Banks are institutions, customers are people, and the twain must meet. Each wants identity. Each demands respect. So what can solidify this relationship? Bank and Credit Union officials unanimously agree the focus must be on personal contact coupled with the speediest and most efficient high-tech.

Tech and “Touch” is the keyword for the banking industry today. There is a need to become even more sophisticated in the first, and much more human in the second. Puget Sound banks, from the biggest to the smallest ,are working on these goals.

“We are here to meet public needs. Banks and customers must share a mutual trust,” say the CEO’s. “Clients today are in a hurry to meet deadlines. Time is as precious as money. A quick response is essential. They also want to be recognized as vital entities, not as numbered accounts.”

“A loss of individual recognition is irritatingly apparent in the buttons pushed and delays in electronic communication today,” commented Robert W. Robinson, Sr. Vice-president and Regional manager of Frontier Bank in Poulsbo. “No one likes to wait on 'hold' when they need an immediate loan. Calls or e-mails each have a purpose demanding attention. Besides, we all need to know a face, a voice and a real person to feel comfortable with our institutions.”

Robinson believes the next generation will employ high-tech as the tool it is. “With a transactional emphasis, banks in the last few years have been learning the operations of high-tech at the expense of human relationships. Our kids are being taught tech in grade school. They see it as something to use like a pencil or a power drill to get a job done. They will start businesses from a far more knowledgeable position than ours has been.”

The rapid growth in electronics has been a factor in the many mergers of banking and investment companies. Frontier’s merger with North Sound helped both banks. Just as did the takeover of Silverdale State by American Marine. The amalgamation of six mergers created the growth of Pacific Northwest Bank, the largest regional commercial bank in Washington State. Now a three billion dollar bank, Pacific Northwest has 55 branches in Washington state.

“Our merger resulted in giving much larger lending limits and an array of services in cash management,” Robinson remarked. Frontier is now a 1.8 billion dollar bank with 37 branches in Western Washington, 600 employees, yet still qualifies as a ‘community bank.’’’

“When American Marine purchased Silverdale State in April 2000, the transaction enabled expansion in both banks,” says Rex Townsend, President and CEO of American Marine on Bainbridge Island. “Silverdale State remained as a separate company in the city of Silverdale, which is an excellent market in the geographic hub of Kitsap County. We helped them surmount a liquidity issue and the high-tech equipment operation needed. Ownership of their bank helped us expand our horizons in doing what we do well. — staying focused on Western Washington needs.”

Since the friendly takeover, a combined policy of service enables each of the five branches to donate more money and time to charity and common causes, according to Townsend. “These are represented by increased lending for small businesses, non-profit agencies, ballfields etc.,” he commented. “We do not do credit scoring and sorting by machine. We know our customers and they can meet face to face with bank policy-makers.”

"The Gramm-Leach-Bliley Banking Moderation Act of 1999 permitted banks of all sizes and types to do more things and old things in different ways. Investments and brokering, real estate, stock repurchase programs, with additional flexibility in ways of lending for homes, cars and appliances and commercial transactions all became available to us,” Townsend pointed out. Banks found themselves in competition with discount brokerage houses, real estate mortgaging and sales, credit unions and each other — all scrambling for clients.

It doesn’t take a rocket scientist to see the scrutiny needed to compare interest rates, commissions or charges on purchases and sales, time versus productivity, share earnings, asset-debt ratios. Besides all this, expertise in these new arenas became a sudden necessity for all lending agencies.

Imagine the flurry behind green doors all over the state and nation. “Where shall we look?” “Who might be a welcome takeover?” “Which banks need help?” “Which would partner well with individual corporate goals?" "What and where is our best opportunity?” “What about risk-reward ratios?” “How do we partner with other financial firms?”

Goals became paramount as never before while banks and those offering similar services burrowed through annual reports and their corporate souls.

The “buck” still goes ‘round and ‘round locally and globally to keep economies healthy. But no two businesses operate the same. Like the people they serve, financial institutions can differ as much as their customers” choice in neckties.

Three types are apparent. The Big Banks, international in scope and scale, the Regional banks who serve a specific region of a country, and the Community banks, with some 500 million and under in assets, who focus chiefly on residential rather than commercial lending.

“Persistent mergers seem to indicate that regionals are becoming a scarce commodity,” said Townsend. George Brace, executive vice-president and Manager of Community Banking for the Pacific Northwest banking group, may not agree.

“As the largest commercial bank headquartered in the state of Washington, we are not trying to be “big,” Brace contends. “However, group strength from takeovers has enabled us to become a three billion dollar bank with 55 branch offices in the state. Since bank lending is regulated according to percentage of capital, we are capable of lending up to 30 million on our own.”

“We employ 850 people with no layoffs, and feel we now have an opportunity to recreate our bank to where pride in operation will resemble “the good old days,” according to Brace.

Once the president of the former Old National Bank of Washington, he predicts continued growth in on-line banking. Old National was absorbed by Pacific Northwest along with First National Bank of Port Orchard, the National Bank of Tukwila, Kittitas Valley Bank, Pioneer Bank in Yakima, Interwest Bank and Pacific Northwest. The group retained the Pacific Northwest name.

Pacific Northwest is catering to businesses. “We can excel in this type of lending, featuring quick response — a 24 to 48-hour response from experienced lending agents, some of whom have been with us in excess of 20 years,” says Brace. “Local community banks do the same, but are limited to a certain size loan and cannot participate in the Seattle market.” Pacific N.W. hopes to open or acquire branches in Vancouver, Wash. and Spokane.

