Business in California often forces compromise between tradition and feel-good informality, and banking is no different.

Take San Jose's Heritage Bank of Commerce. Located in the heart of the Silicon Valley, Heritage has a lobby full of classic Harley Davidsons, and funky works of modern art grace its walls. An old-fashioned institution this is not.

In fact, the bank has been open for just a year and a half. But that hasn't prevented Heritage from enjoying some old-fashioned success. The first new bank in San Jose in more than a decade when it was begun in June 1994, Heritage posted a profit after just 11 months of operation, catching even bank officials off guard.

"It's astounding to make a profit in the 11th month," said Robert P. Gionfriddo, Heritage's executive vice president. "I was optimistic we'd make a profit early, but I didn't expect it to happen so soon."

"We're still just a speck on the banking horizon, but we've gotten a lot done," said John E. Rossell 3d, president and chief executive. "We've made a mark early and that gives us a sense of accomplishment."

Heritage represents a new breed of start-up bank. Whereas in the 1980s, banks were able to get up and running with a capitalization of $3 million to $4 million, Heritage came up with $14 million before opening its doors.

Armed with a wide array of investors, the bank started strong and took advantage of improving economic conditions in the San Jose area. The third quarter of 1995 saw Heritage post an 24% increase in assets from the previous quarter, to $123.3 million, and deposits were up 27%, to $110.5 million.

Mr. Rossell said he anticipates Heritage will show a net profit for its first full fiscal year of operation, to end in December.

"That's impressive," said Campbell Chaney, an analyst in San Francisco with Rodman & Renshaw. "It usually takes 18 months to two years to make a profit, so they're off to a good start."

"I think the problem Heritage is faced with is putting all their capital to work," said James R. Kenney, chief executive of local rival San Jose National Bank.

Other than that, about the only downside for Heritage is that the bank will have to move soon. The city of San Jose has taken over its building by eminent domain, displacing Heritage so that Adobe Systems can expand. Bank officials are negotiating for a new location, but service hasn't been disrupted.

Mr. Gionfriddo said Heritage's success will rest with its ability to serve small business. The Silicon Valley area has a reputation as an entrepreneurial hotbed, spawned largely by ever-evolving computer technology.

"Business owners tend to have big egos. They've put their lifeblood into their business and they want to know that we understand their business," Mr. Gionfriddo said. "I think that's where we can offer them a unique perspective."

Heritage has used its size, or lack thereof, as an effective lure. E.A. Hathaway & Co., a general contracting firm in nearby Santa Clara, did $60 million worth of business last year and has been around for more than 50 years. But it wasted little time moving its business to Heritage.

"We wanted to be a significant customer so that when we had needs, we would be able to talk to the decision makers at the bank," said Stephen McCoid, chief financial officer. "We wanted to feel as if we could call the president or the vice president and get a prompt response."

William J. DelBaggio Jr., Heritage's chairman, said his bank has benefited from two other area independent banks, Plaza Bank of Commerce and Pacific Western, being purchased by Comerica Inc.

Hundreds of businesses in the area that didn't want to bank with the larger entity became easy picking, and Heritage has gone after them.

"We're very bullish on the Santa Clara Valley area and feel there's a lot of business out there for a bank like us," Mr. DelBaggio said. "It's up to us to go out and get it."

Mr. Rossell said Heritage used four Northern California banks as models: Plaza, South Valley National Bank, University Bank and Trust and Mid- Peninsula Bank. While Plaza and University have been acquired, the other two are still around and just as eager for business as Heritage. In fact, the Silicon Valley has produced some of the most nimble community banks in California, including San Jose National Bank and Silicon Valley Bank, a competitive environment that makes Heritage's growth even more remarkable.

Mr. Rossell said mixing a strong community bank approach with the unusual combination of a successful loan management group and a successful deposit team (recruited in large measure from Plaza's ranks), has enabled the bank to appeal to a variety of different customers, from brewers to flange makers.

Mr. Rossell said he had long considered opening a new bank. After stints at Bank of America and Wells Fargo, he said, he was anxious to get back to banking on a smaller scale, where community bank officials could play a long-term role in a region's development unfettered by changes affecting big banking.

"We don't make any bones about wanting to be a conservative lender, but we're also out there aggressively looking for loans," he said. "We feel we can be the business bank of choice in this area. There is a lot of competition out there, but it keeps us sharp and it keeps us honest."

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