President's Blog

I always worry just a bit when I see someone trying to sell something with the approach of “one size fits most.”  For someone (and maybe lots of someones) the one size available will work just fine.  But there are always those that don’t fit that one size.  That’s where the trouble can begin.

Sierra Vista Bank was included in a list of local banks published in the major Sacramento newspaper on February 11th.  The article was focused on one local institution that is facing some challenges. A table of other banks may have been an afterthought to round out insight on the banking challenges facing the region.  Without any commentary, the table just reflected a ‘one size fits most’ view of our local banking community.  We were listed second on that table.

Most times I’m thrilled to be at the top of the pile.  This list, however, may leave the wrong impression of where Sierra Vista Bank is in its development and progress.  In short, the ranking consisted of the rating results from a couple of national rating companies focused on financial institution performance.  The numbers were accurate but they don’t tell the actual story.  It’s one of those snapshots where, if you don’t understand the context, it is much too easy to get the wrong impression of where we actually fit.

Here’s the context:

• The rating agency models that made the publication were formed to encompass all financial institutions regardless of age, market, business objective, relative size, etc.  They view the landscape in terms of everyone’s 20 or so performance ratios being comparably the same.  Their stars, smiley faces or rankings may not translate well from one era to another or one company to another – especially in times of significant financial marketplace disturbance.
• The numbers shown in underlying the reports were from regulatory reports for September 30, 2009.  We are significantly different in February 2010 – we’re aging in dog years at the moment.  Decisions we made for Q3 need the perspective of the entire year to see how we actually performed.
• We’re a de novo (translate as ‘new” – 34 months old) so comparing us to older and more mature organizations is like dragging a junior high kid into a college class.  The junior high kid isn’t dumb; it’s just a weak comparison.
• Being young, our business model has a much different shape than many of the institutions that might be considered our competitors.  Even apples and oranges don’t describe the difference.

Looking at those factors, our star (or percentage, or rank, or whatever your preferred moniker) is actually rising – and pretty quickly – when compared to the standards being considered for the purpose of the listing.

Since September 30, 2009:

• We just posted up our first quarterly profit ever (almost $40 thousand in the fourth quarter of 2009).
• We finally have grown up to $105 million in total assets.  That’s how we are now able to pay our own way.  And the new Cameron Park branch is paying their own way too.
• Our loss for 2009 includes an expense of about $700 thousand that was internally transferred and is now sitting in a reserve account in the Bank to cover the potential of any bad loan that comes up.
• We had no loans past due at the end of the year.
• Our three biggest criticized challenges are backed up by real estate that has a current market value larger than the loan problems.  Real estate sales are tough right now, but the assets are there to help protect us.
• We were holding a nice amount of cash liquidity at year end.
• We received $1.2 million of new capital by investors at year end.  That had a very positive effect on the ratios calculated for the rankings.  We anticipate the receipt of more capital before the end of the 2nd Quarter of 2010.  All of this is from private investors, NOT government funds.

So here’s the good news: we’re bigger, we’re profitable, we’ve got a good supply of dry powder (loan loss reserve), we’ve got money (some to lend, some to invest, some to cash checks), and we’ve got an increase in our capital with more to come.  Yes, bad things can happen that we can’t see right now.  If they do, we’ll manage through them just like we’ve done so far.

I look forward to the day when the financial world has returned to something more normal and we’ve grown and matured to the point where a standard rating agency report adequately reflects where we stand in the world.  But even then, I’ll give you the same advice. “Go to the source and ask the questions.”  It is a much better fit if you create your own personal measurement of the quality of your financial institution.  Remember: One Size Only Fits Most.

Greg Patton
President & CEO
Sierra Vista Bank

The marketing department in BIG banks must be the best job in the world.  It is a fiction writer’s dream job since there seems to be no real necessity to connect the actual world with the one they get to create in massive advertising campaigns to be spread across page and screen.  The teller lines are always short, the staff always smiling and helpful. No one is ever confused by the letters, disclosures or other fluff that comes out of the big machine.

If technology can solve your banking issues, our LARGE brethren certainly strut their solution stuff.  A recent ad showed a mom and two kids at the mall.  Once their bank text messaged their account information to the mom, all was right in the world and the three of them went skipping off to experience the joys of indoor bargain hunting.  I have never seen this behavior in real life.  The mom’s are generally stressed and the kids would rather be confined to Saturday School than spend their time cruising the mall with their mother.  And generally, when you are so uncertain about the amount of funds in your checking account it isn’t because you fear that there is TOO MUCH money available.  Maybe the text said “Bank Error In Your Favor – Collect $500.”

The great banking give-aways went the way of the dodo bird, the mammoth and other challenged species formerly found in La Brea.  The Crocker Bear and the toaster may have been the only truly great banker give-aways that anyone actually cares to remember.  Now the government limits the value of what can be given away with an account, otherwise they want you to pay taxes on the ‘gift value’.  You’ve probably seen those BIG banks that give away cash when you: open, maintain, refer, prepare or prefund one of their offerings.  That cash also comes with a 1099 issued in your name at the end of the year.  Yes, nothing says we love you like cash but having to pay taxes on that love seems to mess with the overall gift concept.

I believe that’s why people like you prefer to bank with a small bank like Sierra Vista Bank.  We’re not big on gimmicks.  Our goal is real value for your deposit and borrowing needs.  Everyone on this team takes pride in being able to answer the questions that you have. They take personal interest in figuring out how to make something work.  And when the answer is ‘no’ or at least ‘not now’, my experience is that our bankers want you to understand why that has to be our approach.

Now I think our ads are catchy. How can you deny a guy willing to be caricatured into 4X4’s, jungles, airplanes or Shakespearian era costuming? But that’s the extent of our shtick.  From that point on our goal is real value from real bankers with real answers to your real problems.

So that’s who we are.  No gimmicks, no tricks, no creative financial smoke and mirrors.  We hope you’re glad as well.  But if I could just figure out how to give away a tax-free poodle with every new account…priceless.