Relationships you can bank on
Bank of Manhattan Executive vice president Kevin Campbell.
Bankers who understand local businesses and communities are imperative
by Kevin Campbell
The South Bay economy and, in particular, the banking environment has felt the effects of the 2008-2010 financial crisis. The crisis has cut much wider and deeper than previous recessions. The slowdown of the early 1990s was not as dramatic, in the sense that its impact was largely restricted to the aerospace and real-estate sectors.
The good news is there are pockets of business that are picking up as we roll into 2011. Areas of improvement include real estate, bolstered by lower prices and low interest rates; the financial services sector, helped by the stock market’s increase in the past nine months; and some local tech/entertainment industry growth related to increases in personal spending.
Many local small and mid-size business owners have spent the last two plus years trying to maintain their bottom line profits. They have done this, as sales have decreased, by cutting expenses. One local entrepreneur said he had “cut the fat, cut the muscle and now was worried that he had to cut the bone.”
But as the economy turns, more businesses are concentrating on top line sales growth and expansion, while continuing to keep an eye on the expense side of the ledger.
Consumers are beginning to free up their wallets at local establishments, including restaurants, clothing retailers and home improvement stores. One of the factors in the improving trend is that consumers are more demanding of value or perceived value than in the past. Retailers have responded, as evidenced by local restaurants’ 2 for 1 burger days, and $2 Taco Nights. Many retail establishments seem to have a permanent “sale” sign in their front windows. Everyone wants a deal these days, whether it’s dinner, a dress or a new home. This is something that will probably stick around for some time, or at least while the memories of the downturn stay fresh in people’s minds and value takes on a new meaning.
We have seen an improvement in the banking sector as the larger banks have started to gain better financial footing from a capital and profitability perspective. The local community banks have been more active in their markets and have helped fill the void over the last few years. But even with things seemingly getting better, a common question I hear from businesses and consumers alike is “How do I get a loan these days?”
The fact of the matter is that the financial regulatory environment has changed dramatically over the last few years. Just ask any consumer or business owner who has tried to get a loan how difficult it is. And why is this? There is no more “easy money.” The stated income days and low doc/no doc loans for consumers and businesses are gone. What matters now is personal and business cash flow. The cash flow has to be sustainable and documentable.
From my perspective, the key is to have a relationship with your banker, whether you are at a large bank or a community bank. You want your banker to know you and your business, so that they can be your advocate when trying to get your loans approved. Having bankers who are partners and who understand the local businesses and communities are imperative.
It’s often said banks only lend you money when you don’t need it. To a certain extent, this may be true and this makes relationships that much more important.
As a career banker, having worked at some of the largest financial institutions in the world, I have seen a lot of changes in the banking industry. When we started Bank of Manhattan in August of 2007 (just as the financial world was getting interesting), our goal was to become an outstanding local business with its primary purpose being to serve the community — its residents and businesses. We cater to our community based on relationships and local knowledge. We have been very fortunate to weather the financial storm and continue to make loans in the community and give back to local charities, particularly educational and youth organizations.
We are fortunate in the South Bay to have some of the largest financial institutions at our disposal: Wells Fargo, BofA, Citibank and Union Bank to name a few. In addition, we have several outstanding local community banks: Beach Business Bank, Malaga Bank, and Bank of Manhattan. Each of the banks has something special to offer. I realized early on in my career that you can’t be everything to everyone. Some of the larger financial institutions may offer low rates but you may need to fit in the credit box, while the community banks may be more responsive to structure and terms of the loans because they tend to be more relationship driven.
Case in point: when Vineyard Bank left the construction lending market several years ago, they left a huge void in the construction loans market that was filled by local community banks. In addition, community banks that were able to maintain strong financial balance sheets were able to pick up sound, long standing local businesses that may have experienced some challenges during the downturn. As the economy turns, many of the larger banks have and will come back aggressively looking for business. That bodes well for the local consumer and business owner. Again, the key for the consumer and the business owner will be the ability to show and demonstrate cash flow, establish relationships and communicate with their banker.
Kevin Campbell is a lifelong South Bay resident. He is a career banker, having held senior positions at BofA and Citibank. He helped start the Bank of Manhattan where he is an Executive Vice President. ER