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How does 'the new normal' in community banking affect dealmaking?: Part II
Editor’s note: This is the second post in a two-part discussion on local commercial lending and real estate development in a post-recession regulatory environment. The first post is here.
In the aftermath of the Great Recession, new banking regulations and procedures have dramatically changed the financial market, and there are few industries that have been more impacted than real estate.
I recently sat down with Brian Campbell, Vice President of First National Bank of Michigan, and 616 Development founder, Derek Coppess, to uncover exactly how this "new normal" has impacted dealmaking in West Michigan.
First National Bank of Michigan made it possible for 616 Development to secure financing for 616 Lofts at the Kendall in downtown Grand Rapids, at 16 Monroe Center.
Brian, would you say community banks are able to push deals through faster than national banks?
Yes, very much so. We take what would be a four-month process to provide just initial feedback to customers, and we get it done in one week, tops. Because our management and employees are so well versed in the local market, we can provide feedback quickly.
In today’s marketplace, things move fast. You’ve got to close on the property fast. You’ve got to close on the loan fast. You’ve got to get going fast. You can’t afford to sit on the sidelines and leave the customer out there hanging, because, at the end of the day, we want to make things happen for them.
Derek, what impact does shorter financing time lines have on your ability to close and push deals through the pipeline?
Shorter time lines make all the difference. Every deal we do reaches a point when something needs to happen incredibly fast. To me, this is where our great relationship with First National comes into play. Their decision makers are right here, and because it's a small community, they have real skin in the game when it comes to meeting deadlines and doing what needs to be done to close the deal.
At the risk of sounding like a broken record, working successfully with banks all comes down to building solid, trust-filled relationships. Without that, time lines don't even matter, because if the deal isn't founded on solid relationships, it shouldn't be done in the first place.
Brian, would you say that the "new normal" is, in a way, a return to the way banking used to be before the bubble?
Yes, specifically, in that it's returned to being relationship driven. It is, after all, a relationship. Banks and customers need one another to be successful. 616 Development has helped us on a lot of fronts, and we're trying to help them be successful. Even if it's something as simple as my mentioning Derek's and Matt's name if there's an opportunity — it's about trying to connect people.
In the transactional world, there's no connectivity. And when you become isolated, that's when you fail, because you have no network to fall back on when times get tough.
Derek, what value have you found — both for dealmaking and on a personal level — in the relationship-driven approach that exists in community banking?
Personally, I've simply seen a lot of reinforcement of 616's core mission: building community. In essence, that's all we're doing here. We are being good neighbors and adding to the growth of our local community and economy by banking locally. In my experience, when you invest in your local community, it invests back in you tenfold. It's an extremely mutual relationship, and one that is at the heart of what we do.
I can call the president of the bank on Monday and be having lunch with him on Wednesday — that relationship is a beautiful thing!