Grass Valley-based Hills Flat Lumber Co. had been banking with a national institution for 30 years when the Pardini family's third-generation managers went to that bank for a construction loan to build its Colfax store in 2000, CEO Jeff Pardini said.
Pardini had been assured a loan would be "no problem," he said, but as his deadlines approached, "they had no sense of urgency." He faced the prospect of construction delays costing $25,000 a month.
"The (bank officer) said to me, 'How do we know you guys aren't going to skip town?'" Pardini recalled. "The people (at the local branch) who do know you, who work for that bank, aren't allowed to make the decisions."
Meanwhile, officials at locally operated Citizens Bank of Northern California "had been after us for years," and had been researching loan options, Pardini said.
Citizens called a 5:30 a.m. meeting with the loan committee.
They "gave us a million and half unsecured line of credit ... to get us to the point where we could get a construction loan," Pardini recalled. "They knew we were not going to skip town ... And we have never even been late on a payment."
If, despite all efforts, Citizens Bank were to fail, western Nevada County would feel a profound impact, observers said.
"We'd all survive, but it would be a much more difficult survival without a community bank," said customer Ray Byers Sr., of Byers LeafGuard in Grass Valley, whose business was able to expand thanks to a Citizens Bank loan.
For local business owners and residents, Citizens Bank often has been "the lender of last resort," said Eric Sams, of Sams Investment Strategies in Grass Valley.
That's because out-of-area decision-makers at large banks typically don't understand local markets and local credit needs, said Dan Werner, a regional bank equities analyst for Morningstar in Chicago.
Among Citizens Bank's customers are about 30 percent of area businesses, Citizens Bank President and CEO Gary Gall said.
As the economy tanked and businesses faltered, "We restructured $14 million in small business loans," Gall said.
If regulators should decide Citizens Bank can't make it, officials with the Federal Deposit Insurance Corp. would step in, quickly bring in another institution and reopen the bank under a new name after a weekend of work.
The process would be largely seamless for depositors and borrowers.
(See "Banks regulated by state, feds" for details of that process.)
But going forward, relatively small businesses like Hills Flat Lumber Co. likely would have a harder time getting credit, observers said.
"We would step back 20 years," said Judy Hess, who was among Citizens Bank's founding group of officers and who now is senior vice-president of banking.
"If we lost a bank like Citizens Bank, it would be a tragedy to this community," Hills Flat's Pardini said. "The landscape of this community would look completely different."
To contact Senior Staff Writer Trina Kleist, e-mail email@example.com or call (530) 477-4230.