By Dan Franklin, Director of Commercial Real Estate, River City Bank
I’m often asked: how does River City Bank still make a buck with such low CRE mortgage rates? It’s true that we compete heavily on pricing for both loans and deposit accounts, which results in a lower net interest margin than our industry peers. However, the bank has consistently generated a healthy – well above industry average - return on equity, averaging 15% in the past five years, so our model is working. How? By being a very efficient, low-cost producer. But we didn’t invent this strategy – we simply copied the playbook from some of the most successful businesses; think Costco, Amazon, IKEA, or any company Elon Musk has run, for example. These businesses were all obsessed with cost management and productivity.
While there are, of course, other successful approaches to running a business, producing a good or service at the lowest cost provides substantial competitive advantages and staying power, particularly in times of recession. To achieve this goal, River City Bank’s culture is ruthless with cutting unnecessary expenses – even small ones that ostensibly don’t move the needle – since doing so sends a cultural message that prevents expense bloating. However, there are a couple of big exceptions where we don’t skimp: customer service and compensation for our high-performing employees. Steve Jobs once said: “A small group of A-players will run circles around a large group of B and C-players.” We agree, Steve! And that’s why we invest heavily in recruiting and compensating the most talented bankers. Ironically, this approach still arguably reduces overall expenditures because it produces more high-quality work with fewer people. Also, our clients and mortgage banking partners demand the competency and responsiveness that only A-players can provide, so we don’t consider this strategy to be optional.
River City Bank continues to grow and is always on the lookout for talented bankers – reach out if you know one! In the meantime, thank you for your business!
Dan Franklin manages all of River City Bank’s commercial real estate origination activity throughout California and the western United States. Since joining the bank in 2008, Dan has served in various commercial banking roles, including years as Commercial Banking Director, Business Development Officer, and Relationship Manager. A recipient of the Chartered Financial Analyst designation, Dan received his undergraduate and MBA degrees from the University of California at Davis.
