Central Valley Community Bancorp (CVCY-NASDAQ)
August 7, 2009 Issue
The Most Powerful Name In Corporate News and Information
With A Nice Mix Of Commercial And Industrial Loans, While Still Providing Real Estate Financing, Central Valley Community Bancorp Has Been Able To Continue To Gather Deposits And Avoid Some Of The Non-Performing Loan Problems Affecting Many Other Community Banks
Central Valley Community Bancorp (the "Company") was established on November 15, 2000 as the holding company for Central Valley Community Bank (the “Bank”) and is registered as a bank holding company with the Board of Governors of the Federal Reserve System. The Company currently conducts no operation other than through its ownership of the Bank. The common stock of the Company trades on the NASDAQ stock exchange under the symbol CVCY.
Central Valley Community Bank and Central Valley Community Bancorp
Dan Doyle joined Central Valley Community Bank (formerly named Clovis Community Bank) in June 1998 as President and CEO following the retirement of the founding President and CEO. Over the past eleven years under his leadership, the Bank has experienced great financial success as one of the fastest growing community banks in California’s Central Valley region.
With 38 years of banking experience and a variety of educational degrees, Doyle’s previous banking experience and business values contributed greatly to Central Valley Community Bank’s current success. Previously, Doyle served as Regional President for US Bank in Washington State. In 1990, Doyle served as the first President and CEO of US Bank of California, where he built a strong foundation and expanded the bank to reach a total of 71 offices and $2 Billion in assets over a five-year period.
• California Bankers Association, Executive Board of Directors and Chairman
• National Board of Directors for Boy Scouts of America, Western Regional Board
• The Downtown Fresno Partnership and Property Based Improvement District, Chairman
• Business Advisory Board, Craig School of Business, CSUF, Chairman of the Board
• Beta Gamma Sigma Honor Society, AACSB International Accredited Business Programs
• Regional Jobs Initiative, Committee Chair
• Collaborative Regional Initiative, Champion
• Fresno Business Council, Director
• Fresno County Tobacco Proceeds Bond Fund, Trustee
• United Way of Fresno County Tocqueville Society, Trustee Chair
• United Way of Fresno County, Past Director, 2004 and 2005 Chairman of the Board
• Sequoia Council of the Boy Scouts of America, current Board Member, 2005 and 2006 Past President
• Fort Washington Country Club, Past Director and Vice President
Interview conducted by:, Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published - August 7, 2009
Mr. Doyle: “When I became the president and CEO of Central Valley Community Bancorp, it actually was called Clovis Community Bank at that time, and the bank was under regulatory orders as of eleven years ago the last major downturn in the economy at least in California. The immediate vision was to help the bank remove itself from the regulatory orders and then secondly was to look at the opportunity to grow and expand the franchise of the company in the San Joaquin Valley, moving out from just the Fresno County market. After this we were able to achieve the first goal, we were released from the regulatory orders back in 1999, and subsequently we have been growing the company in the San Joaquin Valley.”
CEOCFO: What is your vision today?
Mr. Doyle: “Our vision today is to continue that growth pattern where there are opportunities and where we can find experienced and good bankers that will fit into the culture of our company. We want to really grow with our customer base as more and more of our business customers are expanding or have been expanding in our market place in the San Joaquin Valley. We felt it was important in order to grow with those customers to be able to meet their needs in other communities where they do business.”
CEOCFO: How do you break down between commercial and retail, and would you like to see that change at all?
Mr. Doyle: “One of the lessons we learned when the bank was under regulatory orders back in the mid-1990’s in California was that concentration can be a problem, particularly when one sector of the economy goes against what you would like it to be. We set out as part of our overall strategy when we retooled the organization to try to be more diversified in our portfolio and quite honestly that has worked well for us in the current downturn here in California. When we look at our bank generally some of the things that will stand out when someone looks at the assets and the liabilities of our companies, is it is still primarily what a community bank is, it is still gathering local deposits and lending the money locally. That is where the bulk of our income comes, from that interest margin. What we have attempted to do is not to be as real estate concentrated as many of the community banks have in the California market place and generally across the country and that has served us well in this downturn, because we have not faced some of the non-performing loan problems that unfortunately some of the other banks have faced. We have had a nice mix of commercial and industrial loans and yet still providing real estate financing, but not as heavily in the construction phase of real estate. However, we are more into looking at owner-occupied as opposed to investment real estate property and then production agriculture lending. When I arrived on the scene and as we retooled the organization the bank had no agricultural loans to speak of, which was a little unique since we are right in the middle of one of the richest and most productive agricultural parts of the country in the San Joaquin Valley. So since I had experience in agriculture and my chief credit officer whom I brought and hired also had a quite an extensive amount of agriculture experience, we decided that was an area to expand if we had the right amount of skills in our loan officers that that would be something that would be helpful to our diversification. Consequently we hold commercial industrial loans at about 27% of our portfolio, agriculture runs about 10% and that is production lending. Home equity loans/consumer loans tend to run around 12%, construction/land loans at 9%, commercial real estate at 13% and the remainder, 28% is particularly owner-occupied real estate.”
