Times are so good at Bank of Commerce that the toughest challenge facing chairman Peter Q. Davis is selling the bank's stock to investors.

The fastest-growing of all U.S. bank stocks last year, Bank of Commerce now trades at roughly six times book value. So some investors fear they have missed the boat.

"Everybody says to me, 'I should have bought the stock last year,'" said Mr. Davis, who is also president and chief executive officer of $714 million-asset Bank of Commerce. "What I've got to do is set new goals and keep them excited about the potential."

However skittish individual investors may be, analysts remain bullish.

"It is one of my favorite California banks," said Hans Schroeder, an analyst at San Francisco's Hoefer & Arnett who initiated coverage of Bank of Commerce in 1996. "It has quality management, a predictable strong earnings stream, and a well-thought-out plan."

That plan is to build on the bank's wildly successful Small Business Administration lending program.

Without making an acquisition, Bank of Commerce has increased assets by an average of $100 million a year since 1994. (The 23-year-old bank completed its first purchase last month when it bought Rancho Vista National Bank, Vista, Calif.)

Moreover, net income has soared, peaking at $2.57 million in the first quarter, a 123% increase from the year earlier.

"The asset growth has been tremendous of late, and we think it's only going to continue," said Beth Ruckwardt, an analyst at Pacific Crest Securities in Portland, Ore., who rates Bank of Commerce a "strong buy."

The growth has come mainly from SBA loans.

Last year, Bank of Commerce made $200 million of SBA loans, first among U.S. banks and fourth among lenders, behind Money Store, Heller Financial Inc., and AT&T Capital Corp.

And in its stated purpose to catch Money Store-which made about $800 million of SBA loans last year-Bank of Commerce has recently opened loan production offices in five states, including Texas.

Within three years, the bank aims to have loan production offices in 24 states.

"Eight hundred million dollars is still only 8% of the SBA program, so it's not like we're trying to get it all," said Mr. Davis, 58. "We're just simply trying to go from 2% of the market to 8%."

Bank of Commerce entered the SBA loan business in 1976, when Mr. Davis joined the bank as a senior loan officer after 12 years at BankAmerica Corp. At the time, the one-year-old bank had only $1 million of capital and a $150,000 lending limit.

"Any successful company would quickly outgrow that, and they would have to leave and go to a bigger bank," said Mr. Davis, who was named Bank of Commerce's president in 1978.

In linking itself with the SBA, Bank of Commerce could immediately begin making loans for as much as $650,000.

The reason: SBA guarantees $500,000 in addition to the bank's lending limit.

By the early 1980s, a secondary market had developed for SBA loans, and Bank of Commerce began selling its loans. That allowed it to raise capital and in turn make more loans.

"We just became more and more aware that this was a great niche for us," said Mr. Davis.

That niche helped carry the bank through the dark days of the savings and loan crisis and the California recession.

"At one point, like in 1993, we had almost 3% return on assets when other banks were not making any profit at all," Mr. Davis said.

Flush with capital and eager to build assets, the bank stopped selling its loans in 1994. But last year, as demand increased, it began selling some loans and holding others, allowing it to build both capital and assets.

Besides catching Money Store, Mr. Davis wants to build Bank of Commerce through acquisitions into San Diego's largest.

By doing so, he hopes to attract deposits and other business from local governments, which currently bank with Bank of America.

"We're still too small to handle all of their banking needs, but by being the biggest bank, it's just easier for them to say, 'If anybody can handle it, it's Bank of Commerce,'" he said.

Mr. Davis also wants to continue to build the value of the stock. Though the share price has fallen 20% from the mid-April high of $22.438, it is still trading 300% above its December 1996 price.

Charlotte A. Chamberlain, a bank analyst at Jefferies & Co. in Los Angeles, called the bank's internal growth strategy "five-star."

But she questioned its acquisition strategy, especially after it paid $37.8 million, or 4.08 times book value, for Rancho Vista.

In terms of book value, "they paid more for Rancho Vista than First Union paid for Money Store."

Mr. Davis has heard the criticism before.

He defends the deal by noting that the bank paid only two-thirds of its own book value for Rancho Vista.

What is more, he said, the deal finally gives Bank of Commerce a presence in affluent north San Diego County.

One goal Mr. Davis has not set is cross-selling small-business customers.

Though many community bankers encourage cross-selling, Mr. Davis said it is not cost-effective for business development officers to spend time trying to sell checking accounts and cash management services.

"In my opinion, cross-selling is like asking a baseball team to play left-handed on Mondays and right-handed on Tuesdays," he said.

It is even less efficient, he added, to cross-sell customers out-of- state, where most of the bank's growth is expected to occur.

"If you expand and take checking accounts, then you run into all kinds of rules the state has about what you can charge for NSFs and what the process is for getting credit for uncollected funds," he said.

Even the recent spate of mergers has not convinced Mr. Davis to build more banking relationships, which many community bankers see as their key to surviving big-bank competition. With more large banks targeting small- business customers, Mr. Davis said, the pressure will be on community banks to maintain top-level service and lower rates.

"Small banks say they provide these tremendous relationships, but they have also got a responsibility to make a profit," said Mr. Davis.

Of course, Bank of Commerce does not shun relationships entirely. It is working to attract more municipal deposits. And it has developed a niche making loans and providing bookkeeping services to homeowner associations, of which California has many.

But Bank of Commerce's continued success hinges mainly on its ability to expand its SBA loan portfolio, analysts said. Since mid-1997, the bank has opened loan production offices in Oregon, Washington, Nevada, Arizona, and Texas. Later this year, it plans to open offices in Utah, Illinois, and Georgia.

"We frankly admit we're just copying Money Store," he said. "We see the states that they are in and the volume of business there."

Business is especially brisk in Texas. Led by a former Heller loan officer, the three Texas offices will make about $10 million of SBA loans this year, Mr. Davis said. Next year: "We're thinking it could be close to $100 million."

Pacific Crest's Ms. Ruckwardt said Bank of Commerce is wise to stick to what it does best.

"They're diverse in different ways, with geography being the main diversification," she said. Besides, she added, "they know what they're doing with SBA lending, and that's an advantage to anyone that needs an SBA loan."

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