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Monday, May 27, 2024

Right Place, Right Time

A little more than six months after opening Bank of Santa Clarita its officers were already thinking about expanding. The bank has applied to issue a secondary stock offering to raise an additional $7 million, and, if approved, will release the offering this month, with the proceeds slated for expansion. The new stock offering would come atop an initial $15 million or so the bankers raised to start Bank of Santa Clarita, which opened late in October. And it comes as the bank’s assets have grown 75 percent to $39.1 million since the end of 2004, and deposits and loans have nearly tripled to $26.6 million and $24.3 million respectively in that same period. The success of the startup may make it look easy to get a new bank launched, but James D. Hicken, Bank of Santa Clarita’s president and CEO, said the outward appearance is deceiving. A number of factors have converged to help Bank of Santa Clarita’s early growth spurt, including the business and population growth in the city and surrounding area, the expertise of the company’s officers and board and, perhaps most of all, the bank’s position as the only community bank in the area. Valencia Bank & Trust, which had operated in the community, was acquired by the San Francisco-based parent of Union Bank in 2003, leaving a void for a local bank, which Bank of Santa Clarita has sought to fill. Hicken, a lifelong resident of the San Fernando Valley who went to what is now Harvard Westlake High School, along with most of the bank’s officers and directors, are residents of the Santa Clarita Valley, a key factor, said Hicken, in the bank’s success. Question: Why did you decide to start up a new bank? Answer: I had a number of people come to me (after the sale of Valencia Bank) and say we need to start a new bank, but I didn’t think the timing was right. One of two things was going to happen. The acquiring bank was going to do an exceptional job or they’ll come in and make substantial changes, and those might not be viewed by the community as favorable. It had to be a few years after that before the community would make a determination as to whether they wanted a new community bank. Our concern in 2004 was that was an election year. You had federal elections in November, 2004, and that was right around when we were going to go to the market with stock. Al Qaeda and terrorism were threatening. If we had a repeat of Sept. 11, that would have jeopardized us raising the capital. Q: So what made you decide not to wait for that process to play out? A: When Union Bank acquired Valencia what they did is they created a new commercial banking office in the Santa Clarita Valley. That office, of which I was the executive vice president and manager, was to handle middle market and large corporate accounts. They pulled out 17 or 20 of the largest relationships and put those accounts in the office and my mission was to grow the office. Roughly in the middle of 2003, the determination was made to close the office up here and move it to Woodland Hills. In the context of doing that it would have caused me to assume a different job at Union Bank. So you have that occurring at the same time that I was getting more and more feedback from customers that the Valley really did need a new community bank. Q: How has your location in the Santa Clarita Valley affected your business? A: The Santa Clarita Valley is a very, in many aspects, small community. We’ve got 225,000 people in the Santa Clarita Valley. The population is larger, but if you go to many towns in the Midwest we look just like those small towns. The reason Valencia Bank and Bank of Santa Clarita were so successful is the people who live here really enjoy picking up the phone and talking to management. If the board resided outside the Valley it wouldn’t have the same flavor. The fact that that people who bank here are the same people we see on the soccer field, in the supermarket is very important to the people here. Q: To what do you attribute the bank’s growth so far? A: I think very clearly we’re benefiting from the growth that’s taken place here. If you look at the growth of Valencia compared to our bank, we have grown at a rapid pace, but it’s a totally different community today. When I joined Valencia Bank, we had 6 million to 7 million square feet of space (occupied by businesses in Santa Clarita). Today we’re over 15 million to 20 million in industrial space and that is continuing to grow. The population has also increased dramatically. So very clearly we are the benefactor of that growth and we will continue to be going forward. Q: Do you think you would have had the same initial success if you’d located say in the San Fernando Valley? A: You go to Woodland Hills and you’re just another face on the block. In order to be successful, you’ve got to be able to differentiate yourself. In Woodland Hills how do you differentiate yourself? We’re well known here. Q: What do you see in the future for the