Interview with: Curtis S. Reis, Chairman and CEO, Daniel Erickson, CFO - featuring: their business banks headquartered in Southern California, offering a wide range of financial solutions tailored to businesses, developers, executives and professionals.

Alliance Bancshares California (ABNS-OTC: BB)

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With the number of financial institutions decreasing and the population increasing since the mid-1980’s, Alliance Bancshares California has benefited from their focus on being an independent business bank

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Financial
Regional – Pacific Banks
(ABNS-OTC: BB)


Alliance Bancshares California

100 Corporate Pointe
Culver City, CA 90230
Phone: 310-410-9281

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Curtis S. Reis
Chairman and CEO

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Daniel Erickson
Chief Financial Officer

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published - March 29, 2007

BIO:
Curtis S. Reis
Chairman and CEO

Alliance Bank, Culver City, California hired Curtis S. Reis  to become President, Chief Executive Officer, Chairman of the Board and a Director on August 1, 1986. On November 1, 2005, he relinquished the title of President, remaining Chairman and Chief Executive Officer. Mr. Reis has over 45 years of extensive commercial banking experience. From 1956 – 1980, he worked for Bankers Trust Company in New York, and was a Vice President there.  His responsibilities included head of the Southwestern Division of the Corporate Banking Department, he ran its Credit Department, its Commercial Banking Training Program, its Consulting Division and served as Vice President and Chief of Staff of Bankers Trust New York Corp. This covered the five affiliate banks with a total of over 100 offices throughout upstate New York.  He served as a Director of two of the banks. During 1957 – 1959, Mr. Reis served in the US Army at Fort Dix, N.J.

Mr. Reis joined Crocker National Bank in 1980 and was a Senior Vice President. His responsibilities included managing the Main Office in Los Angeles, District and Region Manager.

In 1983, Mr. Reis was elected a Trustee of Cornell University, Ithaca, New York, his alma mater and is now a lifetime Trustee Emeritus. He was a member of the Audit and the Development Committees. He has served as Chairman of the Domestic Lending Council of Robert Morris Associates, a national association of bank lending and credit officers. He has been President and Director of the Jack Kramer Club in Rolling Hills Estates. He serves on the Cornell University Council; Cornell’s College of Arts and Sciences Council, the Board of the Cornell Alumni Association of Southern California and was President of his Cornell class from 1959 – 1981. Mr. Reis was a Director of the California Bankers Association for many years and served as Chairman from 2002 to 2003. He was chair of CBA’s State Government Relations Committee. He has chaired the Culver City Chamber of Commerce and served as a Director for nine years.   He has done extensive fund raising for the United Way as well as Cornell. He was formerly the Chairman of the Fair Housing Council in Northern New Jersey. He was President of the Upper Ridgewood (N.J.) Tennis Club and a Director for several years.

Mr. Reis is a graduate of the Stonier Graduate School of Banking at Rutgers University in New Jersey and has done extensive post-graduate work at New York University. He and his wife Pamela reside in Rolling Hills and he has three grown children and six grandchildren. Pamela previously worked for First Interstate Bank as an Executive Vice President.

Daniel Erickson
Chief Financial Officer

Daniel L. Erickson joined Alliance Bank as executive vice president and chief financial officer in 2002. Erickson’s responsibilities include management of all accounting, treasury, SEC reporting, asset/liability management, bank operations, taxation, data processing, human resources, facilities and purchasing activities. He also is a member of the bank’s management committee, ALCO committee and strategic planning committee.

Prior to working at Alliance Bank, Mr. Erickson spent four years with Pacific Mercantile Bank as executive vice president and chief financial officer. He was also previously employed at Republic Bank and Marathon National Bank with similar titles and responsibilities. Dan has over thirty-five years of banking and accounting experience. During this time, he has managed financial, operational, audit and technical aspects of banking entities in California and Colorado.

