simple numbers and getting to know borrowers, even when they may have less-than-stellar applications.
That’s exactly what Hyperion Bank did when Natan Shvarts and Igor “Yosef” Giterman, both Ukrainian immigrants, walked into a branch in Philadelphia in 2016.
“This was just one of those situations where someone comes in and you realize they’re at a crossroads,” says Frank Sullivan, executive vice president at the $244 million-asset community bank. “Natan had graduated from rabbinical school, but he was renovating homes to augment his pay.”
Giterman worked for the same home rehabber, and he and Shvarts clicked. The two soon realized that if they could raise some capital, they could work for themselves. That’s what brought them into Hyperion Bank.
“They said they had eyeballed this property that was a teardown,” Sullivan says. “Their credit was good, but they were young guys, just starting out. They weren’t sitting on a million dollars. But I worked through the numbers and finally told them I would take a run at it. Ultimately, we got the loan approved.”
That first loan helped the duo launch Yona Construction, now a thriving business that renovates and builds homes and acts as a general contractor for other clients. The relationship has flourished in the years following that loan. Hyperion Bank has made five or six more loans to the company since then, and Giterman and Shvarts have referred a number of other customers to the community bank.
“When people come to me, I let them tell their stories, and that’s what I did with Natan and Yosef,” Sullivan says. “They were just really likeable guys, and they’ve done a great job. I’m proud of them.”
Texas Bank: A two-day turnaround
When the owner of a manufacturing company in San Angelo, Texas, worked out a deal to sell his business to three members of the company’s management last November, he asked his primary bank to finance the transaction. The buyers needed a loan of $1.5 million and wanted to close the deal by the end of the year.
What should have been a quick approval evidently stymied the bank, a large regional institution. With just two days left in 2020, they admitted they couldn’t get the loan done on time.
“The bank basically back-burnered the deal and didn’t give it the attention they needed,” says Casey W. Barrett, president and CEO of $341 million-asset Texas Bank. “So, [the buyers] were panicked and called us on Tuesday, Dec. 29.”
Barrett and his colleagues leapt into action.
“We don’t have the long chains of command and all the different committees and different people the regional banks have to go through. All they do is muddy the water.”—Casey W. Barrett, Texas Bank
“It was all hands on deck to get the deal underwritten,” he says. “We spent most of Tuesday on the phone talking to the buyers and understanding their position, and then the loan officer and I underwrote the deal. Then we called a special meeting of the executive committee on Wednesday.”
The deal was approved just under the year-end deadline. “We don’t have so many hoops to jump through,” Barrett says. “We don’t have the long chains of command and all the different committees and different people the regional banks have to go through. All they do is muddy the water. It was actually kind of a no-brainer on our side.”
Texas Bank’s success at closing the deal quickly has led to a growing relationship with the manufacturing firm. The company is switching all of its checking accounts from the regional bank to Texas Bank. Barrett says the business plans to use the bank’s remote deposit capture and cash management services, two features that helped further cement its decision to switch banks.
“Even though there’s not a Texas Bank location in the other towns they do business in, because of technology, we’re able to offer what the big banks offer at a competitive price,” he says. “And on top of that, we give the kind of service you’re not going to get from a bigger bank.”
Helping those hit hard by COVID-19
When a community bank recognizes an urgent need among its neighbors, often the quickest response is a cash grant. First National Bank of Las Animas responded that way when COVID-19 struck.
The $465 million-asset bank in Las Animas, Colo., spearheaded a local grant program that provided $1,000 grants to about 40 local businesses and organizations that were hit hard by the pandemic. The bank and local business owners stepped up to donate the funds, and state funds were later added to the program.
“The program was very local and subjective,” says Dale Leighty, CEO and chairman of the board. “We literally went out to some people and said, ‘Please apply for this, it’s what it’s set up for.’ We were able to help quite a few people.”
The bank also helped by purchasing a quantity of $25 and $50 gift cards from local restaurants and giving them to first responders, grocery store workers, nursing home employees and others dealing directly with the coronavirus. This effort helped both card recipients and restaurants. “Our restaurants were so hard hit,” Leighty says.
Because of the generosity of First National Bank of Las Animas, those restaurants—along with many other local businesses—have a better chance of surviving.