CEOCFO: How do you attract business?
Mr. Doyle: “We attract business the old-fashioned way. Since our primary focus is small and medium-sized businesses, we believe that is still the greatest opportunity for community banks because our belief is that is still a market that values relationships and values the experience and knowledge that a banker can have in dealing with a customer. We find that although we do a fair amount of advertising and marketing, the best source of business is referrals from our existing customers. We are also very engaged in the community and one of our sayings in the bank is that ‘Community’ is our middle name. So we are very engaged in the community and we are seen as a local bank that is committed to doing the right thing for its customers and trying to help and grow our community. We do generate business from our activities in the community and working with the non-profit community as well as for-profit corporations and business’.”
CEOCFO: Your literature talks about ‘unique brands of personalized service,’ will you give us an example of how that translates into action?
Mr. Doyle: “Our brand of customer service is in many ways attempting to still provide the high touch as well as high-tech options for customers. We encourage our customer base to use our branches, and we don’t attempt to discourage them from using our branches, yet we know with the younger generations and with busy schedules people also like the high technology. So we have the remote capture deposit, we have bill-pay, and we have cash management services. Our belief is that customers really like options and they like to be in control to be able to make decisions regarding delivery channel. We provide a courier service where we will pick up deposits from our business customers. However, when someone comes to our office or they call us on the phone, we are going to do our very best to call them by their name, to recognize them, and acknowledge them. Even on our phone system, each of us will answer our phone and if they end up in our voicemail they can always opt-out to a human being. We hear many times with the large banks that customers feel like they are just a number, and that they can’t get to a decision-maker. They feel they get lost in their automated voice system, so we work diligently to make sure that our clients can get to human beings if they want to and let them chose what is the most convenient method to receive service, because that is important to them.”
CEOCFO: Please tell us about the merger last year and the growth coming up, with the opening of a new branch?
Mr. Doyle: “Actually in 2008 we were really the only bank in California of the roughly 320 banks that did have an acquisition or merger that wasn’t government assisted. That is pretty unusual because in California with the number of banks over the last five or ten years there has usually been somewhere around ten to twenty acquisitions. We were fortunate because in our company we were not saddled with many of the loan problems in 2008 that many of the banks were, so we were able to look for opportunities as well as continue to grow our existing client base. We were presented with an opportunity to acquire another bank in a key market to us that we have always seen in our strategic plan, as it is part of the San Joaquin Valley where we did not have branches. However, that particular bank did have some challenges in their loan portfolio as many banks did. We believe we were able to negotiate a fair and reasonable price for both buyer and seller. In addition, because we were able to spend the time and energy in taking on some of the problem loans that they had, there was an opportunity for us because though the market is depressed today, we knew long-term that particular market would be outstanding and it would be a growth market for us and it fit our long-term strategy.”
CEOCFO: How do you ensure that as you grow you keep that personal focus, and steady customer service, so many companies lose that in the growth?
Mr. Doyle: “It is a fear we have. It is a fear that the larger you become and the more geographically you are spread, you could lose that, so there are several things that we attempt to do that are important to us in that growth strategy. We had an acquisition last year, but each year we have always had new start-up branches on our drawing board. So it has always been dependent on a couple of things whether we do an acquisition or open a new branch, and it depends on what the opportunities are available. Some of those opportunities center on human resources, looking for the very best bankers that we can find to open a new branch or even a merger it is very important to us to understand the culture and the human resources of the bank that we are acquiring. So when we look at our overall strategic plan and growth and what are the limitations, the limitations are really the human resources. It is about making sure we are finding the very best people that fit our culture. These are people that have a desire to serve their customers and their communities, with a high integrity, skill sets, as well as motivated to work hard and do the right thing for their customer. So that is a real critical issue for us and when we look at how we drive our company part of the growth strategy for us, I mentioned earlier is to meet the needs of our customers and that is definitely number one. Number two is that we feel in order to attract and retain the very best bankers in the market, whether that is a teller or a commercial loan officer, we believe we need to continue to provide an environment that they feel is good for them. We are focused on their desire for their own career whether that is increased salaries, increased incentives, increased benefits, or career opportunities being able to move up to additional jobs. We are very committed to that and providing training so that when we attract someone our retention will be high and will be the kind of people that we want. We feel if we do that very well, have the best bankers who love what they do and they love taking care of their customers, that by having satisfied customers that will allow our bank to continue to grow and provide shareholder value with profits and franchise value, and likewise continue to serve our community. So all of those things in our mind flow from having the very best people we can and that is a critical ingredient when we look at growth and expansion for our company.”
