John DeCero didn’t take an easy path to this week’s honor as the Business Journal’s finance Person of the Year.

The co-founder and former president of Irvine-based California Republic Bank—now chief executive of Mechanics Bank in Walnut Creek—was one of the few bankers who anticipated the financial crisis and the Great Recession that started almost a decade ago.

He and former California Republic Chief Executive Jon Wilcox formed the idea for a new bank after they left Western Financial Bank in Irvine, which was acquired by Wachovia Corp. in 2006 for $3.7 billion.

“In 2006, when we were at the previous bank … we saw that things were way overheated, not only in the mortgage markets, but the commercial markets, the construction markets and land development,” he said. “You could see there was a bubble there.”

He and fellow bank organizers raised $52 million in capital from about 300 investors—almost twice that required by the Federal Deposit Insurance Corporation—and launched California Republic in 2007 in Newport Beach. It targeted midsized businesses and said it wouldn’t provide loans larger than $12.5 million.

The bank asked its investors for leads when it opened for business. Ten years later, it had grown assets to $2.2 billion.

DeCero this past October helped sell California Republic in an all-cash, $330 million deal with Mechanics Bank.

That’s about twice its book value—the difference between assets and liabilities—and significantly more than the national multiple of 1.3 reported by SNL Financial, a banking industry data provider.

DeCero capped the Mechanics Bank deal with the chief executive appointment, succeeding Ken Russell, now steering a bank with $5.4 billion in assets. Wilcox joined the bank’s board.

Patient Capital

Capital requirements for new banks were much lower in 2006 when DeCero formed the idea for California Republic.

Any bank aspiring to build $300 million in assets needed to start with about $12 million in capital, according to S&P Global, a banking industry research firm.

The FDIC in 2007 ordered California Republic to raise $30 million in capital.

DeCero said he was “totally” aware of the impending financial crisis and chose to raise an enormous amount of capital without institutional support. The strategy was a patient credit policy without the pressure to make risky loans, a plan that likely helped California Republic avoid other banks’ mistakes.

It chose to grow assets strictly organically without acquiring other banks. The Great Recession and the financial crisis meant a lot of competitors could have been bought cheaply through government-assisted acquisitions, an easy way to grow assets.

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