bank. Do you expect that it will be acquired by a larger bank as has happened with many community banks? A: It would be a fair statement to say most likely you will see us expand throughout the Santa Clarita Valley and potentially elsewhere. If you look at Valencia Bank and Trust, they had three offices in Santa Clarita, two in Antelope Valley and loan production in Oxnard and Camarillo, so it was a very good formula for Valencia. Our goal is to always be an institution that provides a high level of hands-on service. At the same time, we are a publicly traded company, so it’s imperative we provide good growth and earnings for the shareholders. But one of the things that was very clear from people when we formed this institution, the people we talked to did not want this to be an institution that was going to bulk up and be sold. The fact that Valencia has sold has made it better for us because people are very appreciative of what Valencia was. Q: Some of the recent successes of community banks make it look simple to open a new bank. Is it really that simple? A: Not all community banks are going to be successful. In part, they are driven by the market dynamics. Your market dynamics will make a big determination as to whether you’re going to be a mediocre or good performer. It is becoming increasingly much more difficult to start a bank today the requirements from an experience and background perspective that the regulatory community now requires. They want CEOs and presidents that had prior experience. It is becoming increasingly much more difficult for start-up banks to find the talent to get the bank off the ground. You’re going to find the number of new banks starting to diminish. The regulatory hurdles to get a new bank off the ground are much more significant than they were 20 years ago. You also have a lot of regulatory compliance issues that you didn’t have 15 or 20 years ago. There’s a lot more sophistication that goes into starting a bank day one than what you had 20 years ago. Q: How did you get involved in banking? A: I graduated from the University of Utah in 1978 with a degree in accounting. My dad was the managing director of worldwide small business at Arthur Andersen. He always expected I would go to work for Arthur Andersen. Like most kids I went the other direction. We were in a recession and not a lot of other companies were hiring. I interviewed on campus with Walker Bank (later First Interstate). They were throwing out an operations program and I thought it sounded a lot more interesting than accounting. Once I got into it I started doing a bunch of different jobs with First Interstate. The more I stayed the more I enjoyed it. Q: What has kept you in this profession? A: The customers. It’s one of the few jobs where you have the opportunity to work with a lot of highly successful and talented people. I have been an individual enamored with the whole process of capitalism. I’ve always said that one of the things I enjoyed is I live vicariously through my customers. Every day you’re dealing with different people, different issues, different products exporters, importers, service companies. No two days are ever the same. Q: How has banking changed since you entered the industry? A: Core banking is still the same that it’s always been, which is the banks lend out money and take deposits. It’s changed a little in that banks have moved into ancillary services like trust, insurance. Those really don’t pertain to community banks. We stay within the core environment. What has changed is the sophistication. When I first got into banking, a small bank could never compete with a large bank on technology. Now we are often cheaper because the large banks have self-invested legacy systems. We get our services through third party vendors that do that for a living. We can compete very effectively in those arenas. The regulatory environment is much more onerous than it was 20 years ago. The Bank Secrecy Act, Patriot Act, Sarbanes-Oxley. You have to invest in people who have compliance backgrounds. You go back 20 years ago this country did not compete on a global basis. So you’ve got to be able to deal with the global needs of small businesses. Identity theft, check fraud, you have to be much more vigilant in terms of watching how you run your business and how you deal with those risk factors. James D. Hicken Title: President and CEO, Bank of Santa Clarita Date/Place of Birth: 12/15/55; Los Angeles Personal: Married, two children Career Turning-Point: When Metro Bank was acquired by Comerica and I elected to go to work for Valencia Bank and Trust. Retrospectively, that was the turning point that set me on the path to be involved in the start-up of a new community bank. And Union Bank’s acquisition of Valencia didn’t hurt either. Had Union not acquired Valencia there would be no need to start a new bank here. Most Admired Person: My dad gave me the foundation. If I had a mentor in banking it would be Gordon Smith at Union Bank.

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