For 15 years, Epic Bancorp in San Rafael, Calif., has fared well serving tony Marin County north of San Francisco.
But chief executive Mark Garwood said that if the $505 million-asset company hopes to maintain its rate of growth, it would need to expand throughout the San Francisco Bay region. It may even buy a bank or two, he said.
“After we open 2 more branches we [will have] penetrated every one of Marin’s markets,” said Mr. Garwood, who became president and chief executive in July, after founder Kit M. Cole retired. “That’s why we’re headed out of the county.”
Mr. Garwood has been president of its subsidiary, Tamalpais Bank, since 1996, and its CEO since last year. Ms. Cole still serves as chairman of the bank and the holding company.
Epic’s assets have tripled since 2000. At the time of its 2004 initial public offering it said that intended to reach $1 billion in assets by the end of the decade.
Mr. Garwood said that Epic is now large enough to consider acquisitions, but it also plans to open a half-dozen branches in two to five years, in other high-net worth communities in the surrounding counties, and at least three more loan production offices. It has seven branches in Marin County, and two loan offices in Santa Rosa and Sacramento that it opened last year.
Epic will open just two more branches in Marin County. Mr. Garwood estimated that 75% of Marin County is either mountainous or agricultural land, limiting the opportunities for development. Commercial real estate and construction loans make up early 60% of Tamalpais Bank’s $424 million loan portfolio.
Lee Calfo, a director of research for Cohen & Co., gave Epic a “50-50 chance” of reaching $1 billion of assets by 2010. Reaching the goal, he said, would require buying another bank.
“But they have to be very careful with acquisitions, because they virtually have no nonperfoming assets or charge-offs,” Mr. Calfo said.
In recent quarters, the company has struggled with lackluster earnings, due to continued margin compression amid rising interest rates. While it’s had double-digit increases in both earnings and assets for most of the years since its founding in 1991, core earnings have been relatively flat for the last three quarters.
Mr. Calfo said that while earnings may continue to be suppressed by low margins for the next couple of quarters, loan increases should enable Epic to return to double-digit earnings growth once the yield curve steepens and deposit costs level off. During the second quarter, loans rose 13%, to $424 million.
Deposit growth, 15% in the second quarter, should also pick up, particularly as it opens new branches, Mr. Calfo added. Customers should be attracted to Tamalpais’ branches, which feature computers with Internet access, a children’s play area, and meeting rooms for community and charity events.
“Their branch style has given them a good reputation in Marin County, and I do think it’s exportable,” Mr. Calfo said.
Last year Epic opened a second subsidiary, Epic Wealth Management, which now has over $260 million assets under management, Mr. Garwood said.
“This fits perfectly with our strategy of serving high-net worth customers, and we’re now looking to acquire other advisory firms in the Greater Bay,” he said.
