Interview With The CEO: FNB Bancorp (FNBG) - Thomas C. McGraw
May 2, 2012 - The Wall Street Transcript has just published U.S. Banking Report: An Investor offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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THOMAS C. MCGRAW has served as the Chief Executive Officer of First National Bank of Northern California since 2002, having been a Member and Secretary of the board of directors since 1988. He is also a former Member of the board of directors of Pacific Coast Banker's Bank. Mr. McGraw has a master's degree in social work and worked with the developmentally disabled for 10 years at The Janet Pomeroy Center in San Francisco. He is currently the center's Chairman of the board and a Board Member of The Tug McGraw Brain Tumor Foundation.
TWST: What is the history of First National Bank?
Mr. McGraw: We are a community bank originally founded in 1963 by six local businessmen. The bank's name in 1963 when it was founded was First National Bank of Daly City; Daly City is the first city immediately south of San Francisco. We started with one branch. The initial subscription of investors was oversubscribed, and so we had plenty of money to open in 1963. We have grown gradually over the years strategically. We went from one branch in 1963, and today we have three branches in San Francisco, we have nine branches in San Mateo County, which is the county just south of San Francisco, and we have a branch which we purchased from Wells Fargo in Sunnyvale, which is actually in Santa Clara County. That one we have not yet opened because we opened a de novo branch in San Francisco in April, and we want to wait until we are at a breakeven status with our new branch in San Francisco. We have seen a lot of competitors come and go.
Our risk profile is very conservative, and I think that has insulated us from a lot of the more risky activities that other banks took. About five or six years ago, one of our directors said, "How come all these other banks are making more money than we are?" And we said, "Well, it is simply because our risk profile is so conservative." After the last five years, that director is probably very happy that we have a very conservative risk profile given the mortality rate of banks. I became involved with the bank in 1988, at which time there were about 14,000 commercial banks in the country, and I think today we're looking at somewhere in the neighborhood of about 6,500, and that number continues to shrink either through failures or through mergers and acquisitions. So far, no one has ever made a serious run at us. I'm delighted to say that we've remained independent.
TWST: Who is the typical customer at First National Bank of Northern California?
Mr. McGraw: When the bank first started, it was local - small businesses and local consumers. We still pride ourselves in being local, but our geographic footprint is, obviously, larger than it was in 1963. Probably 85% to 90% of our business is commercial, with about 10%, maybe 12%, consumer. Our sweet spot is typically businesses with revenues anywhere between $3 million to, say, $15 million or $20 million, that's the general sweet spot for us. There certainly are some that are businesses that are smaller, some that are bigger, but that is our target market. Most banks are now flush with cash and deposits, and we certainly are. The biggest challenge right now is trying to find qualified borrowers. There are an enormous number of borrowers out there. In fact, I would say that, candidly, we have probably turned down more loans in the last two years than we had in the previous 20 years that I've been associated with the bank.
A lot of that is because we lend at a maximum of 65% loan to appraised value. We ask for three years' tax returns on commercial loans. We ask for CPA-audited financial statements. We do a global cash flow analysis, and then we stress-test these credits to see what's going to happen if rates go up. We have been fortunate in that we have a large following of loyal customers, and we're very blessed that we have close to 200 employees. Of those 200, probably over 80 have been with us 10 years or more. We have a lot of history with our employee base. Our logo is that of a family, and so we treat our employees like family. We treat our customers like family. And if you keep that focus on the customer continually, everything else seems to fall into place. I think that's really one of the reasons that we've been able to thrive over the years.
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