Mr. Erickson graduated from the Stonier Graduate School of Banking at Rutgers University in 1985 and received his bachelor of science in accounting from University of South Dakota in 1967. He is a certified public accountant in both California and Colorado. Dan is on the stewardship committee of his local church and a founding board member of the Tustin Public School Foundation. Mr. Erickson resides in Orange County and is married with six children and three grandchildren. He enjoys running and traveling.

Company Profile:

Alliance Bank is one of the leading independent business banks headquartered in Southern California, offering a wide range of financial solutions tailored to businesses, developers, executives and professionals. Serving small to mid-sized businesses, Alliance Bank's strategy focuses on delivering progressive products and services including deposit and cash management services as well as commercial, small business, asset-based, construction and real estate financing. Founded in 1980, Alliance Bank is the principal subsidiary of Alliance Bancshares California, with regional banking offices in Culver City, Irvine, Woodland Hills, Burbank and in 2007 in West Los Angeles.

CEOCFO
: Mr. Reis, what was your vision when you became CEO, and where are you today?
Mr. Reis: “My vision twenty years ago was a lot different than it is today. It was a bank in great difficulty and in free fall and one, that I was not sure was going to survive frankly. It was not until about ten to twelve years ago that we could see that the world had changed and our opportunities had changed. Then a real vision emerged to our becoming a true business bank with a wide range of products and services pitched and geared to businesses.”

CEOCFO: What do you offer businesses?
Mr. Reis: “We start with a philosophy that says you run your business the way you want and we will put you in the right product or service depending on how you want to run your business. In other words, if you are a company with very little net-worth but good receivables, we would probably put you in our asset-based lending group, which is run by a fellow that used to be with GE Capital. If you are somebody that wants to buy a building to house your business, we will put you on our SBA (Small Business Administration) department. If you are somebody who wants to retain their earnings, have reviewed or audited financial statements, we will put you in one of our regional offices where you get traditional lines of credit or term loans. That is kind of our philosophy; to move people up and down the food chain depending on how they want to manage their business and build their company or if they want to take most of the earnings out of the company, but still be qualified to borrow from a bank.”

CEOCFO: What do you deliver that is a bit different?
Mr. Reis: “We try to respond to or emphasize areas that going to take off. One such area that is in the early stages right now is remote image processing and we think that it is going to change the face of banking over a period of years for business clients. Essentially, it is a device that is put on the desk of the CFO or bookkeeper, where they can take the checks that have been sent to them by their customers, run them through a machine, and then an image comes to the bank so they can get immediate credit for their deposits. They do not have to go into the bank, but can be served from almost any place. The caveat is that you need to know who your customers are, if you can trust them, and if you are dealing with people with integrity, because there are opportunities for fraud and misuse. However, that is true with any banking relationship. In addition, we think that remote image processing will require less money for brick and mortar for business banks. Banks that serve retail customers will probably want to continue to have branch systems because there are enough customers that still like to go into branches and use ATMs, but that is not where we are putting our emphasis.”

CEOCFO: Will you give us a sense of the customer base that you serve?
Mr. Reis: “There is no typical customer and we like the diversity. We serve everything from real estate developers to manufacturers to service providers to distributors to professionals, doctors, lawyers, CPAs, etc. However, they have to have a business flavor to them in general. We do not look for much in the way of walk-in traffic, because that is not our cup of tea; we want to focus on small to mid-sized business and professional firms. Companies with sales under a hundred million would be our sweet spot. We do not have a low-end number, but as we get bigger, we are looking for relationships in the 7 to 8 figures, typically.”

