SANTA CLARA, Calif. -- Perhaps no bank exemplifies the exultant highs and stupefying lows that community banks in California have gone through in the past four years as much as Silicon Valley Bank.
Once a darling of Wall Street growth investors and one of the fastest-growing banks in the country, Silicon Valley suffered a setback last year, went through a sweeping change in management, and is still trying to put its fiscal house in order.
The job of fixing Silicon Valley falls to John C. Dean, named chief executive in April. He has spent the past six months extricating the bank from its real estate debacle and restructuring management -- a job made harder because Silicon Valley can't afford to alienate the high-tech and venture capital clients that helped it make a name for itself in the '80s.
"The focus since I've been here has been on loan quality, as you would expect," Mr. Dean said. "But what we're really trying to do is get back to what the bank does well, which is lending to start-up, growth technology companies and servicing the venture capital community."
The Santa Clara, Calif.-based bank, founded in 1983, grew from $240 million of assets at the end of 1988 to a peak of $1 billion in the middle of 1992.
Its leader was Roger V. Smith. Even as cracks began to show up in the California real estate market and in Silicon Valley's portfolio in 1990, Mr. Smith was still boldly saying he wouldn't abandon the commercial real estate market.
Mr. Dean said the key problem with the bank was that it got away from what it did best and lent to commercial real estate projects, not only in Silicon Valley but elsewhere.
End to the Boom
In December 1991, nonperforming assets quadrupled to $21.4 million. By the end of 1992, they tripled again to $75 million, or 7.8% of total assets. In 1992, the bank posted a $2.2 million loss, and its days as a golden boy among California's community banks seemed to be over.
An examination by the Federal Deposit Insurance Corp. in the fourth quarter of 1992 resulted in a scathing report from examiners. The regulators criticized Silicon Valley's wild growth without the internal controls and systems to support it. It called for the appointment of a new chief executive officer and a new chief credit officer.
Mr. Dean, 45, came on in April from the chief executive's job at $6.5 billion-asset Pacific First Bank in Seattle, just as Pacific First was being acquired by Washington Mutual Savings Bank.
Profits Limp Along
So far this year; Silicon Valley has limped along in terms of profits while Mr. Dean has built up loan-loss reserves and restructured management.
He has used both existing officers of the bank and brought in some new people to build up the support systems. The new chief operating officer has been with the bank for several years, while the new chief credit officer and data processing chief are both new faces.
But even with the changes, Mr. Dean said he has bent over backward to show the bank's core customers that the bank is still in the game.
"It's always a challenge when you focus internally not to forget your clients," he said. "We've been working very hard to get out there. I've met as many of our clients as possible in the last six months."
Mr. Dean said the bank's officers have held a series of receptions in California and the Northeast, where it has an office in Wellesley, Mass., with literally thousands of customers. The receptions are informal cocktail parties with hors d'oeuvres, a quick thank-you speech, and a raffle for Silicon Valley Bancshares stock.
Whether or not Mr. Dean and his new team can return the bank to its former glory remains to be seen. It still has to deal with $32 million. in foreclosed real estate and $29 million in nonperforming assets. It is still profitable, though not near the stellar returns it posted in 1990.
However, Mr. Dean sees a return to strong earnings next year. "Our goal is to put us in the top 10 percentile of banks in the country" in performance.