Pinnacle Bank in organization by business people in Morgan Hill,
Gilroy and Hollister
GILROY
– Backers of a new bank planned for downtown Gilroy have just
launched campaign to raise up to $25 million in capital to compete
with South Valley National, Heritage Bank South Valley and a host
of national banks already vying for the business of small merchants
in the region.
Pinnacle Bank in organization by business people in Morgan Hill, Gilroy and Hollister
GILROY – Backers of a new bank planned for downtown Gilroy have just launched campaign to raise up to $25 million in capital to compete with South Valley National, Heritage Bank South Valley and a host of national banks already vying for the business of small merchants in the region.
David J. Funkhouser, the chief executive officer of the proposed bank – to be named Pinnacle Bank – declined requests for interviews last week, citing a demanding schedule leading up to the launch of the initial public offering on Thursday.
But in documents obtained through a California Public Records Act request, The Pinnacle has learned that the bank is targeting between $20 million and $25 million in startup capital, according to the California Department of Financial Institutions.
The bank’s current name is “Pinnacle Bank in formation” and will remain so until a successful completion of it’s IPO and the go-ahead from regulators at the DFI. It will be located at 7597 Monterey St. in Gilroy, according to DFI documents. If the regulatory process continues smoothly, organizers hope to have the bank open as early as June.
A second branch is planned for Morgan Hill on Butterfield Boulevard.
Initial capital was raised by roughly 60 organizers of the bank, each contributing $20,000 toward the capitalization, said Susan Black, a member of the board of directors and a retired president of Mid-Peninsula Bank, a subsidiary of Palo Alto-based bank holding company Greater Bay Bancorp.
“Businesses in the area have really been underserved by the other community banks,” Black said. “The other banks that call themselves community banks are not based here – they’re based in either Santa Barbara or in San Jose. There has been a groundswell of support for this bank.”
Neither Heritage Commerce Corp nor South Valley National responded to requests for interviews by press time Thursday.
The board of directors is comprised of business people in Morgan Hill, Gilroy and Hollister, including Joe Filice and Allen Greco of the Gilroy-based accounting firm Greco & Filice, and Al Guerra, owner of Guerra Nut Shelling Co. in Hollister. Filice has been elected chairman of the board.
San Benito Supervisor candidate Richard Place was originally expected to sit on the board, but bowed out when he decided to run for office, Black said. He remains on the bank’s advisory committee.
Henry Chow, the bank’s chief operations officer, hails from San Jose National, also a subsidiary bank of Greater Bay Bancorp, which boasts a market capitalization of nearly $1.4 billion. Bruce Kendall, the bank’s chief financial officer, worked for Coast Commercial Bank, a business bank in Santa Cruz also under the Greater Bay umbrella.
The local market for lending shouldn’t come as a surprise. Gilroy’s growth over the past decade – both in homes and businesses – can only be described as unbridled, fueling the demand for capital by both builders and businesses. And with a dedicated construction loan department, that fact has not been lost on Pinnacle Bank.
New community banks popping up throughout California has been a consistent phenomenon for the past five to seven years, said Anissa Yates, a spokesperson for the California Bankers Association in Sacramento. She cited two factors unique to California as fueling the creation of new banks.
One is the high volume of trade between California and Pacific Rim countries, including China. The other is the huge number of small businesses seeking capital through Small Business Administration loans. California dwarfs any other state in the number of SBA loans, she said.
“Our perspective is that banking as a growth market has been consistent in the last five to seven years,” Yates said. “Much of that has been the influence of small business development. The SBA notes that Califorinia provides the majority of SBA loans, and banks are providing the funding for those new businesses – it puts community banks in a good position.”
Another factor organizers of Pinnacle Bank may be, well, banking on, is a natural internal growth of competing banks.
Joe Morford III, a banking analyst with RBC Capital Markets in San Francisco, explained that banks such as Pacific Capitol, the parent to South Valley National Bank, and Heritage Commerce Corp., the San Jose-based parent of Heritage Bank South Valley, tend to swim upstream for larger companies as they themselves grow, providing for larger loans and higher returns. As they grow and seek larger clients, startup banks – called “de novo” banks – view it as an opportunity to establish banking relationships with smaller businesses.
As those new banks grow and become profitable, they become attractive acquisition targets for the larger banks. After a flurry of M&A activity, where independent small banks are gobbled up by their larger competitors, banking entrepreneurs see the opportunity to launch startup community banks that promise a closer relationship to local businesses.
“There has been a steady flow of de novo banks, a little more in 2004 and ’05 than so far this year,” Morford said. “New banks tend to focus on a little different segment of the customer base; bigger banks move up market in terms of customers. The de novo banks are trying to bring banking back to the local community.”
Board of Directors/officers
Joseph A. Filice, chairman
Accountant, Greco & Filice, Gilroy
David J. Funkhouser, CEO, director
Banker, Gilroy
Bruce Kendall, CFO
Henry Chow, COO
Susan Black, director
Retired banker, Pebble Beach
Frank A. Dicker Sr., director
Retired banker, Morgan Hill
Allen R. Greco, director
Accountant, Greco & Filice, Gilroy
Albert F. Guerra, director
Guerra Nut Shelling Co., Hollister
Edward J. Rossi, director
Businessman, Morgan Hill
David Scoffone, director
Businessman, Gilroy
Source: Department of Financial Institutions
