Tri Counties Bank eyes expansion into California Wine Country ag lending

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Santa Rosa and the North Bay are not the first areas many people think of when they think of Tri Counties Bank, but President and CEO Rick Smith wants to change all that.

Opening its lone Sonoma County and North Bay Branch after a merger with North Valley Bank in 2014, Tri Counties has looked for ways to expand its loan business in the area, particularly in the agricultural sector.

With a small number of banks and financial institutions holding much of the market share in Napa, Sonoma and Marin counties, Smith acknowledged it can be an uphill battle that requires a direct approach.

“The hardest thing to break down is you’re a new bank, there’s a lot of competition and it’s just getting the opportunity,” Smith said, noting that in his estimation, less than 10 banks make up over 70% of all deposits in Sonoma County.

Smith said his bank has approximately $6.5 billion in assets and over $4 billion in loans with about a 75% ratio. He added looking to agriculture in an area like the North Bay could be a way to expand the bank’s loan book.

Farm loans make up less than 1% of the bank’s portfolio, but loans to the agricultural industry can include commercial and industrial loans, about 6% of its book, and construction development loans, around 5%.

The bank targets more than just farmers however according to Smith. Tri Counties seeks to make loans to a broad swath of the agricultural sector, including specialty equipment manufacturers, beer makers, the wine business, bottling concerns, and more, he said.

Offering services to ancillary businesses serving the agricultural industry would likely bring Tri Counties into competition with similar banks, according to Tim Coffey, vice president of research at FIG Partners LLC. “There’s a lot of different facets to the agriculture business,” he noted, including marketing, distribution and various support industries. “Other banks have found success there, like Bank of Marin.”

Tri Counties Bank’s strategy has long been to serve both business and consumers, Smith noted, acknowledging that his bank’s sole branch in the North Bay is more business-focused.

Smith also said that about 75% of the bank’s revenue comes from business customers, while Coffey noted Tri Counties is looking to expand on its success lending to business and business owners by focusing on agriculture.

Commercial real estate makes up almost half of the bank’s loan portfolio but that could be changing as a result of a strong economy, Coffey said.

“Because of valuations in real estate, some of (the bank’s) borrowers are starting to sell their property, which means the loans go away,” Coffey said. “They’re searching for ways to grow the loan portfolio that doesn’t grow the risk profile of the business.”

However, Julianna Graham, senior vice president and North Bay area manager of Tri Counties Bank, said the bank’s commercial real estate business is doing well. “As far as commercial real estate, we’re not seeing any slowdown; in fact, there’s a lot more growth,” she said.

Graham, who previously worked in agricultural lending, said the agricultural expansion is more in the outreach phase, focusing on enterprises including the wine industry and connected business as the main agricultural engine of the North Bay.

Entrenched lenders in the agricultural industry would continue to be a problem regardless of strategy, Coffey said.

“Somebody like a Rabobank is a big agricultural lender,” Coffey said. He added the federally established Farm Credit System is difficult to compete with, something Graham echoed, noting its lenders do not pay taxes and can often offer more competitive loan terms than many private banks.

Tri Counties could win business by being more aggressive and entrepreneurial in taking business from traditional agricultural lenders, Coffey said, noting that offering a higher level of service could lure clients away from their long-time lenders.

He added a strategy could be to target a group of businesses and try to pry them away from their current lender through other strategies too, including offering larger loans and getting referrals from current clients.

Smith said he saw an edge for his bank in technology and automation, as well as online banking and IT solutions, in making its services more attractive, but he is still relying on the human touch. “I firmly believe the difference is the people and working very hard to hire and retain talented bankers that are trustworthy and working on behalf of the customer,” he said.

“A big bank would get traction through marketing and advertising and special offers,” Smith added, noting at Tri Counties “we do it the old-fashioned way, one handshake at a time. … We hope when we make new customers happy, they’ll tell other customers.”

While Smith said the bank is looking to expand its loan book, he also said the Santa Rosa branch offers a full range of services, including deposits, loans, technology solutions, wealth management mortgages and more.

He also noted the branch is profitable, adding, “The analysis for profitability has kind of changed and the need for branches is changing because of automation.” Smith described the Santa Rosa branch as a “base of operations,” but did not rule out further acquisitions in the North Bay to expand the bank’s services there.

A 25-year veteran of the bank, Smith is no stranger to expansion. He joined Tri Counties when it was in a footrace with Wells Fargo to open banks in grocery stores, then a new concept that originated in the Midwest and expanded nationwide.

Although that tide has rolled back with increasing automation, Smith said Tri Counties still has supermarket branches in places like Yuba City, Redding and Chico, where it is headquartered.

Before entering the banking world, Smith started and sold a wholesale produce business after graduating from Sacramento State University. He went to work for Safeway at a time when the company was trying to cut out the wholesalers and buy directly from producers. He found himself working in the wholesale business in Hawaii for a time before landing at Tri Counties.

“In my history I have been very much like my customers,” Smith said, recalling a time running his first produce business in West Sacramento when a major customer had not paid and he worried he would not be able to keep the business running.

“The most important thing I learned is what it feels like to make money or not make money,” Smith said. “Understanding that difficulty and the challenge to that helps me relate to my customers and, hopefully, it also helps us have a culture of helping customers.”

Smith’s father-in-law was a previous president of the bank and recruited Smith to open branches in supermarkets because of his background in the wholesale world.

Elected as CEO after serving for a year as interim president in the late 90s, over the years Smith has held many positions at the bank, working in operations and lending, and as a senior vice president and chief operating officer, among other roles.

“When I started in the bank there were 13 branches and today there’s 80,” Smith said, noting the bank has grown from having $450 million in assets when he started, to its over $6 billion today. Graham, the vice president who oversees the North Bay operations, said the bank that started with a focus on the counties around Chico is now in 46 counties statewide.

Graham has also known Smith for over a decade, including from when she worked at the California Bankers Association and Smith was on the board.

“With Rick what you see is what you get,” Graham noted. “He’s a very understated person but he’s very authentic.” She added that his experience running a business has proven invaluable to his leadership at the bank over the last 20 years.

“It is unusual to have a business owner become a bank CEO,” Graham said. “He just has a different point of view. None of us have run produce companies and had to make payroll and grow the business.”

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at or 707-521-4257

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