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B A N K I N GThe Power of Community BanksQ&A with Steven Sefton, Regents Bank’s new presidentAfter the global financial crisis andmortgage meltdown, mega banks are busytrying to repair their images, while thecommunity banking industry emerges withan untarnished reputation. Small and midsizedbusinesses power the economy, andcommunity banks serve many such businesses.As a result, community banks canrise and fall on the same tide as theirSteve Seftonclients. So what’s a business owner to dowhen deciding where to go for a loan?Regents Bank’s new president, Steven Sefton, has 28 years ofbanking experience in Southern California. He shared with SanDiego Metro about the power of community banks.Q. Big banks have huge amounts of money available tolend. Why wouldn’t a small business owner go there first?A. Big banks are in and out of the community bank market, dependingupon which way the winds blow. A big bank’s mission ismaking money in a variety of markets that may or may not includethe community. In contrast, the mission of a community bank is toinvest in its community. The personalization of services is likely to bebetter at a community bank as well, because it’s not structured on a“plug-and-chug” system for important services like evaluating borrowingneeds.Q. Where can a business owner find the best advisoryrelationship?A. I believe it can be found in either a large bank or a communitybank, it’s just more difficult to find in a large bank. People providethe business advice that business owners want and need, not institutions.It’s all about the banker. I was recently talking with a frustratedbig-banker. She was scolded by her boss for selling herselfrather than the bank, but business owners choose relationships withpeople, not institutions. By the way, the banker got there becauseher community bank was bought by the big bank.Q. You emphasize advice and advisory services. Whatexactly does that mean?A. Decades ago, the local community banker was on the businessowner’s advisory team for critical decision making. It was a close relationshipthat enabled the banker to customize his or her advice accordingto the endless variables that exist for each business. I believebankers should still operate according to this legacy, and communitybankers are well positioned to do so.Q. Back to lending, don’t big banks make the majorityof business loans?A. Measuring by total amount loaned, yes, but Independent CommunityBankers of America reports that community banks made 58percent of outstanding bank loans to small businesses. The key differenceis that the community bank approach is consultative, and thebig bank approach is about commodity — who can provide the lowestrate and most relaxed terms?Q. If a business owner already banks with a big bank,shouldn’t they start there for the loan?A. Sure. If a business owner has that gold nugget of a banker whois doing all the consultation I described. If not, a business owner canget the same or close to the same pricing and terms with the communitybanker and get so much more in return. We recently sat ona panel with local big bankers, and one conceded that his big bankdiscourages consultative banking and sees it as a legal liability.Q: Won’t a business owner get a better interest ratefrom a big bank?A. Even if a community bank has a higher rate, it can be a betteroverall relationship and worth the bit of extra cost. When times aregood, anyone can do business with a big bank, but the relationshipswith senior management that you get at a community bank can bepriceless when a business hits the inevitable bumps in the road. Anotheradvantage is that you’re likely to find faster turnaround for loandecisions at a community bank.Q. What if the community bank goes under or gets acquiredafter it makes a business loan?A. There is no reason to wait for your bank to fail. Require yourbank, both community and big bank, to give you a report card onperformance every quarter to stay ahead of a problem. If your communitybank is acquired, it shouldn’t matter, because the acquiringentity will bend over backwards to keep the existing clients.Q. What about big banks that specifically advertise tosmall businesses?A. Anyone can talk the talk. I recently read a Bloomberg articleabout a very large bank that touted their old-fashioned loan and deposit(community banking) strategy. But in the same article, deep atthe bottom, the CEO conceded that his earnings were driven by nonbankservices. Where a bank’s earnings are, there resides its heart. Acommunity bank’s heart is with its clients, in the community.2 2S A N D I E G O M E T R O . C O M | J U LY 2 0 1 2 | 2 7 T H A N N I V E R S A R Y 1 9 8 5 - 2 0 1 2