More and more people are fleeing the expensive California coastal cities for the state's more affordable central valleys, and Tri Counties Bank in Chico is opening branches in hopes of winning their business.
The $1.5 billion-asset bank announced last week that it plans to more than double the number of its branches in the Sacramento area to 10, by opening five branches in Raley's grocery stores, as well as a traditional branch in the Sacramento suburb of Roseville.
Over the next year Tri Counties also plans to open in-store branches further south in Wal-Mart Super Centers currently under construction, two in Bakersfield and one in a suburb of Fresno.
It is also remodeling four loan production offices into full-service branches in various cities in the San Joaquin Valley.
Tri Counties, which is based about 100 miles north of Sacramento, has had a series of growth spurts in recent years. It expanded into the San Joaquin Valley and the southern part of the Sacramento Valley in 1997, when it bought nine branches from Wells Fargo Bank.
And Richard P. Smith, the president and chief executive officer of Tri Counties' parent, TriCo Bancshares, said it does not plan to stop opening branches.
"We want to be the dominant community bank in these Central Valley communities," he said. "It's the fastest-growing region in California, because the home prices are lower than they are in the major metropolitan areas of California, particular in the San Francisco region."
Mr. Smith acknowledges that Tri Counties has a long way to go in many of those communities. It currently ranks No. 1 in its hometown of Chico, with a 27% deposit share, but it has meager operations in counties to the south - in Sacramento County, it had a share of just 0.08% in June 2003, according to the Federal Deposit Insurance Corp.
Large companies like Bank of America, Wells Fargo, and Washington Mutual dominate those markets, and a number of community banks rank above Tri Counties in each of the counties south of Chico in which it does business.
Ramsey Gregg, an analyst at Sandler O'Neill & Partners LP in San Francisco, said that no matter which banks rank higher, Tri Counties will likely be very successful in the central valleys.
"They really don't need to take market share away from their competitors in order to grow in those areas, because all of those communities are really growing themselves," Mr. Gregg said. "Tri Counties has shown to be really committed to their strategy, so in time, they'll have decent market share there."
People are indeed flocking to the valleys. Sacramento County's population grew about 25% between 1990 and 2003, to 1.33 million, according to the U.S. Census Bureau, and four of the state's five fastest-growing counties since 2000 - Placer, San Joaquin, Stanislaus, and Merced - are in the valleys.
In contrast, San Francisco County's population grew just 7.3% between 1990 and 2000, to 776,000 - and from 2000 to 2003 it declined 3.2%, to 751,000. Marin County's population has declined 0.5% since 2000.
There has also been a good deal of branch-building in California's central valleys, particularly in Sacramento, where competition for market share has become especially fierce, analysts say.
So far the majority of Tri Counties' 46 branches are in the northern California counties of Butte, Shasta, and Siskiyou, but the bank plans to bulk up to the south of Chico to even out the distribution of its network.
Mr. Smith said its strategy of capturing market share is to be very aggressive - Tri Counties will open numerous branches at a time to attract many customers quickly. It will do that by opening in-store branches when it enters communities, then opening traditional ones in those communities after the in-store branches have attracted customers.
"In many of these markets, customers would have no reason to enter traditional branches, unless we did a significant amount of advertising," he said. "Going into a supermarket gives us access to a large number of people," and the branches "are less costly to construct and operate."
Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc., said Tri Counties' in-store branches have many more services than typical in-store ones do and are often twice as large. Moreover, the branches have private rooms, so that customers can discuss confidential matters with bankers, he said.
"Many supermarket in-store strategies" rely on "a kiosk-type format, with part-time staff, but that has often turned out just to be an expensive ATM," Mr. Cannon said. "Banks like Tri Counties that build full-service branches in grocery stores that even offer customers privacy is really beneficial in attracting new customers."
