California Bank of Commerce completed its
initial public offering on July 3, 2007, raising $27.5 million. Operating
from a single suburban location in Lafayette, California, the bank serves
well-established owner operated companies throughout the San Francisco Bay
Area. The firm employs an experienced cadre of business bankers and finds
many of its clients through referrals from an extensive network of Bay Area
accounting firms, law firms and other professional service firms that serve
the same market with the same emphasis on excellent service. The bank serves
businesses from a broad range of industries, typically offering them
treasury management services and lines of credit or term loans of $1-5
E. Rossell III, President and Chief Executive Officer, California Bank of
Commerce. Mr. Rossell is also a Director of the Bank. The Bank is located in
Mr. Rossell has over 24 years of commercial banking experience, 17 of those
in the position of President and Chief Executive Officer. Most recently, he
was the founding President and Chief Executive Officer of Santa Cruz County
Mr. Rossell was the founding President and Chief Executive Officer of
Heritage Commerce Corp and Heritage Bank of Commerce, in San Jose,
Prior to establishing Heritage Bank of Commerce, Mr. Rossell was Senior
Credit Officer for Silicon Valley Bank where he served as Chairman of the
Credit Committee for the Commercial Division.
Mr. Rossell was a Senior Consultant with the St. Louis accounting firm of
Brown, Smith and Wallace, providing merger and acquisition and financial
planning services for middle market companies prior to joining Silicon
Mr. Rossell was successively the
President and Chief Executive Officer of three subsidiary banks of Mark
Twain Bancshares, headquartered in St. Louis Missouri, including its lead
bank, Mark Twain National Bank.
Prior to joining Mark Twain Bancshares, Mr. Rossell was employed by Wells
Fargo Bank where he held successive positions as Vice President in the San
Francisco Corporate Banking Group and as President of Wells Fargo and
Company, Canada, Ltd., a Toronto-based commercial finance subsidiary.
Mr. Rossell holds a Bachelor of Arts degree in English from the University
of Virginia and a Masters of Business Administration from the Darden School
of the University of Virginia.
California Bank of Commerce (CA)
3595 Mount Diablo Boulevard
Lafayette, CA 94549
Interview conducted by: Lynn
Fosse, Senior Editor, CEOCFOinterviews.com, Published – March 5, 2010
CEOCFO: Mr. Rossell, you have a long
history in banking; why are you with California Bank of Commerce today?
Mr. Rossell: I am now working on my
third startup and I saw this bank as a unique opportunity to take advantage
of everything I have learned. As I approached the end of my career, I was
also attracted by the opportunity to play an active role in putting together
the management team that will replace me when I am gone.
CEOCFO: What is unique about California
Bank of Commerce?
Mr. Rossell: California Bank of Commerce
is not unlike one of the business banks that you recently wrote about in Los
Angeles. However, we are younger and we serve the San Francisco market
place, but our model is similar. We are a middle market business bank. We
operate from a single suburban location, outside of San Francisco. We
operate from an upstairs location, with no signage, no ATMs and no night
drop. We are not so much a community bank as we are a community owned
business bank. Our client focus is on businesses that are anywhere from
about $10 million to $100 million in sales, all around the San Francisco Ban
area. Most of our clients are located along the transportation arteries that
connect the cities of the San Francisco Bay area, with a concentration in
Alameda and Contra Costa counties. We reach our clients with a potent
combination of up-to-date technology and high touch business bankers
who often spend their time at the client’s place of business. On the
technology side, we encourage our clients to take advantage of internet
banking and remote deposit. On the touch side, we employ lenders and cash
management officers who have been at it for a long time and really know the
Bay Area middle market.
CEOCFO: How do you reach potential
Mr. Rossell: We reach potential clients
in a several ways. The most important way is through our Relationship
Managers (RM), who are out and about, working their referral network. Our
RM’s are often known and respected by accounting firms and law firms that
serve the same client profile that we serve. We support our RM’s with a
limited but unique advertising program that utilizes the local business
journal and various industry publications. Our ads focus primarily on our
clients and our byline is “defined by the company we keep”. We get
additional support from our shareholders, who were handpicked as people who
would participate actively in building the bank.
CEOCFO: Why are your clients choosing
California Bank of Commerce?
Mr. Rossell: Probably the most important
reason that clients pick us is either because they already know us, or
because they were given a recommendation to make us their bank by their CPA
or their attorney, or other trusted advisor. In the final analysis, our
success in finding new clients is built upon a good reputation disseminated
by word-of-mouth. Although the bank is young, our people are well known and
so our reputation precedes us.
CEOCFO: What are clients finding at your
bank that they are not finding elsewhere?
