People’s Bank of Commerce
We put people first
Business View Magazine interviews representatives of the People’s Bank of Commerce, for our series on Top Oregon Community Banks.
People’s Bank of Commerce is the only locally-owned commercial community bank in Southern Oregon and Klamath County. Headquartered in Medford, Oregon with branches in Medford, Ashland, Central Point, Grants Pass, and Klamath Falls, People’s Bank has been providing its customers with superior, responsive, and flexible service with a friendly approach since it first opened its doors in 1998.
Years of conservative solid banking fundamentals and doing right by its customers, employees, and the community have paid dividends in more ways than one. People’s Bank has prospered financially and remained well-capitalized through the economic downturn, and is now highly-regarded as one of the top community banks in Oregon and the bank of choice in the Rogue Valley and Klamath County. The entire banking team takes pride in its commitment to put people first, believing in the mantra, “When we put people first, families grow stronger, businesses thrive, and our community flourishes.”
Business View Magazine recently spoke with Ken Trautman, co-founder of People’s Bank of Commerce, Julia Beattie, President and Chief Lending Officer, and COO Jerri Reno, about the inception and evolution of this trusted community bank. Trautman has served as its President and CEO since September 2008, when his friend and co-founder, Mike Sickels, retired. The following is an edited transcript of that conversation.
BVM: Can you talk about the bank’s history and growth?
Trautman: “Back in 1996, there were a lot of bank mergers going on and Mike and I thought there was value in a locally-owned, community bank, where the decisions you’re making concerning your lenders were pertinent to the market you’re in. So, we started putting together a community bank. It took us about two years to get the capital we needed, the regulatory approvals, and a branch site located. We opened our doors in March 1998 and were approved to start with $3 million in capital. We oversubscribed and ended up with $6 million and that capital carried us for the next 10 years until the Great Recession. Seven of us started the bank, so we wore a lot of hats. My partner, Mike, was the CFO/CEO, I was the President and Chief Credit Officer, and Jerri Reno (now our COO) did everything else you can think of when you set up a bank.
“After two years, we opened a branch in Ashland, Oregon in an old Dairy Queen building that came with a drive-up permit. Even today, Ashland only has 13 drive-up permits allowed in the city, so there’s a value to having that. Then we opened our third branch in Central Point, Oregon in the throes of the recession. Really bad timing. Central Point is a bedroom community of Medford, a retail community. That one’s been a bit of a struggle for us. In 2010, we built our fourth branch, on Barnett, in the other end of Medford. That was an attempt to move our head office to a new building. We built a three-story commercial building about 21,000 sq. ft. with the bank and lending on the first floor. We leased the second floor to the medical community and the third floor was our administration offices.
“That served us well until about three years ago, when there was a change in the customer dynamic. People wanted a more open environment, where they could see their loan officers and key decision makers. So we built another three-story building in a different part of town, this time with limited offices. The whole ground floor is wide open. It’s a throw-back industrial look building, long and narrow with exposed ceilings. It has rounded corners and is totally unique in our market. We use the entire space and ended up moving our admin from the five-year old headquarters on Barnett to the third floor of the new building to centralize our services. We’re building our sixth branch now in Klamath Falls. We also have a branch in Grants Pass, Oregon.”
BVM: What plans do you have for growth and diversification?
Trautman: “In 2017, we bought a 36-year-old factoring company that buys receivables from truckers, predominately on the east coast, to diversify our income streams. We need to get 40 percent of our income from non-interest income. Traditional community banks have about 85 percent of their income from interest income. It’s really challenging to make a living as a community bank when interest rates are as low as they are right now and there’s no value on earning rates on deposits. So we were successful with that. We also have a mortgage division that has taken advantage of this low interest rate market and has grown substantially.
