In 1993, Heritage Commerce Corp. sought Brad L. Smith's advice on starting a bank. This month the fast-growing San Jose, Calif., banking company named Mr. Smith chairman.
Mr. Smith, who helped found South Valley National Bank in 1982, will spearhead Heritage's expansion efforts in the Bay Area. He is also the new president and chief executive officer of Heritage's soon-to-open bank subsidiary in the booming South Valley, his old stomping ground.
These new responsibilities end Mr. Smith's brief sabbatical from banking.
He resigned as president and CEO of South Valley National two months ago. The bank's parent, Salinas, Calif.-based Pacific Capital Corp., was sold in December to Santa Barbara (Calif.) Bancorp.
Frustrated that he was not involved in strategic planning or policy decisions at Pacific Capital, and worried his role would only be diminished at Santa Barbara, Mr. Smith left shortly before the merger's completion.
"There were personal objectives I couldn't pursue professionally at South Valley," said Mr. Smith, who stayed on at the bank after it was first sold to Pacific Capital in 1996. "I've watched Heritage grow, and what they're doing is interesting."
Heritage, parent of Heritage Bank of Commerce, is shooting to become the Bay Area's next super community bank.
Organized in 1994, $400 million-asset Heritage has quadrupled its assets in four years and raised $26 million in capital through three public offerings. It formed a holding company to launch start-up banks, opening its first in the East Bay city of Fremont last year. It recently added some veteran Bay Area bankers to its board.
Its next move is to open its third subsidiary in Morgan Hill, in the fast-growing South Valley region.
About 20 miles from downtown San Jose, the South Valley-a collection of small towns known for producing garlic and lettuce-is emerging as the next business hub in Silicon Valley. New houses and business parks are beginning to crop up, and incubator companies associated with the area's technology are moving in.
"The business banking approach can now be successful in the South Valley," Mr. Smith said. "It is really ready for it."
Olaf F. Vlieks, a bank analyst at Hoefer & Arnett in San Francisco, said Heritage has the right idea by focusing on the South Valley.
"One of the only ways for Silicon Valley to grow is south," Mr. Vlieks said.
Heritage is also looking to make acquisitions. CEO John Rossell said the company wants to "take advantage of its stock price" and begin acquiring banks in the $100 million to $200 million range. Heritage's stock was trading at $25 per share midday Tuesday, near its 52-week high and up 28% since Nov. 1.
Mr. Rossell said Heritage could reach its goal of $800 million of assets by 2003 with just one acquisition and internal growth.