CEOCFO: How do you reach new customers?
Mr. Reis: “We have about 35 relationship managers whose primary job is to go out and call on businesses. We rely greatly on word-of-mouth and we do not do a lot of advertising. We think of ourselves as more like a good law firm or CPA firm for example, where the customers are very happy with us and they refer us to their friends, clients and associates. The key to that is to have relationship managers that are not only well-trained, but sort of acting as the unpaid CFO for the small and mid-sized companies, so they can provide more banking services. They are an advisor and a person to try ideas on. We want our people out there in front of the customers, to really be the primary decision-makers, to structure, price and write up loans. By the time they bring a loan request in for final approval, the bank’s loan committee should say yes well over 90% of the time. We expect the loan officer to turn down the deals that should be turned down right from the get-go and not to have the senior people in the bank discuss deals very long or make changes. The customers like to deal with the decision-makers and that is a real plus. The goal is to build some trust between them so that if there is a problem, they will come to their relationship manager early on. Our understanding typically is that we will not cut and run, but will try to work them through their problem or whatever the issue may be.”

CEOCFO: Will you tell us about your SBA focus?
Mr. Reis: “We are a preferred lender, which means we can approve SBA loans any place in the United States. Obviously, our emphasis is primarily in California, but we are doing more business in the adjacent states and the occasional deal in the other parts of the country. Many of our referrals come in through brokers or our regional offices, referred by our account officers who have a client that wants to buy a building or piece of property to house their business. We have business development officers that are also out there.  It is a good, steady product. Business has been a little slower recently for three reasons; one is that real estate prices have ramped up so much in California that it is more difficult for smaller businesses to justify paying top-dollar for facilities. They may be better off continuing to rent until prices come down a little, or because they do not have enough of a down payment on the deal. A second issue is that the real estate market has had a pretty good run and I think a lot of businesses are taking a step back. A third point is that we are not too interested in marginal deals. There may be others out there doing a start-up restaurant without real estate, but that looks like a risky deal to us. Therefore, we would probably pass on something like that.”

CEOCFO: Will you tell us about the private banking area?
Mr. Reis: “We do not really have a private banking area per se. We hope that our relationship managers in effect provide that service to whomever they are dealing with including the CEOs and CFOs. That would be in terms of providing full banking services to them, lines of credit, good rates on money-market accounts, CDs and so on. It all ties into the relationship with the business. We do not really go after a lot of small retail accounts except to the extent that they may work for one of our customers. Excellent service is a crucial part of the relationship.”

CEOCFO: What is the economy like in your area?
Mr. Reis: “The economy is fairly strong here in California. The challenge in my opinion is bringing in deposits to fund the loan demand. Our loan demand is still very strong as California continues to grow and not just construction lending, but also a large quantity of small, newer companies. California is not much of a Fortune 500 location anymore the way it was maybe 20 years ago with aerospace, defense and some other companies that were headquartered here. Entertainment is still obviously here. Therefore, the real strength of this economy is its entrepreneurial nature. Something like 25% of the newer businesses are being formed by immigrants from Asia, Latin America and other countries. You do not have to be a blueblood to get into business; all you need is a good idea, a little capital and a willingness to work hard at it. The labor force is here and our attitude toward businesses is that if you can do it well, we would like to do business with you. However, with people putting their money to work in different ways, it has been harder to grow the core deposit side as much as the loan side.”

CEOCFO: Do you work a lot with the immigrant population?
Mr. Reis: “We like the immigrant population. I would say that maybe 25% of our business is what I would call first or second generation immigrants. I think that number is growing. Our own workforce here looks in many ways like the United Nations and we are very proud of that fact. We probably have 20 different countries represented in our workforce from Latin America, Asia and Europe. Therefore, our workforce mirrors our customer base. Los Angeles is a wonderful place to live and work with a very enlightened attitude on that subject.”

CEOCFO: Will you tell us about the financial picture; you have certainly had a good year?
Mr. Erickson: “We have been on pretty steady growth pattern for the last five or six years. Our assets have increased almost 30% in 2006, but before that 40% or more. It has been a function of opening up some successful offices; one in Burbank and one is Woodland Hills over two years ago. Our 5th office will be on the Westside close to the Santa Monica City border. We have a wonderful culture, which helps us attract people from other financial institutions. We plan to stay independent. Many of our new employees have been with institutions that have gone through acquisition situations where they have had to acclimate their customers to the different philosophies of the new owners. We have been able to attract some very good people over the last 3 or 4 years and that has been instrumental in helping us grow.”

