Bank Names New CEO

With a new CEO in place, the Bank of Santa Clarita is eyeing several strategic moves in an effort to drive profitability for shareholders. Among the initiatives: adding new service fees to generate income, entering the secondary market for the sale of Small Business Administration loans, expanding online banking capabilities and opening an office outside of its home area. Frank Di Tomaso, who has been interim CEO of the financial institution since early April, is leading the community bank into a new direction as its top executive. One of three founders of the bank, he served as vice chairman for five years and continues as chairman, a post he’s held since 2009. Di Tomaso said the bank’s board of directors voted in mid-August to drop the interim from his CEO title and is not actively seeking to hire a replacement. He replaces James Hicken, who had been chief executive and president since the Bank of Santa Clarita was founded in 2004. The Bank of Santa Clarita has two offices and employs 33 people. For the quarter ending June 30, the bank had total assets of $205.7 million and net income of $35,000. For the same period in the prior year, the bank had total assets of $210.2 million and a net loss of $56,000. Backed by the bank’s nine-member board, Di Tomaso said he is focused on increasing the return on shareholders’ investments and making the bank more competitive in the marketplace. “It’s a common theme of late in the banking industry that some shareholders are disappointed about the levels at which stocks are trading,” Di Tomaso said. “We aren’t immune to this trend.” From 2008 through the first half of 2012, Bank of Santa Clarita has consistently turned year-end profits, with its return on average equity fluctuating in the neighborhood of 1 percent to 3 percent. The bank’s current return on equity is 1.3 percent. That number is calculated by dividing average common shareholder equity by net income. A high return on equity indicates a better performing company. “From a perspective of making it happen, I have taken more of leadership role and accelerated that process,” said Di Tomaso, who started his career as a loan officer with Union Bank, spent 12 years at Metrobank and another eight years at City National Bank. Tough competition With an affluent population that includes small business owners and entrepreneurs, the Santa Clarita Valley is an attractive area for banks to locate, from the large national institutions to the community banks, such as Bank of Santa Clarita and Mission Valley Bank, with two locations in the city. In May, regional player California Bank & Trust opened a branch in Valencia. In the highly competitive marketplace, observers say community banks such as Bank of Santa Clarita are in a position where they need to generate more income and grow their business, or potentially face being an acquisition target. A bank that has stagnant growth may be seen as attractive, but the transaction would best make sense if the buyer were a similar size and culture, said David Haithcock, executive director of the California Independent Bankers. “Some will weather the storm and wait for the opportunity to get through it, and others will look for an exit,” Haithcock said. Di Tomaso vows the bank will not become an acquisition target. Rather, he says, the Bank of Santa Clarita is more likely to be the buyer. “If it’s anything other than a dominant role, we are not interested,” Di Tomaso said. Today, Bank of Santa Clarita competes with the national brands in business lending, and tries to match what Mission Valley, California United Bank or Santa Clara Valley Bank offer deposit customers, Di Tomaso said. “They are out there and working as hard as we are to attract those types of funds.” At least one area observer says that the bank is reaping the benefits of close community ties. In 2011, the bank became a sponsor of the small business development center at College of the Canyons. Representatives have participated in access to capital events and panels to inform business owners of available finance options, said Steve Tannehill, executive director of the center. “Certainly the fact they are here in town can give better access,” Tannehill said. Growth strategy In an effort to make the bank more competitive and to generate fee income, the bank will consider credit card processing and online payment processing. And in the next month, the bank will begin selling SBA loans on the secondary market, Di Tomaso said. These would be loans to businesses beyond the bank’s boundaries, where maintaining a close relationship is not essential, he added. “The yield on the sale of SBA loans can be attractive,” Di Tomaso said. Meanwhile, the bank is investing in moves that can lead to cost savings and looking for other ways to become more efficient. For example, the bank is building a 15,000-square-foot facility in Valencia Commerce Center, scheduled to open in early 2013, to consolidate back-office operations. The bank also expects it will reduce its workforce through attrition over time, Di Tomaso said, though he did not provide specifics on the number of jobs impacted or the potential cost savings. Looking ahead, the Bank of Santa Clarita also is considering technology upgrades to better serve the demands of today’s consumers. Some of the investments under review: introducing mobile banking, expanding remote capture (in which clients can process checks in their own offices), and providing clients with online access to their bank statements. “The cost of these changes — especially technology — will be significant for a bank of our size,” DiTomaso said, while not giving an exact figure. “But that will be more than offset by the convenience they will bring for customers and the potential for generating new sources of revenue.” Eventually, the bank also may expand its footprint. Plans likely would start with a loan production office in the north San Fernando Valley, Di Tomaso said, noting the bank is in talks with individuals who might run that office. He could not say when the office would open. “Based on the performance of that, we would open a more permanent type of location,” Di Tomaso said.