By Karen Epper Hoffman
To bring in commercial loans, many community banks simply rely on their connections with small businesses in the local towns where they operate.
River Valley Bank’s success last year in generating business and commercial lending also derived from strategic decisions to pursue a greater variety of businesses across the $1 billion-asset community bank’s diverse geographic footprint in Wisconsin and Michigan. Although the bank’s lending “sweet spot” for River Valley Bank used to be in issuing $1 million to $4 million loans, its recent expansion into Madison, Wis., along with stronger loan demand generally has allowed the bank to offer more loans in the $7 million to $12 million range, says President and CEO Todd Nagel.
Headquartered in Wausau, Wis., River Valley Bank now boasts a portfolio of more than $620 million in business and commercial loans (and another $200 million in residential and consumer installment loans). Last year the bank’s loans-to-assets ratio for its business lending alone reached 52.5 percent, placing it 19th among the top-producing commercial lenders among ICBA member banks with more than $1 billion in assets.
“Our greatest challenge has also been an asset,” Nagel says in reference to the bank’s wider geographic spread.
River Valley has 15 branches reaching from southern Wisconsin all the way up to the south shore of Lake Superior. But the distance between the bank’s locations—it takes six-and-a-half hours to drive between the two farthest flung branches—also helps River Valley spread its commercial loan risk across a number of markets and types of business, Nagel says.
“The markets dictate the loans,” he points out.
The move to Madison, where the bank has produced loans for five years before opening a full-service branch this spring, has been very strategic for River Valley beyond its traditionally rural markets. Under Nagel, the bank also has been reaching out to the hospitality industry and commercial real estate borrowers. It also is targeting booming sectors such as medical practices, assisted living and nursing care facilities, and large equipment financing.
About half of River Valley’s 10 commercial lenders are specialists, focused on a particular industry, and half are generalists, Nagel says. For example, one of River Valley’s 10 loan specialists, a former heavy-machinery salesman, is dedicated full-time to this segment.
The bank also has been building a national lending business in motorhome financing, where it has thus far issued about $20 million in loans inside and outside of its geographic base.
The mix of business sectors and geographic locations helps mitigate risk and expand opportunities for River Valley, Nagel says. And the bank is not shy about promoting technology to reach borrowers who might be as much as 100 miles away from its retail offices. The bank once closed a loan in a customer’s dump truck.
“We have a very robust mobile banking platform, we use thumbprint access and offer remote deposit capture,” Nagel says. “We’re becoming more of a technology support company than just a bank. Customers love it.”
Karen Epper Hoffman is a financial writer in Washington state.