Mr. Rossell: The first thing that they
find is a bank that is sound and is eager to do business with clients that
are likewise sound. Second, they find a bank that considers their
relationship important. Our typical line of credit is anywhere from $2-4
million. Given our age and client list, such a relationship is by definition
very important to us. Third, clients find that they have access not just to
their RM, but also to his or her banking assistant, for operational needs,
as well as to two members of senior management. Senior management contact
includes, for credit driven relationships, our Chief Credit Officer. We are
quite unusual in that most banks, particularly bigger banks, have a
philosophy that people making credit decisions preserve objectivity by
remaining at arm’s length from clients. We disagree with that perspective -
we find that when our credit folks meet clients we are more responsive and
we make better credit decisions. All of these qualities are appealing to an
owner-operated business. They mean the bank takes seriously this idea that
they are going to partner with the client. We will position ourselves so
that we are able to roll with them in good times and bad times.
CEOCFO: What is the financial picture
for the bank today?
Mr. Rossell: We are 2˝ years old. As of
December, we have had operating profits for two quarters. It is too early to
comment about the first quarter of 2010, but we made a GAAP profit in
January. If you look at the trend line you can see that GAAP profitability
is going to happen very shortly. In the meantime, we are growing capital and
we are growing our legal lending limit, because the operating profit
accomplishes that for us. On the balance sheet side, we are growing steadily
on both sides of the balance sheet, with relationship driven loans and core
deposits. At the end of the year, we had a 23% ratio of non-interest bearing
deposits and our interest bearing funding costs are very favorable. Our loan
pricing is below peer, but we are choosy about loan quality. Our asset
quality is good and we have no non-performing loans. We have strong capital
ratios, but if we keep growing we will need at some point to raise more.
CEOCFO: Although many of your clients
come from recommendations, what do you look for in a new client before you
take them on?
Mr. Rossell: In a word, relationship.
In addition, we look for businesses that have a good track record.
Given the recent economic downturn and recent bank difficulties, how do you
reassure your clients?
Mr. Rossell: We get in front of both
client and prospects with our numbers. We talk about our liquidity
management practices, our capital ratios and our asset quality. When the
INDY MAC crisis happened in July 2008, we were just one year old. We had
depositors with millions of dollars in the bank, well beyond FDIC coverage.
So, we developed our program of sharing performance data with clients and
prospects. We remind the community that we are young, but our officers are
experienced and our bank is safe and sound. We believe that if the process
of education between bank and client is two way, the relationship that
develops will be strong and long lasting. Confidence is only meaningful if
it is mutual.
CEOCFO: What is ahead for California
Bank of Commerce?
Mr. Rossell: In its infancy, California
Bank of Commerce took on a very challenging economic environment but
nevertheless, accomplished what is critical to a new bank. We grew core
deposits and added to earning assets in a measured way. We intend to
continue to do more of the same. For the next two years, we will grow the
bank by about $4 to $6 million a month in new loans and deposits. We will
emphasize balance; we think one of the big mistakes of the banks that have
been fortunate enough to grow, is that they sometimes grow one area at the
expense of another. For the sake of growth they either put on loans that do
not represent a high standard of quality or they accept deposits for which
they do not have a safe use. So, we try to be sure that we are funding
incremental business with new deposits and that those deposits are
relationship based deposits and not high cost. On the asset side, we put the
emphasis, not so much on yield, as on the quality of the assets. Business
banking is a scale business, and we are working hard to achieve scale. So,
we are resolved to grow, but the emphasis is on careful, steady growth.
CEOCFO: Why should potential investors
take a look at California Bank of Commerce?
Mr. Rossell: There are a several reasons
investors should consider California Bank of Commerce. We have an
experienced team. We are growing despite an adverse climate. Investors will
also see a clean loan portfolio and that is probably the number one factor
today when people buy commercial banks. Is it safe, is it going to survive?
We are core deposit driven and our funding costs are favorable. We have a
unique combination of high-end technology, sophisticated bankers and
community bank accessibility which is appealing to the upper half of the
middle market. The management team has been clear about its focus and
strategy. It is a fairly narrow focus, on owner operated businesses, but
that is where the real strength of this economy lies. That is to say the
entrepreneur’s economy. Lastly, an investor will be able to see quickly that
the bank has worked its way through onerous start up related costs
associated with the first three years of a de novo bank. As we finish out
our third year in business, one will see from the trend lines that the bank
has momentum taking it in the direction of profitability. Unfortunately,
this is a time when many banks are moving in the opposite direction. At the
margin, we represent a good investment opportunity. Lastly investors will
see that our bank’s share price has been relatively stable, particularly for
a startup bank in an environment where price-to-book is down in the 60%
range or below. Our own share price has held up at around book value and
book value is now growing. Investors will be impressed that we have a
supportive shareholder base.
CEOCFO: Final thoughts, what should
people reading about California Bank of Commerce remember most?
Mr. Rossell: We are defined by the
company we keep. That phrase is more than a tagline for us. It is
our credo – we hook up with people and companies that the rest of the
business community admires and we emphasize good, strong relationships.
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