CEOCFO: What do you see 5 years down the line?
Mr. Reis: “We expect the Bank to continue to grow nicely as long as the economy remains reasonably healthy. We don’t believe we can match the percentage growth we experienced in the previous five years because we are so much larger now than we were in 2001. I joined the bank in 1986 and during that 20-year period, a couple things have changed. The number of financial institutions headquartered in California was over 600 in the mid 1980’s. Today it is about 300, but there are 10 million more people and hundreds of thousands more businesses. Everything has come our way in terms of our approach and philosophy. We have been very fortunate with the strategy we have picked in this marketplace. I look for the growth in California to continue to be tremendous, but too much of the growth is concentrated in too small an area in my opinion. We would rather see new cities emerge, with the wealth spread out, because we are putting tremendous pressure on transportation and housing costs. As a result, part of our strategy is to have locations that are closer to home for some of our people so they do not have to drive and spend four hours a day in a car. With the computer era, more and more people can operate from home or a remote location. However, I do not see that as a wave of the future entirely, because there are certain jobs where you have to be present, such as a teller. If you are a relationship manager, you are judged based on the business that you bring in and the service you provide and if you are just sitting in the office all day long, you are probably not doing your job right. You can be out there on calls and if you schedule your calls intelligently, you can concentrate on a certain area and be more efficient that way.”

CEOCFO: Why should potential investors be interested?
Mr. Reis: “The story and the numbers speak for themselves. The bank was formed in 1980. If you had invested in this bank in 1987 when we were in our second round of raising capital, you would have paid $1.00 a share for the stock. Today it is selling at about $17.00 a share. Obviously, it was not a straight line up, but it is roughly a 15% per year-compounded return. I am not predicting that we can continue to do 15% compounded returns, but I do think we can have an above-average performance over that period. We are not looking for people that are making quick investments to flip the stock over a short period of time. Most of our investors have been with us for many years and have been rewarded for being here. A lot of people say, ‘Gee I missed the move’, and I say, ‘Well that depends on your point of view’. You could have even bought our stock at under $3.00 a share five years ago. You may have missed from $1.00 to $3.00, but you would not have missed the move from $3.00 to $17.00. I think the same thing holds true today. I have no idea what the stock is going to be five years from now, but I am quite bullish and optimistic. For investors that want a good solid company, this is the place to go.”

Mr. Erickson: “I would also add parenthetically that some of the people that invest in banks like ours are people that love to invest in community banks in growth markets such as Florida, Texas, Arizona and California. This has been a tremendous strategy for people that have stayed the course, because over a period of time a few of them get sold, and most of the banks have performed quite well, perhaps better than the market as a whole. We think that strategy still holds true as a philosophy. We would like to be one of the banks they consider.”

CEOCFO: In closing, what should people take away from this interview?
Mr. Reis: “There are a couple of things. One is that we are still an old-fashioned bank in many ways. We get offers to be purchased and there are people that come and take a look at us all the time. However, one of the things I am traditional about is that I really believe in the service that we provide. The reality is that most of our clients and most of the businesses below $50 million in sales have almost no access to capital except from banks. I feel strongly that we have a mission to serve those people and provide them with the capital, so they can thrive. If our customers do well, we do well. I look at us as more than just a place where you can invest money and make a quick profit. I think we provide a very valuable service in this part of the world. I think people have to believe that what we are doing is important, that they support that philosophy and that they are investing in that philosophy too. If they are looking for a quick turn, I do not recommend Alliance Bank as a place to put your money.”


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“I joined the bank in 1986 and during that 20-year period, a couple things have changed. The number of financial institutions headquartered in California was over 600 in the mid 1980’s. Today it is about 300, but there are 10 million more people and hundreds of thousands more businesses. Everything has come our way in terms of our approach and philosophy. We have been very fortunate with the strategy we have picked in this marketplace.” - Curtis S. Reis

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