Fullerton-based Commerce National Bank has raised $18 million in a stock sale to open new branches and make more loans to small businesses.
The bank originally planned to raise $15 million in the stock offering but boosted its size by 20% based on investor interest, said Mark Simmons, Commerce National’s chief executive.
Commerce National opened in late 2003.
The bank is focused on lending to Orange County businesses that post yearly sales of $3 million to $50 million.
“These are bread-and-butter loans for us,” Simmons said.
Customers include real estate developers and accounting and law firms. Commerce National has lent to developers of small tracts of homes in Anaheim Hills, Buena Park and Vista. Other clients include an importer of women’s purses from China and India.
Simmons said he hopes to tap funds from the offering to boost the bank’s assets to $275 million to $300 million in the next few years.
“We’ve gotten to $100 million in assets in one and a half years from a dead start,” Simmons said.
At the end of the second quarter, Commerce National had $82 million in deposits. It did $40 million in loans in the period.
The bank reported a loss of $296,200 in the second quarter. Simmons expects Commerce National to break even by the end of the year as it grows its operations.
Like many smaller banks, Commerce National drums up business from companies that are looking for a lot of attention from their banker.
Lyle Eisel, owner of Placentia-based Eisel Enterprises, a maker of concrete underground vaults for water and gas meters, and storm and sewer drains, said he ran into trouble depositing funds into his account at a former bank.
“I’m old school, and usually deposit my money every day. Everytime I’d try to make a deposit, where I’d go over the authorized level, they had to get approval,” said 73-year-old Eisel.
Eisel recently got a loan from Commerce National to expand his factory on Fee Ana Street.
“I like the customer service,” he said.
The bank opened an Irvine branch a year ago, and has plans to open a Newport Beach branch and a third location in South County.
Stiff competition in Irvine comes from OC’s crop of other small business banks, such as Newport Beach-based Orange County Business Bank and Costa Mesa-based Commercial Bank of California. They also were founded in the past few years.
In Commerce National’s blue-collar Fullerton neighborhood at Lemon Street and Orangethorpe Avenue, the bank faces competition from larger banks such as Wells Fargo & Co. and Union Bank of California.
Proceeds from Commerce National’s offering also will be used to hire more bankers to set up lending lines and other bank services.
The bank has two dozen employees, but plans are in the works to establish a new banking department devoted to helping underwrite guaranteed Small Business Administration loans, Simmons said.
OC has seen a recent flurry of new bank startups of late, including ethnic-focused ones such as First Vietnamese American Bank in Westminster.
The new banks come as the county’s population per bank has grown from 124,000 in 1994 to 273,000 last year,seven times the national average. The number of locally based banks fell from 21 a decade ago to about 18 today after consolidation in the past few years.
A common sentiment from small bank founders: “Big banks are less responsive to customers,” said Robert H. Smith, former chairman and chief executive of Security Pacific Corp. of Los Angeles. Smith is a Commerce National board member and owns a stake in the bank.
Bank of America Corp. bought Smith’s century-old Los Angeles bank in 1992. The $5 billion deal, the largest U.S. bank buy at the time, created the nation’s second-largest bank by assets.
Smith is the author of “Dead Bank Walking,” a behind-the-scenes story of how Security Pacific was crippled by a 1989 capital requirement law that eventually led to its 1992 acquisition by Bank of America.
“I won’t shoot from the hip, or take extraordinary risk with ventures,” said Smith, who spoke from his Jackson Hole, Wyo., home. “I learned lessons from my tough times at Security Pacific.”
Commerce National’s Simmons was chief executive of Marine National Bank from 1986 to 2000, when the bank was bought by Salt Lake City-based First Security Bank.
Simmons became friends with Smith after Marine National was bought by South Korea’s Shinhan Bank a few years before the First Security sale. Smith, an executive at Shinhan at the time, was named chairman of Marine National after the Shinhan buy.
Simmons also enticed another close friend, Bernard E. Schneider, to help start Commerce National. Simmons has known Schneider, Commerce National’s chairman, since junior high school in Anaheim.
Schneider is the former chairman of Pacific National Bank. He stepped down when Newport Beach-based Western Bancorp bought Pacific National. U.S. Bancorp. later bought Western.
Simmons shrugs off talk of selling the bank once it becomes profitable.
“We are not building this bank up to sell it,” he said.
