In the midst of negotiations with a landlord for new office space, Lisa Hamilton needed a loan.
Four large banks refused to lend her the money without SBA funding — but she didn’t have time for that lengthy process.
An optometrist, she owned two Pearle Vision franchises and wanted to open a third location.
Hamilton needed the money for medical equipment, furniture and remodeling.
Frustrated, she went to Adams Bank & Trust, a small regional bank with offices in Colorado Springs and elsewhere along the Front Range.
“Callen Borgias reviewed my business plan, income and credit history. He made a decision in two weeks,” she said.
Borgias is the regional president of Adams.
After months of frustration, Hamilton had found her solution at a small bank.
Her experience is the sort that small banks are hoping to capitalize on in a nation where small businesses have grown increasingly wary of Wall Street and large banks since the financial crisis began in 2007.
Sentiment against the big banks appears to be worsening. Between August and February, large banks fell from 81 to 66 on the biannual BAI and Finacle customer loyalty scorecard.
In past downturns, small banks tended to pick up a good deal of runoff business from their bigger competitors. That hasn’t occurred this time around — not yet, anyway.
“While there may be sentiment against big banks, there is no flight from big banks,” Borgias said. “Good customers are hard to pry loose.”
Small and large banks are struggling because of the financial crisis and the resulting increase in regulatory scrutiny. Many of the smaller banks, especially those with smaller capital reserves, have reached their limits on making commercial real estate loans.
The U.S. Senate last week approved its version of the Financial Regulatory Reform bill. Eventually, a final version combining the Senate and House iterations of the reforms is expected to be passed that could limit banks’ ability to lend even further.
Small banks will be especially burdened by two provisions of the Senate’s version of the bill, said Don Childears, CEO of the Colorado Bankers Association.
Certain securities would no longer be viewed as what the banking world calls Tier One capital. The more Tier One capital a bank has, the more it can lend.
In Colorado alone, this would affect 11 small- to mid-size bank-holding companies, eliminating $4.4 billion in lendable assets — nearly 7 percent of the state’s lendable assets, Childears said.
Meanwhile, what are small banks doing to capture market share?
Although they’ve heard plenty of horror stories from small-business owners, small bankers know that often it’s just too much of a nuisance for clients to switch business and personal accounts unless they have no other choice.
“There’s no low-hanging fruit just because we’re a small bank,” Borgias said.
Big banks won’t agree, but small bank types say their competitive advantage is in the relationships they’re willing to build.
“I spend a lot of time getting to know my clients and their companies, so when they need (a loan) I can advocate for them,” Borgias said.
Finding market share has meant trying new things for the banks.
FirstBank Colorado, which owns two banks in the area, is gaining visibility by sponsoring the Colorado Sky Sox and publicizing its annual philanthropic giving.
“We’re going to keep doing the same thing we’ve been doing for decades — taking in deposits and lending the money locally,” said Brian Larson, president of FirstBank Colorado Springs and FirstBank El Paso County.
Downtown, at Stockmens Bank, a small bank chartered in Colorado Springs, President Rob Alexander can regularly be found in the lobby, ready to shake customers’ hands.
“Moving forward, the thing we beat the big banks on is very simple — accountability,” Alexander said.
“I can’t blame someone else upstream. There’s nowhere for us to hide if we make a mistake,” he said.
Everyone claims they’re ready to go the extra mile; Stockmens recently proved it.
Alexander said a client recently needed a special software interface for his check-scanning machine.
Even though none of his other clients needed one, Alexander bought one and installed it.
“I didn’t even know it existed, but it’s a good product, unique,” he said. “Now it’s online and everybody can use it.”
Borgias, meanwhile, talks about staying flexible.
At Adams, Borgias tries to make sure that loan requests are evaluated on a case-by-case basis according to their individual merits.
“We don’t sell products, and we don’t have what’s called a ‘sweet spot’ or ‘postage stamp’ (formula),” Borgias said. “We view ourselves as consultants — this approach allows us to be creative in finding solutions.”
That’s an approach that keeps Rusty Green, a consultant and realtor for Falcon Properties and Investments, coming back.
Green has been negotiating deals for Falcon with Adams Bank since 2004, when Adams opened its first Colorado Springs branch.
“We were never even able to get through the door at larger banks — the banking culture isn’t supportive of small developers,” Green said.
“We sit down and talk with them (at Adams) about the real estate economy and decide together if a deal makes sense. We get their input before we even do the deal,” Green said.
“They’ve talked me out of some projects that in hindsight I’m glad I didn’t do.”
Despite all of their efforts, there’s no question that large and small banks alike have made fewer small-business loans.
Small-business loan portfolios on Wall Street decreased 9 percent between 2008 and 2009 — more than double overall lending portfolio declines, according to the latest Congressional Oversight Panel report on banking trends.
But that doesn’t tell the entire story.
Although small-business lending has declined, there have also been fewer loan requests since the recession. As residential and commercial real estate values plummeted, fewer small-business owners could qualify for loans and haven’t bothered to apply.
The bottom line: Small and large banks, just like their customers, are awaiting the return of better days.