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Western Sierra Bancorp is in position
to continue its successful strategy of opening new branches and making acquisitions in
high growth areas
Financial
Regional
(WSBA.NASDAQ)
Western Sierra Bancorp.
4080 Plaza Goldorado Circle
Cameron Park, CA 95682
530-677- 5600
Gary Gall
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
April 7, 2005
BIO:
Gary D. Gall
President and CEO, Western Sierra Bancorp
Gary D. Gall, with over 30 years of community bank
management and lending experience, has been actively involved in Northern California
community banking since 1973.
After spending 20 years leading successful community
banks, Gary joined Western Sierra Bank in 1993 as its President/CEO. Gary quickly
became eager to share Western Sierra Bank’s philosophy of outstanding community
service with other local banks and in 1997 formed Western Sierra Bancorp. When
he joined Western Sierra Bank, it had $50 million in assets and consisted of four branches
all located in El Dorado County. He led the organization to record growth and
profitability to become one of Northern California’s most successful community bank
holding companies.
Western Sierra Bancorp presently has four
subsidiaries including Western Sierra Bank, Lake Community Bank, Central California Bank
and Auburn Community Bank. With the recent acquisition announcement of Gold Country Bank,
the seventh acquisition since 1999, assets will exceed $1.3 billion with 38 locations
throughout 17 counties in northern and central California.
In 2004, Sandler O’Neill & Partners, L.P.
recognized Western Sierra Bancorp as one of the 30 top performing publicly traded
community banks in the United States with a market cap under $2 billion. Western Sierra
Bancorp was also recognized as one of the Fastest Growing Companies by the Sacramento
Business Journal in 2004.
Gary D. Gall currently serves as President of the
Cameron Park Rotary Club, has been a member of the Board of Trustees for Simpson University
in Redding, California since 1998 and is a charter board member of the El Dorado County
Boys & Girls Club.
Company Profile:
Western Sierra Bancorp is a multibank holding company dedicated to the needs of the
Communities we serve. Western Sierra Bancorp is comprised of Western Sierra Bank,
Lake Community Bank, Central California Bank and Auburn Community Bank. At present,
Western Sierra Bancorp operates 33 branches and loan production facilities in the counties
of El Dorado, Placer, Sacramento, Lake, Stanislaus, San Joaquin, Calaveras, Amador, Contra
Costa, Tuolumne, and Butte.
On November 19, 2004, we announced our merger
agreement with Gold Country Financial Services, the holding company for Gold Country Bank,
headquartered in Marysville, California. In the spring of 2005, Gold Country Bank will be
merged into our Western Sierra Bank operating unit. The combination of Gold Country Bank,
with over $140 million in assets and five branch locations will increase our consolidated
assets to more than $1.3 billion, with 35 branch locations.
CEOCFOinterviews: Mr.
Gall, you formed the Bancorp in 1997 with a vision; what were your thoughts then and how
has that developed?
Mr. Gall: "My thoughts then were that it was hard for a
small community bank to compete and to get the efficiencies of the larger banks and the
regionals. I started talking to a number of banking friends about the idea of combining
back offices and putting our back office together. That never seemed to go anywhere so we
formed the holding company with the idea of having other banks join us. We started the
acquisition process in 1998. I should say that we definitely have a three-pronged growth
strategy. We believe in organic growth and we have been growing organically at a rate of
15% to 20% a year over the last five years and have also been growing by de novo. Here in
northern California in the Sacramento region as well as down in the central valley, there
have been some excellent areas to put some new branches. In the last ninety days, we
have added new branches in Modesto, Elk Grove, and North Natomas, which is the north side
of Sacramento; that has worked well. Next month we will be completing our seventh
acquisition.
Over the last five years, we have had over half-a-billion dollars growth organically, and
around $600 million growth from acquisitions, from being $150 million in assets, back in
1998. With this next acquisition closing, we will be at $1.35 billion in assets. The
acquisitions have worked extremely well. Even though we say we want to be accretive in the
first year of the acquisition, we have often seen it within one or two quarters, so we are
very pleased with that and hats off to our acquisition team. In addition to our organic
growth, which will continue, we feel that there are other community banks that will
benefit by joining our organization."
CEOCFOinterviews: Some
of the banks operate under their own name and some of them are merged into what you have;
why isn’t everything under one name?
Mr. Gall: "We believe in having some community identity.
Certainly, the management team that stays on after an acquisition will play a part in our
decision. The location will play a part also. We believe in banks having strong community
roots and when we have a strong leader in that area, we would rather keep that name. The
only change we want the customer to see is what greater services they have and how their
services have been enhanced. It has worked well and we have found that we continue to have
growth in these markets when we handle it that way."
CEOCFOinterviews: Tell
me about your market area?
Mr. Gall: "In the Sacramento region, we have been
fortunate over the last ten years. We have had an average of over 2.5% population growth
rate and over 3% per year employment growth rate. Amazingly, we have had retail sales of
over nine percent a year. There is still a demand for housing in Sacramento and it is
still affordable. We find that companies from the east bay still want to bring their
business out here because of the lower rents and employment is so much cheaper than trying
to hire somebody in the bay area. One other nice thing about the area is there is still a
lot of land, so there is still potential for growth. Rocklin, Folsom, Elk Grove, North
Natomas, Yuba City, Modesto, Merced, and Turlock are all areas of strong growth."
CEOCFOinterviews: How do
you break down between commercial and consumer?
Mr. Gall: "We try to go with the market we are in and
with thirty-five branches you have to be sensitive to the market you are in. Many of our
branches are in areas where it is a retail/deposit base, especially in some of the
foothill branches. When you go down into Roseville, Sacramento and Rocklin, you are going
to find out that most of your deposit base is business. We cater to developers and small
business owners and we do a lot of SBA lending. We like to do construction loans and on
the residential mortgage side, go ahead and sell those off. On the commercial side, if we
can get a variable rate loan, we like to hang on to those. We are very flexible and we try
to create a relationship with the customer so that they are doing most of their business
with us."