“Southern Oregon is a unique market. It used to be a timber community – and it’s the gateway to recreation. We’re 90 miles from the coast on I-5, so Medford is the first major city you’ll hit in Oregon if you’re coming from California. A lot of our growth over the years is from Californians who get tired of the big city and want a simpler lifestyle and move here. We’ve made a living catering to that group and they’ve been a good solid base for us on the deposit side. In 10 years, we went from $6 million in capital to $80 million. Today, we’re just under $500 million in size. Our strategic plan takes in geographic opportunities, particularly expansion northward, whether organic by building a branch, or acquiring a bank. When we started 22 years ago, there were 39 state-chartered banks in Oregon. Today there are 13, so there’s more opportunity for growth on the organic side.”
BVM: How do you keep a competitive edge over other financial institutions?
Trautman: “Of the top ten financial institutions in Oregon, nine are credit unions. And they have a 40 percent advantage over us when we compete on the consumer products because they’re non-tax paying. That’s what drove us into the commercial model. Ninety percent of our business is around commercial loans, whether it’s construction, equipment financing, lines of credit, or developing. We’re the only hometown, locally-headquartered bank within 200 miles in either direction. Our competitors are all regionals, super regionals, and national banks (Wells Fargo, Chase, etc.) And we compete extremely well by getting more efficient. Our goal is to be as low as we can on the cost of our funds on the commercial lending side, so we can pass that savings on to our clients.”
Beattie: “All the local decision making occurs right here. That gives our clients and prospective clients the opportunity to meet those decision makers in the bank and that has real value in the community. It also allows us to be very nimble when our customers need a change. We can respond much quicker than a regional or a national bank. Because we have to work a little harder to be competitive, our commercial lenders have become proficient using a variety of tools.”
BVM: What role does technology play in your success?
Reno: “Over the last three years, we’ve been focused on enhancing our digital banking platform to support our commercial followers and to continue being competitive against the larger banks. So we made the decision to move our core processor to CSI and now we have a robust platform that allows us to offer our customers a variety of services and products, such as mobile banking. In addition, we’ve been able to mainstream our operations for loans and deposits in centralized areas where they do much of the backroom functions. This has freed up our branch personnel to focus on the customer and be more efficient in the delivery of our services.
“With Covid-19, the digital banking really positioned us so our customers could access those services outside of the bank. They could use our online systems and our drive-ups; have customer meetings by appointment only. The branches are now open and clients are learning to deal safely during the pandemic with the mask requirements and hand sanitizer and social distancing.”
BVM: What do you anticipate five years down the road for People’s Bank?
Trautman: “We’re half a billion right now; five years from now we’ll probably be a billion. Most likely we’ll have three, maybe four, new branches. We’re not the dominant player yet in the markets we’re headquartered in, so we’re going to see some significant growth there. We feel that as a homegrown community bank, we should have over 20 percent market share. We’re getting close to that in the Medford market but there is a lot of opportunity to grow in the Grants Pass and Ashland and Klamath side.
“During the pandemic, we did over 1,000 PPP loans for about $93 million – the majority under the $150,000 threshold. A lot were five or ten thousand. The regionals and nationals weren’t geared up to handle those clients and we took care of them. That gave us a lot of new clients and a better appreciation from the community on what we can do. We anticipated the first two quarters of this year would be record profits for the bank and it’s turned out that way. And we expect the third and fourth quarters will be pretty strong.
“When we started the bank, we wanted to create something that would last. We know the value of a community bank in the communities they serve. For the past five years, we’ve spent a considerable amount of money and time making sure we have that next generation of bankers prepared; giving them the knowledge, so we’ll continue to be successful in the future. We have the right people in place. Now, we just need to gradually let those senior folks retire and the new group take over in a different high-tech environment – one where customers expect that ease of service, and yet they still want to walk in and talk to you and have you design something unique for them. We’re really good at that.”
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AT A GLANCE
Who: People’s Bank of Commerce
What: Locally owned commercial community bank
Where: Headquarters in Medford, Oregon
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