Virginia Varela, Golden Pacific Bank president and CEO, offers her insight into the region’s community banks. For more from Varela, check out “Under Pressure” in our May issue. Sign up for our newsletter and we’ll email you when it’s available online.

What’s the biggest change in the regional community banking industry in the past year?

We’re seeing a sharp decline in regional community banks, with many merging out of existence in the greater Sacramento area just recently. I find this sad, because it means less diversity in choice and services for the average customer. Community banks offer a secure, personal approach to banking that small businesses can really benefit from, so it’s disappointing to see our neighbors being acquired by bigger banks.

Community banks face difficult challenges: They are often working under an unfair advantage in comparison to other financial organizations. For example, credit unions pay zero federal taxes in spite of being allowed to operate similarly as banks. Internet lenders are higher risk by nature and may impose predatory practices on unwary customers they never face, but … are not subject to the same level of regulatory oversight as banks.

I believe that if the public was more aware of the inequities in the financial services arena, they would become much more concerned about retaining choices and become more highly supportive of community banks.

What do you foresee as the biggest change on the horizon in the year to come?

The biggest change I foresee in the next year is also my greatest fear: As the number of community banks continues to dwindle, credit and capital for new businesses and entrepreneurs will be increasingly difficult to obtain.

Traditionally, community banks have served small businesses and have been the engine for growth in most communities, and especially in our greater Sacramento market. If small businesses and entrepreneurs do not have access to capital, then growth will be slower, leading to less job creation. I’m very concerned about a lag in the overall market growth and prosperity, and I connect that to a public nonchalance and misunderstanding about the importance of the community bank sector.

The change that I most fear will happen is a continued decline in community banks, unless the public becomes more aware of the benefits that come with community banking. Most people do not understand the unique role community banks play in the country’s economy and the challenges and opportunities this segment of the banking industry faces. My hope is to increase awareness of the benefits that come with community banking to generate more support for our industry.

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