There is a thriving world of community banks, and a growing number of opportunities to be a local investor.
Sara Rubin here, thinking about how sometimes a question from a reader simmers for a long time before it becomes a story. I have heard variations of the questions over the years, and also asked them myself: We talk a lot about the importance of shopping local, but what about banking local? We hear a lot about “voting with our dollars”—the premise that by supporting mom-and-pop, bricks-and-mortar businesses we can help Main Street survive even in the golden era of e-commerce. But is there a more literal way to support Main Street with your dollars, by investing locally, instead of on Wall Street?
I set out to answer those questions in this week’s cover story, and l learned there is a thriving world of community banks, and a growing number of opportunities to be a local investor.
When the community capital conference met in Monterey in 2017, the possibilities for companies to sell equity to regular old shareholders—me and you and anybody with a little bit of cash available to invest—was brand new. Thanks to the JOBS Act of 2012, in 2016 the Securities and Exchange Commission gave the green light to companies to sell stock or debt directly to regular people via crowdfunding. It’s a set of still-evolving tools that means we can buy stock not just in publicly traded Wall Street companies, but also local enterprises.
Consider New Way Homes, a nonprofit that is building affordable housing projects in Salinas, Santa Cruz and Oakland. You can invest $100 (or more). Or Parallel Flight Technologies based in La Selva Beach, which has a patent pending on drones that can carry 100 pounds for two hours, with the idea of delivering supplies to wildland firefighters, currently selling stock for a minimum of $500.
The idea is that if you’re looking to grow your nest egg, there is a place you can invest it (or at least part of it) locally. If you’re a business owner, you can raise a little bit of money from a lot of people—instead of finding an elusive angel investor.
A lot of people might not have an extra $100 available to invest, and they might deem a local enterprise too risky. But the majority of people have bank accounts, and those bank accounts, even in small amounts, also add up—the money you keep deposited in the bank recirculates in the form of investments and loans made by your bank.
After a career working for corporate banks, Anker Fanoe became CEO of Pacific Valley Bank. He says one of the things that differentiates them from the competition is the speed of service—there’s rarely a line, while there might be a long wait at a neighboring bigger bank. He’s not sure why smaller banks have failed to get the number of customers, but he has a theory: “One thing is [bigger banks] have got a lot of money to advertise, and they advertise a lot more than we do. They can afford to do that. A lot of customers don’t even know we’re here.”
Community banks and credit unions are here, and they are proving resilient during a crisis. “Relative to the broader banking sector, community banks continued to report positive financial performance and demonstrated this strength during the Covid-19 pandemic,” according to an FDIC report released in December.
People might we say you should never talk about money, but I think, why not? While Wall Street continues to feel like a system that is rigged, there are alternatives.
-Sara Rubin, editor, Sara@mcweekly.com