This story is part of our February 2026 issue. To read the print version, click here.

In 2008, Harvest Church hit a financial wall. It was midway into a major building program financed through a large regional bank that the church had relied on for 30 years. It hadn’t missed any payments. But as real estate collapsed overnight during the Great Recession, the bank abruptly called the loan. For Pastor Ron Eivaz, it was a gut punch: The bank had always sold the relationship as family.

The church turned to another large bank to take over the loan, but the arrangement unraveled when the bank overpromised and underdelivered, says Eivaz. In the meantime, however, the church had switched its deposits over to Oak Valley Community Bank in Oakdale. Not long after, Oak Valley Executive Vice President Gary Stephens reached out to Eivaz, sat down with him and offered better loan terms that lowered the church’s monthly payments.

Stephens went further. The church was barely scraping by: It was paying its bills but had nothing left over at the end of the month. Stephens scrutinized the church’s finances and pushed Eivaz to take what was left over on the loan payments and build up $50,000 in a savings account. It stuck with Eivaz that a bank officer cared enough to suggest it.

The church has since grown, and not long ago the two had lunch. Stephens asked whether that $50,000 in savings was still there. Eivaz told him that they’d just crossed a million dollars in that account.

Oak Valley’s work with Harvest Church and nonprofits in the area has crystallized into a niche lending strategy for the bank. It now has two loan officers specializing in faith-based lending. The niche operates under different rules because churches are nonprofits, so their debt service coverage ratios are lower than other industries. The church sector has best practices that spell out how much of a church’s budget should go to line items like building and grounds, and Oak Valley uses those best practices to gauge the financial health of churches it might lend to, says Stephens.

Lending to churches and nonprofits is just one of Oak Valley’s specialty lending areas, which also include agriculture, small business and commercial real estate. Stephens says the bank’s narrowed focus addresses a complaint he hears often from business owners and others: “My banker doesn’t understand my business.” Along the way, its assets have grown in the last 10 years from about $900 million to nearly $2 billion. Oak Valley isn’t alone: Other area banks are growing by focusing on lending niches that larger banks have ignored.

The disappearance of community banks

Some banks have figured out winning strategies are critical for the health of the local and national economies. Nationally, community banks continue to close or be bought up. Their number fell 42 percent from 2011 to 2025, to fewer than 4,000 total. It’s part of a longer-term trend since 1985 that results from pressure on banks to invest in expensive technology upgrades, increased costs from the 2010 Dodd-Frank reform that placed strict regulations on banks, lenders and more.

Their loss exacts a heavy toll on small businesses because those banks make an outsized portion of the country’s small business loans. Community banks, those with assets under $10 billion, make more than half of all loans of less than $1 million, even though they hold just 10 percent of total bank assets nationally, says Edward Carpenter, chairman and CEO of Newport Beach-based Carpenter & Company, who’s advised on hundreds of bank startups since 1997.

In the face of that trend, some local banks in the Capital Region aren’t just surviving but growing. Carpenter suspects one of the main reasons small banks get created is because bigger banks struggle to distinguish solid borrowers from risky ones. The SBA Small Loan program requires lenders to prescreen applicants using a FICO SBSS (small business scoring service) score for businesses, and recently raised the minimum threshold for certain loans to 165.

Take Bank of Marin, headquartered near America’s vineyard capital, which merged with Sacramento-area American River Bank in 2021. A community bank earns its value by understanding their customer’s industry. Business owners have little time to spend educating bankers, says bank President and CEO Tim Myers. A bank working with the wine industry has to understand the unique margins associated with each piece of the industry’s three-tier distribution system — producers, distributors and retailers.

Business borrowers need a bank that knows their industry’s business cycle, he says. During economic up cycles, businesses and banks are both happy; it’s during down cycles that a bank that knows the industry is willing to ride out downturns, says Myers. That’s important now more than ever: The U.S. wine industry is in the throes of its longest sustained downturn, with revenues declining another 9 percent in 2025.

Narrow specialties let small banks go national

Other area banks are zeroing in on smaller slices of the lending market too. One national indicator suggests just how much specialty lending has grown: The number of loans through the U.S. Small Business Administration made by lenders specializing in one or a few industries rose from fewer than 2 percent in 2001 to 17 percent in 2017.

Banks that know a company’s industry have another edge: They’re better able to tailor products and services to meet their needs, says Steve Fleming, president and CEO of River City Bank. Once they get a reputation in the industry, more customers in that space flow in. River City has at least 10 specialty lending areas and has seen huge growth in its clean energy and public banking division, launched in 2010, Fleming says. Its track record has attracted customers in a narrow subspecialty of government lending: community choice aggregation, an arrangement in which local governments buy electricity for their residents, often contracting with companies that specialize in navigating energy markets.

