Expanding bank steers clear of Silicon Valley

BY DAVID SPEAKMAN

Humboldt Bancorp is aiming to become a major player in community banking in Northern California beyond its Eureka roots, but don’t expect a face-off with Silicon Valley’s monster banks.

To pay for expansion, the company plans to sell lucrative, non-core businesses. Humboldt says it may be able to grow by opening branches or acquiring other banks.

Humbolt’s strategy is to let the big banks fight over the Bay Area while it focuses on rural areas and second-tier cities. With nearly $1 billion in assets, the company is dwarfed by behemoths such as Bank of America, Wells Fargo and Citibank. It even runs a distant second to larger community banks such as Greater Bay Bancorp of Palo Alto, which boasts assets of nearly $8 billion.

Humboldt CFO Pat Rusnak says Humbolt plans to become a major force in community banking with a footprint that stretches from the Oregon border to Fresno.

“But we have [left] the East Bay and South Bay out of that vision,” he says.

Humboldt, which also operates banks under the names Capitol Valley Bank and Tehama Bank, has a minor Bay Area presence with one Capitol Valley branch in Napa.

Rusnak said Napa is as far south as his bank plans to operate along the Interstate 101 corridor, saying more lucrative territory lies in Central Valley cities such as Stockton, Modesto and Merced.

“We have plenty of opportunity to grow our franchise along Interstate 5 between Sacramento and Fresno,” he says.

Tim Rogers, chief economist with Briefing.com in Chicago, says Humboldt is smart to focus on geographic areas the big banks may view as an afterthought.

“With the banking consolidation, smaller banks can’t compete in the same market with big banks, which dominate with the convenience of location for consumers,” he says.

According to banking industry mergers and acquisitions tracker, Charlottesville, Va.-based SNL Financial, there were 213 banking mergers in 2002 compared with 261 in 2001. The biggest deal was last November’s $5.8 billion merger of Citigroup and Golden State in California.

But Humboldt doesn’t have that amount of cash and may not be able to grow organically in the Bay Area.

“I don’t think they can finance themselves as cheaply as the monster banks,” says Briefing.com’s Rogers.

Humbolt may succeed by looking for openings in all the right places.