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Economy | Rural Economy Project

In Tough Times, Rural Businesses Turn To Community Banks

It’s been a tough couple of years for bankers. What started with the collapse of Enron, climaxed with the Wall Street melt-down of 2008.

Bankers — particularly in small towns — point out that there’s a big difference between what they do and Wall Street.

For this, the fifth in OPB’s series on Oregon’s rural economies, Kristian Foden-Vencil looks into what exactly community banks do for small towns and local businesses.


The boat yard at Winchester Bay on the Oregon coast is a little boy’s dream.

Massive old wooden boats stand peeling in the sun. Brass propellers lie around and pleasure yachts get repaired and repainted.

Owner, Oley Nelson, has run the place for the last 30 years.  The bread and butter of His business is the maintenance of Coast Guard vessels from up and down the west coast.

Climbing onto one, workers put in new ribs to strengthen the hull.

Oley Nelson: “Right here, see, we’ve replaced those, and replaced these all around.”

Kristian: “And the nose would receive the biggest bashing from the waves, and that’s why it would bend perhaps?”

Oley Nelson: “That receives the roughest treatment.”

Over three months, the vessel will be completely renovated and repainted.

But in 2008, when the nation fell into an economic meltdown, Coast Guard business and other contracts dried up. Nelson says suddenly he needed a loan to keep the boat yard running for a few months.

He went to his local community bank ‘Oregon Pacific’ because he says, the big banks were of no use.

Oley Nelson: “All they do is take the application and they send them to Portland, Eugene or Seattle. And those people up there, they don’t know who you are, or what you do. They just look at the numbers and go gee, these don’t look good. But Oregon Pacific Bank, they can look at the numbers, then look at my history and say, well, this is Oley’s slow time, so he needs an influx of cash to get him through until he starts his busy spell.”

Nelson says working with a small bank can mean the difference between bankruptcy and survival. 

Oley Nelson: “Without them being in the community, there would be several businesses in Reedsport and Florence that wouldn’t be here. They wouldn’t have made it through the downturns we’ve had on the coast, and we’ve had several.”

‘Oregon Pacific Bank’ stands on Route 101 through Florence.

It has four branches in Florence, Roseburg and Coos Bay.

All told, the bank has about $165 million in assets. That may sound like a lot, but it’s 14,000-times less than the assets held by Bank of America.

‘Oregon Pacific’s‘ president, Jim Clark, concedes that means big banks can often offer better interest rates or lower fees.

But he says small banks like ‘Oregon Pacific’ are more likely to help if there’s a problem.

Jim Clark: “We can bring all the proper people to a room very quickly, talk about the problem, determine if we can resolve it the way the client wants. Or if we can’t, be able to explain to them, why we can’t. We never say, because it’s a policy. We have the opportunity based on our size to think about it and does the policy still make sense or is it time to maybe change.”

Across the hall from Clark’s office sits the bank’s Chief Financial Officer Joanne Forsberg. She says being a banker over the last few years has been tough — people don’t see a difference between what she does and the skullduggery witnessed in financial markets.

Joanne Forsberg: “They just think all bankers are wrong and it was Wall Street that got everyone into trouble…. the press doesn’t understand the difference. When they say banks, they mean investment banks, not a regular good old community bank, or a bank that takes your money and lends it out just Plain Jane.”

In fact, the biggest fear of small bankers nowadays is that politicians will lump them in with investment banks.

Congress is currently considering a package of financial reform bills — to curtail the excesses of Wall Street.

Linda Novarro is the chairwoman of the Oregon Bankers Association. It lobbies Salem and Congress on behalf of the state’s banks. Novarro worries that if they’re not careful, small banks could get tied-up in unnecessary red tape.

Linda Navarro: “We want to make sure that the final bill that makes its way through the senate and the house, provides for important reforms and protections for consumers, while at the same time not stifling the ability of traditional banks to continue to serve their communities. Anything less than that and you end up with reform that doesn’t even get at the problem.”

In D.C., Oregon Senator Jeff Merkely, just introduced a tough new amendment to the financial overhaul package. For instance, it would stop banks from engaging in high risk speculation.

But he says, it’s not going to be a problem for small banks.

Jeff Merkely: “The reason the community banks have a very important role to play is that they’re close enough to the ground that they can evaluate the opportunities much more effectively than often a large, distant bank can. So they’re ready to make loans that a big bank might never even consider. And so community banks are essential to our small businesses.”

Jim Mitchell agrees. He owns ‘Coastal Fitness’ here in Florence. He recently recently got a loan from his local bank to build new lap and exercise pools. He says they’ve stuck with him as he’s grown his business for the last 18 years.

Jim Mitchell: “There was a time when we thought, it’s going to be important for us to shop around, because we don’t want the bank to be too comfortable with our business. But at the same time …..our kids go to school together, we see them at community events. So they know who we are, they know what we’re about and that personal relationship is just critical.”

That might seem like a ‘good old boy’s club.’

But in a small town, like Florence, businesses appear willing to pay a little bit more for their loans in exchange for knowing that if they hit a snag, the bank isn’t going to leave them high and dry.

This story is part of our Rural Economy Project.  We’re looking at how small businesses and communities around Oregon are coping with the recession that began last year.

Next week we’ll wrap up the series with a look at how each of the businesses featured share some common ties.

The Rural Economy Project is a partnership between OPB and the Rural Development Initiative, Sustainable Northwest and The Oregon Consortium and Oregon Workforce Alliance. 

The Rural Economy Project is funded by the Corporation for Public Broadcasting.

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