Bankers as Entrepreneurs? Panel Says Yes

It's hard to think of banks as entrepreneurial companies started by two guys in a garage, but executives of two California banks were recently named finalists in a national contest for the title of Entrepreneur of the Year.

Silicon Valley Bank, based in Palo Alto, and Far East National Bank, in Los Angeles, were cited by a panel of business leaders put together by Ernst & Young, Inc. magazine, and Merrill Lynch Business Financial Services6 Inc., the sponsors of the award.

Lender to High-Tech Firms

Silicon Valley Bank, as its name implies, is an eight-year-old company focusing on financial services for high-technology firms, with an emphasis on emerging and middle-market companies. Its president, Roger Smith, was recognized by the awards group for supporting entrepreneurship both "emotionally and financially," according to Ernst & Young.

"We believe new is not bad," said Mr. Smith, who was formerly the head of Wells Fargo Bank's special industries group.

Silicon Valley is an active lender. Its $869 million of assets at the end of the third quarter includes a loan portfolio of $590 million. Its return on average assets hovers at 1.5% while return on equity is a thriving 26.1%

Avoiding Credit Pitfalls

The company emphasizes that it is not sacrificing credit quality when it finances technology ventures. All loans, regardless of size, must be approved by the bank's loan committee, which includes senior management and a corporate lending of officer. The lender's oposition on the panel is rotated among all bank officers.

Silicon Valley's services include start-up financing through a subsidiary that specializes in receivable-based lending. It also attempts to link firms with venture funds and other equity investors and provides international trade financing.

Corporate borrowers are frequently invited into the bank for informal lunches to discuss ideas and problems.

We get really excited about the companies," Mr. Smith said. "The key is that we have aspirit in the bank that is friendly to the entrepreneur. We're young too, so we understand ... what early stages are all about."

Silicon Valley has expanded into other high-tech corridors outside its California base, with loan production offices in Boston and Portland, Ore.

An Immigrant from China

Far East National Bank is a 17-year-old institution with $320 million in assets. It is entrepreneurial at its very roots.

Bank president Henry Hwang came from his native China to the United States as a student, with a deep respect for bankers. But his experience in his first banking jobs left him with a feeling of dissatisfaction.

The banks were not set up to solicit business from the Asian community that he knew best. He watched as California's Asian population boomed in the 1970s. By the end of the decade he was ready to organize Far East National Bank, raising most of the money from more than 300 small investors in the Asian community.

Strong on Customer Service

The awards committee, which will announce winners in January, said Far East's customer service philosophy was the key to its nomination. Mr. Hwang said he likes to think that the bank's initials, FENB, stand for "Fast, Efficient, Nicest Bank."

The slogan, he added, reflects a philosophy that comes from his background and understanding of the bank's Asian customers. "They are not very patient," he said, explaining his emphasis on fast service. "And they prefer to put up collateral for everything."

As with Silicon Valley, Far East's customer base presents risks.

Loan Evaluation Process

Financial information on its immigrant customers is often sketchy, but Mr. Hwang says his bilingual staff investigates their backgrounds to evaluate risk. That explains another of the bank's internal slogans: "Good return, no risk." The no risk comes because of the heavy colateral put up against loans.

The awards committee also tipped its hat to Far East National for its managerial skills. Mr. Hwang said that as an entrepreneur himself, he understands the value of generosity in pay, bonuses, and benefits.

Far East's return on assets has ranged from 1.5% to 1.9%. For 11 years running, its return on equity has hit a towering 25%.

Ms/ Franzoni, a freelance banking reporter, is based in Springfield, Mo.

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