Biggest Small Town Bank in the USA

Joe Reid didn’t start out to be a banker. For the first 20 years of his career he was a lawyer but started Capitol Bancorp in 1982 when a friend pointed out that all of the deposits in Lansing, MI (population 119,675) were controlled by large banks from outside of the town, without any local control. His second bank was started in 1988 in Portage, MI (population 44,897).

Today he has 47 different banks, scattered all over the country with a goal of reaching 100 in the next five years. What makes his banks different is that they are all run from the local market. He starts with the funding for a new bank, with half of the equity capital coming from the local community. Capitol supplies the other half and has only one board seat.

Reid told me at breakfast last week, “Our focus is upon the creation of community within the bank and in the community. We don’t want to get too big and we don’t do branching. When the president of the bank says that he has to move upstairs because the customers are bothering him, we know that the bank has gotten too large.”

“The local bank is one of the key pieces of infrastructure in a town. All of our directors own their own businesses and are part of the local market. It is those local, personal relationships, our human capital that allows us to grow our lending. We’ve got 47 banks with 47 different brands.”

“We don’t have a 1-800-I-Can’t-Help-U phone number. You just call the bank president if you’ve got a problem.”

Reid has grown Capitol from $384 million in assets to $4 billion today, all with local bankers and local boards making decisions to help fund and grow their local economies.

I first heard of this unique bank a couple of years ago and bought some of their stock because I loved their concept of locally run banks. I’m thrilled that I got a chance to meet Joe Reid and to share the vision of BoomtownUSA with his directors. There are a lot of similarities between his banks and Boomtown’s concepts.