CEOCFO: How have you reassured your customers during this current crisis?
Mr. Doyle: “Fortunately we have had some very good recognition during this crisis time of 2008 into 2009. In our market place in California of course Indy Mac was one of the banks closed by the FDIC. The news reported people waiting in line trying to take their deposits out. We also saw the national news and certainly there was a tremendous concern by the average consumer and businessperson as to the safety and soundness of the banking and financial institution. We used that as an opportunity to reconfirm with our own employees who we were, what our financial status was and how we were rated. One of the California consulting groups that provides information in the banking industry and also rates the banks in California has a rating system and we have for many years been recognized as one of the top-performing banks and in 2008, they actually recognized us for our performance as being ‘the’ exceptional bank in California in the asset group of $600 million to $1.2 billion assets. We used that of course to share with our customers and employees that we continue to be safe and strong, that we are well capitalized, that we didn’t have the non-performing loans that others had. We had the capacity; we were the only banks in California to do an unassisted acquisition, so we felt those were all things that pointed to the fact that Central Valley Community Bank had a very strong and stable background that had proven leadership and management through the years, because we had been around almost thirty years. So we are trying to make sure that our own team members and employees know that, and that they can share with their customers when they look them in the eye and ask them how their bank is doing, they have an answer and they feel confident in that answer.”
CEOCFO: Are there services that you are not providing that you would like to make available?
Mr. Doyle: “That is certainly something that we always review; what products are available in the market place and what products or services we are hearing from our customers that they like or perhaps we have not had. We attempted to be very aware of available products and meet the needs of our customers. We have done that through cash management, through remote capture, which is a very new and exciting product that seems to be in demand for many of our business customers. For most of the small and medium-sized business it is still very much about the availability of credit, which is still the most important thing in their minds. Obviously, the other products are equally important; it helps tie that relationship to the bank. We have been able to add services to meet the needs of our customers and in some cases where there are unique products such as there are some lock-box services and some international services that with the size of our bank we have not been able to justify staffing or those services. However, we have relationships with correspondent banks who we can outsource those services. We have not found any product or service that our clients have asked for that we haven’t been able to meet their needs.”
CEOCFO: There are some unique problems to California over and above the problems of the rest of the country; how do you address those, and how do you help your clients?
Mr. Doyle: “California is a unique market even in normal times and it is an exciting market, so with that comes tremendous opportunities. The key there is that we have attempted to be very loyal; one of our core values is loyalty. We try to be loyal to our customers as well as our employees, shareholders and others. We believe in being very upfront and honest with our clients and the community and try to share with them the added value that our employees bring, and that our loan officers bring dealing with business customers, our clients business as well as our own bank. We try to be there and offer advice and council as to perhaps what we can do to aid them if they have a need. Certainly we have seen in California this past year and year and a half, with the downturn in the economy that many if not most businesses have been affected by the downturn. We have done everything we can to try to work diligently and to help our customers not only be a survivor but also, hopefully, be stronger coming out the other end. In some cases it is a matter of credit worthiness and trying to help our customers understand what they can do in their own businesses to help themselves become more credit worthy today and even more credit worthy as they come through the cycle. It goes back to that relationship building; we believe that it adds value to those relationships. In the state of California, due to budget problems the State issued warrants or IOU’s to vendors and tax refund recipients. The larger banks have made a decision that they were only going to accept those warrants for one week. Our bank agreed to accept the warrants for an extended period of time. While we don’t like being put in a position where we are forced to bail out the state, we also think that the impact on our clients to be very significant if they are not able to convert payments that they might have received as vendors from the state into working capital for their company. So we have committed to work with our clients and we have indicated that we would go at least through the month of July, instead of just for one week and I think they appreciate that. They appreciate that the bank is taking a risk to help them be successful and survive in their own business.”
