Carl J. Schmitt isn't one to pass up an opportunity to make a point. For Mr. Schmitt, possibly the quintessential California community banker, just about everything has a purpose, a broader meaning.
So, when he decided last week to sell University National Bank and Trust, the Palo Alto bank he rounded and built into one of the Golden State's best independent banks, he said the deal was about more than just 2.1 times book value.
For Mr. Schmitt, the sale of University to Detroit-based Comerica Inc.'s burgeoning California subsidiary says much about the current regulatory environment.
"Banks are subjected more and more to not only financial risk from the movements of the business cycle, but. also the outside forces of political risk," said Mr. Schmitt, a former California superintendent of banks. "The new legislation that has been adopted by Congress, plus the regulations that continue to be promulgated by regulators, have mandated an increase in the complexity of management for small banks."
For Mr. Schmitt, running a community bank meant keeping management lean and close to customers, not being holed up in an office monitoring compliance. Moreover, Mr. Schmitt's decision to sell sends a message to the industry that even skilled managers are having trouble operating under the current regulatory structure, and the best way to get help and still bring value to customers and shareholders is to sell.
"We need the resources of a larger institution," he said. "It has not been a matter of financial capital... rather, it is a matter of concern for management and technological capital."
Such hard realities are nothing new to executives at small banks. In a Grant Thornton survey last year, the preponderance of new regulations and management's inability to deal with them effectively was cited as a main reason why community banks sell out.
University is being sold for $73 million in a stock swap. Mr. Schmitt and his family are the biggest shareholders, with 12%. Commerica, after the deal is completed next year, will have bought three community banks in the area around San Jose and will have 31 branches in the state.
The $422 million-asset University, situated in one of California's wealthiest communities, will be consolidated into Comerica-California by the end of 1995. Mr. Schmitt said, however, that it will remain a separate division within the bank. University made its name, and its huge profits, from a private-banking focus.
Mr. Schmitt said he picked Comerica because they "understand our philosophy of operation," and are committed to maintaining the bank's unique service and marketing culture. University offers shoe shines in its main branch and gives away Walla Walla sweet onions once a year to customers.
Mr. Schmitt said the Walla Walla onion giveaway will not cease.
Further, he said that he will be the only employee directly affected by the merger.
He plans to remain chairman and chief executive until University is formally, melded into Comerica-California. After that. he will remain chairman of the board but will not exercise day-to-day control. He'll become a member of the board of Comerica-California, but plans to head into retirement.
"I'm 60 years old and I love old cars," Mr. Schmitt said. "I've got a 1901 Packard that needs a real tune-up, and a 1910 Brush that needs an overhaul. I want to spend my time working on those and being with my family."