“When you understand a company’s business, you’re able to provide products and services that they need better than somebody who’s in the dark as to what the company is all about. That expertise assists in building a reputation in the industry, which allows you to grow your customer base.”

―Steve Fleming, CEO and president, River City Bank

That’s led to community banks growing outside their traditional geographies. James Beckwith, president and CEO of Five Star Bank, says he stumbled into mobile home and RV park lending by chance when a friend had some mobile home parks coming up for refinancing and asked Beckwith to take a look. “I found, ‘Wow, these things underwrite really well, and they’re very stable. We should do more of this,’” says Beckwith of the space, which involves lending to park operators, not individual mobile homeowners. Contrary to reputation, mobile home parks are the least risky commercial real estate asset class, he adds.

The bank plugged into mobile home associations and was fast and reliable in coming through on loans, so its reputation spread — the bank now lends to park operators in more than 30 states.

Brock Kaveny is director of business development at Sacramento-based Monte Christo Communities, which operates senior mobile home and RV parks. He says that before the company began working with Five Star, there weren’t many lenders working with the industry unless the operator had a real estate relationship with a larger bank, like Wells Fargo or Chase.

It’s one of 13 lending niches in which Five Star operates. Another, providing backup liquidity to venture capital funds as a limited partner, came about in part after the 2023 collapse of Silicon Valley Bank and two others. Suddenly, bankers who were specialists in venture funding were available. Five Star snapped them up and now has two new offices in the Bay Area.

How one local bank’s growth let it upsize its loans

Many banks focus on commercial real estate, but Tri Counties Bank has expanded into commercial real estate loans of a specific size: middle market, or loans to companies with annual revenue of $50 million or larger. The shift pulls the bank into larger deals, part of a restructuring it announced in June, says Scott Myers, head of wholesale banking, who led the reorganization. The bank also continues to back businesses with revenues smaller than $50 million. “The community needs to know we’re not becoming a bigger bank — we’re expanding our offerings,” says Myers.

Tri Counties can pull that off because it now has the balance sheet and in-house talent to handle those deals. Its total assets went from about $7.5 billion in 2020 to about $10 billion in 2025. The bank has a managing director with expertise in putting together the capital stacks and ownership structures involved in larger commercial real estate deals, someone who can surface overlooked sources of capital, says Myers.

Heller Pacific is a Tri Counties client that’s spearheading The Diggs, a $50-million office-to-residential conversion scheduled to create 140 market-rate lofts, new commercial space and mini-storage in downtown Sacramento by 2026. Borrowing can be “pretty impersonal and very cut and dry,” says Heller Pacific president Michael Heller by email. But the Tri Counties loan “feels more like a partnership and collaboration” than the company’s previous loans.

Banks increase their focus but not their risk

Along with lending concentration comes instability, and Fleming points to the collapse of Silicon Valley Bank as a case in point. But community bank leaders say they manage it by picking lending areas that counterbalance. For example, some Five Star specialty areas, like government and health care, resist the regular business cycle, while others, like construction and commercial real estate, boom when times are good.

But most of all, the community banks that have survived outperform because of their local intelligence, says Carpenter. A local bank’s credit committee, which helps drive lending decisions, is itself made up of small-business people. The borrower’s character is one of three elements of successful lending decisions — the other two are credit and expertise — and local business people know better than anyone the character of other local business owners, Carpenter says.

That knowledge may have saved Gilton, a waste management company based in Oakdale, northeast of Modesto. The company is a three-generation family business, and in 1997 the third generation took over from the second under a loan agreement. The company also had loans with a national bank.

Gilton had never been late on a loan payment to its bank, but in 2006 the bank reorganized. The new management told Gilton they didn’t like the company’s debt-to-equity numbers and wanted it to stop paying the loan to the second generation. “I told them I’d sell my property, sell my house and go live in a tent before I do that,” says President and CEO Richard Gilton, but the bank insisted.

Then Gilton ran into Oak Valley’s Stephens at a Starbucks and told him the story. “You’re not the first one I’ve heard that from,” Stephens said. Within two weeks, Oak Valley had assumed all the company’s loans. That year ended up being Gilton’s most profitable ever. Stephens could make that move because the bank knew the character of the owners and how the solid waste management industry worked. “He knew our business,” says Gilton.

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