CEOCFO: Why should potential investors be paying attention to Central Valley Community Bank?
Mr. Doyle: “We think that Central Valley Community Bank has great long-term upside for an investor. One of the challenges that our company has had is that we have had significant ownership of our stock at the local market place and at our board table, so that has hurt the liquidity of our stock. However, while all of the investment bankers always tell us that our stock has traded below the multiples that it should be trading, part of that is just because we haven’t had as much liquidity of our stock, and we have not had as many shareholders wanting to sell their stock. We have had two acquisitions in the last five years now and part of the strategy is not only to grow the bank, but to increase the liquidity and increase the number of shares out in the market place to make them more available when a shareholder wanted to buy or sell. We believe that acquisition last year by increasing the number of shares in the market will help that liquidity and help create a higher premium value and a higher market cap because of the underlying principles of our bank. Although California is certainly having its economic challenges just as the rest of the nation has, the San Joaquin Valley has shown up in Merced and Stockton, Sacramento and Fresno as being key areas that are affected. We believe that our area was early into the recession, and will cover sooner than other areas. When you look at the financials for our company I think what you will see that it has been a strong consistent bank. That is because of cost of funds. We have been blessed with a very low cost of funds and a high net interest margin, so the earnings for our company has been above our peers and the asset quality, loan diversification and cost of funds will allow us to be a survivor and take advantage of opportunities they may come our way in the next few years. Therefore, we will be a great investment for someone that is interested in a community bank that is growing, that has good franchise, good underlying principles of how it makes money, and we will come out as a survivor as we work through the economy, as California and the nation does.”
CEOCFO: In closing, you were elected chairman of the California Bankers Association for 2009 to 2010; what does that mean for you personally as well as for the bank?
“California Bankers Association is the primary trade association in
our state and its membership is made up of most of the banks in the state,
both the large and the small and its mission is a number of things. First,
it certainly is to represent the industries at the state level, but also the
national level. CBA provides advocacy on State and Federal Government
relations as well as Regulatory advocacy, which is critical to banks being
able to manage their business, serve their communities and provide a return
to shareholders. At the national level and we work very closely with the
American Bankers Association as to legislation and changes that could affect
our industry in California and the Nation. Secondly, we provide a great
amount of education and training for the employees of banks in our state to
allow them to continue to meet the challenges of the changing environment
and changing world by having their employees ready to go and trained with
the skill set they will need today and into the future. Additionally, CBA
helps the members with best practices through strategic partners and vendor
relationships. Those are the critical pieces of the association. For me
obviously it is an honor to be able to represent both the large and the
small banks of the state. That includes having the opportunity to fight some
of the battles with our elected folks and the regulators on industry issues,
but also to be out and to be a spokesperson for the industry throughout the
state. So for me personally, it is an honor to have that position to speak
on behalf of the industry. It is certainly an honor for our bank that I was
chosen to do this and it is a testimonial for all of our team here at
Central Valley Community Bank. The community that I serve has written
several stories and they see it as an honor for the community to have
someone here in Central Valley represent the whole state, which includes
major areas like Los Angeles, San Francisco and other metropolitan areas. It
is a very rewarding experience. It can be very frustrating sometimes when
you are dealing with the elected officials and regulations that are sending
changes our way. I can’t think of a more exciting time to be in this
position and to try to express the viewpoint of our industry. It is
important to try to make sure that common sense and good governance
prevails, because we all know something has gotten out of hand in banking
and the economy. That is when the pendulum starts to swing with more
regulations and more control. So it is a matter of trying to do our best to
make sure of the right amount of change that will do good things and not
restrict the banks from serving their communities and helping the recovery.
We need to serve the needs of our community because our banks only will be
successful if our communities are successful.”
“We attract business the old-fashioned way. Since our primary focus is small and medium-sized businesses, we believe that is still the greatest opportunity for community banks because our belief is that is still a market that values relationships and values the experience and knowledge that a banker can have in dealing with a customer. We find that although we do a fair amount of advertising and marketing, the best source of business is referrals from our existing customers. We are also very engaged in the community and one of our sayings in the bank is that ‘Community’ is our middle name. So we are very engaged in the community and we are seen as a local bank that is committed to doing the right thing for its customers and trying to help and grow our community. We do generate business from our activities in the community and working with the non-profit community as well as for-profit corporations and business’.” - Daniel J. Doyle
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