CEOCFOinterviews: Do
most of your new customers come in on the commercial or loan side?
Mr. Gall: "Certainly they do. Most of our new business
customers come from making loans, and from not being taken care of by their present bank.
We are aggressive at going out and telling our story. We have excellent branch locations
and therefore find many of our deposits are driven by the convenience of our locations.
Seventy percent of our new customers came from referral from a friend, which is great
advertising."
CEOCFOinterviews: By
looking at your website, I noticed that one of the things you focus on is premium customer
service and doing the unexpected. Will you give us an example?
Mr. Gall: "We have courier service. We have little pink
pigs, Volkswagens that are painted pink with eyebrows and they go around collecting
deposits from customers. We would rather meet you in your office. If you come to our
office and you need cash management, and you don’t have the personnel you need to
open up all your mail and post all your receivables, we will do that for you through our
cash management services. We have online service if you need it. We would rather do
business with a handshake. If you need a loan that is a bit non-conventional, and you want
someone to talk to, to get some advice on how best to handle your situation, we will be
there to talk to you."
CEOCFOinterviews: How do
you keep that personalized service as you continue to grow, and how do you as CEO keep
in-touch with your tellers on the frontline dealing with customers?
Mr. Gall: "I have hired many excellent people. We
started Western Sierra University. We have three full-time teachers. One teacher focuses
on product knowledge and the other two teach sales and relationships. I keep in-touch with
all the CEOs at different banks and division heads. The message is carried down to all the
branches and divisions. We talk about who we are, what we believe and how we want our
customers treated. People come into the branch for the experience they have with our
employees. It works extremely well to train and then go back and check and see how that
training has worked."
CEOCFOinterviews:
Community involvement seems to be a focus for Western Sierra; what are you doing in that
area?
Mr. Gall: "Each region has its own budget. There are
local baseball teams, Boy scouts, schools. This year we gave a large donation to Nehemiah
Community Reinvestment Fund (“NCRF”) to help minority housing. This year we will
also help Nehemiah with an educational program for those who do not own a home. We are
involved in many Rotary Clubs, Chamber of Commerce. We believe in being involved and
giving back to the community when there is a need. If a new community center or a new ball
park is needed, we try to get involved."
CEOCFOinterviews: Are
there products and services that you are not offering now that you would like to add?
Mr. Gall: "In 2004, we added our financial services
group, which is annuities, mutual funds and related products. In the future, we may look
at trust services. That is being viewed as well as insurance services. As we grow, we will
continue to look at more ways to serve our customers. We did expand our SBA this year,
adding people to that division."
CEOCFOinterviews: What
is ahead for Western Sierra?
Mr. Gall: "First, we are in an expanding market so I
believe we are going to continue to grow market share and I believe we have the right
people to expand our financial influence throughout the central valley. We will continue
to add new branches where we feel there is a need. We are looking at a few locations right
now. I believe we will continue to be known as an acquirer and one that other banks will
take pride in joining."
CEOCFOinterviews: Why
should potential investors be interested and what should they know that they might not
realize when they first look at the bank?
Mr. Gall: "They should know that our asset quality is
second to none. We have non-performing assets at .07% of our loans. We are pleased with
our underwriting standards as well as our collection service. Investors should realize
that we have not changed our underwriting standards since the recession of the early
nineties. We intend to stay in the top of our peer group as far as non-performing assets.
They should also know that there is still significant growth potential. Whether or not we
acquire, our bank is set to grow just because of our locations, the professionals we have
here, and our philosophy of community banking. They should know that we are very diligent
with strategic planning and we take it seriously. We always meet or beat our plan.
Furthermore, we are disciplined in our acquisition. We have walked away from as many deals
as we have completed simply because if there is not a good reason to do it for our
shareholders, we won’t do it."
CEOCFOinterviews: As
CEO, what do you do throughout the day?
Mr. Gall: "Most of my day is spent with others in the
organization, planning, talking about strategies, talking to investors over the phone,
talking to other bankers and letting them know who we are, and where we are going. Over
all just giving guidance and direction to the close to 400 employees that we have
here."
CEOCFOinterviews: Tell
us about the bank that you just got approval to acquire.
Mr. Gall: "The new bank that we just got approval on for
acquiring is Gold Country Bank. It has five branches located about thirty miles north of
Sacramento, one in Marysville, one in Yuba City, and three other branches up in that area.
We feel this will be accretive in the second quarter that we own them. We feel that with a
4.8% overhead ratio, there is going to be some efficiency gained there since we are
running most of our subsidiaries at about a 2.7% overhead ratio. We see a lot of potential
from that acquisition as well as from the new branches."
CEOCFOinterviews: In
closing, since you are doing so many acquisitions, does it get easier each time?
Mr. Gall: "Absolutely! The first two were the learning
curve. The last two to give an example; Central Sierra was acquired in July of 2003, that
went on to be accretive the very same quarter. We saw some low-hanging fruit and
efficiencies, some ways of generating new revenue and it happened immediately. Auburn
Community Bank, which was acquired in December of 2003, was neutral to earnings per share
in the first quarter of 2004, and they were accretive in the second quarter. We have
definitely been able to figure out how to make it work and work quickly. Looking back over
the last five years, we are not so much about cost cutting as we are about revenue
generation. Cost cutting will only do so much; revenue generation has no limit. Over the
last five years, our revenues have increased at a rate of 33% a year, while our expenses
have increased 24% a year. That is a very positive sign when you are doing
acquisitions."
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