Pacific’s chief competitors are Key Bank, Wells Fargo, and US Bank of America. Interviews with Key Bank could not be arranged within time limits for this story.

Wells Fargo is experiencing a tremendous increase in both personal and business efforts, according to Donovan Olson, Regional Manager for the State of Washington in Business Banking. At present, the bank is delivering service through stores and additional bankers, two in Silverdale and Bremerton, one in Tacoma, and supporting banks in South and Central Kitsap County.

Major trends observed by Olson is the availability of high-tech to small businesses as well as large corporations. “Personal banking on the peninsula is cheaper online for the consumer,” he believes. “Our bank offers “very small” specialized packs including business deposits, investment records, payroll, business cards, payroll services and online banking for our customers. We are now one of the largest online banking services in the nation.”

A tech push globally is part of Wells-Fargo strategy. In the joint venture with Shanghai Bank in Hong Kong, the branch is called “Wells Fargo Trade Bank. “We are adding 10,000 internet clients per month, with 2.6 million using our service,” he added. “Among the financial service companies, we offer one of the largest insurance agencies (owned by Wells-Fargo) and one of the largest mortgage operations in the U.S.”

The mortgage business began in 2000 with 76 billion dollars in loans. Brokerage assets under Fargo management total 138 billion. The bank has 1500 financial consultants on staff. Ninety billion dollars is now in personal trust accounts .
Small business loans, ranging from under a million down to $25,000, are a significant emphasis in Wells Fargo’s planning. “We have also given branch managers a strong community authority to implement such loans quickly and efficiently.”

“Big Banks can be operating in 200 countries with offices circling the globe. They can do what regional and small banks cannot do in this respect. Investments and commodities can be traded globally.” Olson affirms. “Businesses can be helped everywhere by the giants in the banking trade, such as US Bank, Bank of America, Citicorp, and Wells Fargo, all US operations. Some even bigger giants, such as Chase Manhattan and other internationals service their multi-billionaire into the trillionaire accounts.”

Ted Rosin, spokesperson for Bank of America, says such banks can offer a wide variety of services for any nation, individual, or institution. He points to two priorities for his corporation: “increasing affiliations with investment companies, banks and other financial firms with a focus on financial products and enhancing customer privacy protection,” which he considers a major issue facing banks today. “We were leaders in the privacy practice,” he said.

Bank of America is still studying growth opportunities in real estate and insurance. Already dealers in commercial and retail mortgages, the bank has formed a Community Development Group to work with low income clients.

“Hundreds of thousands of small businesses exist today, and everyone that succeeds could be another Microsoft,” said Rosin. “We talk with them about goals, startup money from family or friends, business track records and managerial ability. If all goes well, we can help them operate payrolls, set up tax returns, 401K plans, cards, and all accounts.”

The bank is also moving toward insurance as part of its plan.
Rosin sees one-stop convenient shopping services in partnership with other financial servers as a focal effort. “All banks, small, regional and local have more opportunity today,” he claims.

Kitsap Bank is one of Puget Sound’s largest community banks with assets of 408 million. It is ranked fourth in lending of SBA loans in Western Washington and the oldest bank in the state of Washington, celebrating its 90th anniversary three years ago. It also boasts the first female bank president West of the Mississippi during the late Hanna Langer’s term of service.

“We have helped 800 businesses with 160 million in loans,” claimed Scott Harvey, vice president and manager of Kitsap Bank’s SBA department. The bank in 1998 was selected as the SBA National Financial Services Advocate, the only Northwest bank to be so honored.

“We have specialized in one thing — helping entrepreneurs who may not qualify for other loans,” he went on. “If they can’t come up with a down payment, we require less down with an SBA guarantee of 75 to 80 percent on the loan. Our delinquent rate is less than two percent and loan loss less than one percent.”

Harvey says other banks refer people to Kitsap Bank because it is ‘friendly’ for borrowers. In the last year, 55 loans for 12 million dollars were made with the SBA. Ten billion dollars in SBA loans were made nation-wide, representing a rise of eight billion since the early nineties.

Maximum size of such a loan has been increased to a $1,300,000

Job growth today is in small rather than big business, where layoffs are rampant, says Harvey. “Value is sold in successful businesses — that is the staying power.”

Jim Carmichael, President and Chief Executive Officer of Kitsap Bank, worries about “eligibility lines” for banks with 97 percent of businesses in the United States classified as “small.”

“Management experience is primary along with net worth and adequate equity in a business to establish a loan,” he explains. (Adequate equity is described as 30 percent and possibly a minimum of 20.) “Nobody will assume all of the risk, and there are just too many loans out there with risk of default,” he adds. Bank reports show a 70 percent rise in small business lending last year.

Banks are also regulated by law to certain interest rates on SBA associated loans — 2.25 percent over prime rate charged for up to 7 years, and 2.75 percent on those extending beyond that time. When banks engage SBA assistance for a client, there is no way of knowing if previous transactions have been repaid. Terms on the SBA loan agreements are only governed by factors in the transaction,” he continued.

SBA charges their own loan fee with a guarantee of two percent of costs for a loan of $80,000 or less — three percent for above that amount, according to Carmichael. “Banks, on the other hand, cannot charge a fee on an SBA loan, and have to pass on theirs to the borrower. For loans under $50,000, the interest rate can be higher than the fee and bank yield negligible.”

“We banks want to grow the economy. Home, car, and commercial loans are 20 percent of our portfolio, but we do need guarantees.” he concluded.