Bank of Salem is a young bank, but its lending record is long-lived.
That's because its small staff, led by 30-year banking veteran and chief executive officer P.C. "Pete" Vrontakis, have collectively been lending in Salem, Ore., for decades.
With this combination of business and life experience, it's not surprising that Mr. Vrontakis has turned Bank of Salem into the top lender among the country's community banks.
From 1992 through the third quarter of 1995, the $38.5 million-asset bank racked up an average 2.75% return on assets as loans grew 82% - with no delinquencies. The bank has a $26.6 million loan portfolio, 81% of which is secured by real estate. No other community bank in the country has a better combination of lending record and profitability during the period analyzed.
But Mr. Vrontakis, who previously worked at Oregon's Western Security Bank and Commercial Bank, minimizes the six-year-old bank's achievements.
"There are lots and lots of banks that don't have any delinquencies," he said. "It's not that unusual."
But Bank of Salem's success is unusual, especially considering that it is still a relative newcomer. Chartered in 1990, it turned a profit after three months and enjoyed its first profitable year in 1992.
Bank of Salem has worked because it's located in a hot market and it keeps costs down by maintaining a staff that's lean and loved by the area's builders.
The economy of Oregon, and particularly its capital, Salem, has been booming for the past couple of years, and the bank has ridden that wave.
"Oregon is a fast-growing state, and people need homes. The demand is right there," said Mr. Vrontakis, a native of Greece who settled in Salem after graduating from the University of Oregon 31 years ago.
To meet that demand, the single-office Bank of Salem fields a staff of seven and offers six products: first mortgages, business loans, money market funds, certificates of deposit, and personal and business checking accounts.
The employees' experience - they average 15 years apiece of banking in Salem - and local contacts allow them to wiggle into markets that the larger banks are too big and clumsy to reach.
"There's been a tremendous amount of consolidation here," Mr. Vrontakis said. "There are certain things we can do better than the big banks. When it comes to commercial lending, a lot of their decisions are not made locally. It's not unusual for a person to wait 60 days for an answer."
At Bank of Salem, a potential borrower finds out whether he or she qualifies for a loan within two days, Mr. Vrontakis said.
Although Bank of Salem finances some apartment complexes, the bulk of its real estate loans are to builders putting up family residences, Mr. Vrontakis said. For that reason, most of its credits have both commercial and real estate aspects.
At Sept. 30, $16 million of Bank of Salem's loan portfolio was in home construction and development, according to figures from Sheshunoff Information Services. Among other realty-related loans, $4.6 million was in one- to four-family units, and $262,000 was in units for five or more families.
The bank also has a $5.1 million portfolio of commercial and industrial loans for a variety of local businesses, Mr. Vrontakis said. It does business with "a large percentage" of the local builders, he said. And that's without working hard to get them.
"About 35% to 40% of the relationships are ones that I have known for 15 to 20 years," he said. "Most of our other business comes from referrals. We do not advertise at all."
The going rate for builder or commercial and industrial credits - the bank's two highest-yielding products - is prime plus two percentage points.
Oregon may be red hot right now, but Mr. Vrontakis has experienced more than a few Pacific Northwest recessions - including one in 1990, Bank of Salem's inaugural year. So the bank keeps its lending policies fairly conservative.
For example, it doesn't finance lot purchases.
"We like buyers that have large capital so that when a recession hits they won't walk away," he said. "If we're going to work with a builder, they should be able to buy a lot."
Once a house is built, the bank tries to finance the buyer's mortgage, Mr. Vrontakis said. He estimated it clinches the mortgage 40% of the time.
Mr. Vrontakis said the bank has dodged delinquencies by sticking to what it knows best and avoiding consumer credit.
"The delinquency banks are seeing is in new cars and credit cards, and we don't do that," he said. "We just make good loans."