Slow and steady

Tom McGraw’s commitment to rock-solid customer relationships fuels First National Bank of Northern California’s continuous organic growth.

By Carol Patton

Tom McGraw is the type of community banker who posts his email and direct phone number on his bank’s website, turned down a raise and bonus during a struggling economy, and never loses sight of his top priority: building and cementing customer relationships.

80%+

Employee retention rate at First National Bank of Northern California

McGraw is the CEO of $1.2 billion-asset First National Bank of Northern California. The 54-year-old community bank supports 12 branches throughout San Francisco, San Mateo and Santa Clara counties. Its growth is organic, ranging between 5 and 8 percent each year. McGraw says by taking a slow but steady approach, the bank is profitable, resilient and stable—a financial institution customers can rely on in an industry burdened with change.

“We’re not so concerned about doing a one-time deal for somebody,” says McGraw, adding that too many risks are involved with rapid growth. “We want this to be a long-term relationship. That really is a pretty accurate reflection of a culture we sustained for 54 years.”

Grass isn’t always greener
When the recession hit nearly 10 years ago and interest rates nose-dived, it was challenging for First National to continue growing organically. But over the past 12 years, the community bank has acquired several smaller banks and grown its assets by roughly $700 million.

“When businesses grow too fast, fundamental financial management often suffers,” McGraw says. “We always made it our objective, as we purchase banks, to take one step at “When businesses grow too fast, fundamental financial management often suffers,” McGraw says. “We always made it our objective, as we purchase banks, to take one step at a time. At the same time, we continue our organic growth so that we don’t lose sight of our existing customers in the pursuit of new acquisition.”

All about people—Tom McGraw comes from a background of social work and understands the importance of treating his employees fairly. Pictured: McGraw with Shirley Cabanero (l), finance officer, and Maria Williams (r), executive administrator.

Offering niche loans for businesses and equipment contributed to First National’s bottom line. While it doesn’t provide the highest interest rates on deposits or the lowest interest rate on loans, it delivers intangible benefits valued by customers like getting a fair deal or customized solutions, according to McGraw.

Likewise, although employee salaries aren’t the highest among local banks, employee retention is in the 80-percentile range. Of the bank’s 187 full-timers, McGraw says 80 have remained with the bank for at least 10 years. As examples, he points to the IT director, who has stayed for 47 years; the compliance officer (43 years); the president (37 years); and the chief operating officer (36 years). Often, some employees who leave the bank end up coming back.

McGraw partially credits employee longevity to the offered benefits, such as an employee profit-sharing plan that climbed to nearly 13 percent of revenue one year, stock options for officers, a solid health-care plan and educational reimbursement up to $2,000 per year. Those numbers really add up, he says, especially since the bank pays the full tab, meaning nothing comes out of employees’ pockets.

Happy environment

The bank’s respectful work culture also plays a critical role.

Years ago, McGraw earned a master’s degree in social work and worked with developmentally disabled individuals for nearly 11 years. But when his father, who was a founding member of First National Bank of Northern California, stepped down, McGraw reluctantly took his place, acting as temporary president for six months. He was then appointed as permanent CEO in 2002.

“That [social work] experience left me with a sense that it’s all about people, no matter what business you’re in,” he says. “It’s important to contribute to making the lives of others a little easier and perhaps fuller, whether that is extending credit, providing an employee with a new career opportunity or supporting programs in our communities.”

Once in a while, McGraw receives calls from customers who’ve visited the bank’s website and noticed his phone number on the site. Some are surprised to hear his voice on the other end.

“To be able to talk with an owner or decision maker is really becoming scarce and is an important lifeline for our customers,” he says, adding that he posted his phone number on the website 15 years ago. “I would much rather have people reach out to me with stories of where we dropped the ball than to have them shrug their arms and leave. When you lose contact with customers, you lose part of the heart and soul of your business.”

First National Bank of Northern California


San Francisco, Calif.
Assets: $1.2 billion
Retail locations: 12
Employees: 206
Founded: 1963
Website: fnbnorcal.com

He also perceives complacency as the enemy, comparing it to cancer. While employees receive kudos for their hard work and successes, McGraw’s typical response is, “Congratulations, you came up with a unique solution, but how can we do this better to satisfy other customers?”

As part of the community bank’s forward momentum, it joined the NASDAQ stock exchange in April. The following month, its stock took off, jumping from the low $30s to $43 per share, he says. At the end of May, the community bank’s board issued a 3-for-2 stock split, giving shareholders one additional share for every two shares they owned. That drove the stock price back down to the mid-$20s, making shares more affordable for small investors.

During a stockholder’s meeting in June, McGraw asked investors not to get distracted by the stock’s price.
“I said it’s all great, but the important thing for management and all of our employees is to stay focused on providing the best customer service and making sure that the delivery of that service is high quality,” he recalls. “If you do that, everything else takes care of itself.”


Carol Patton is a writer in Nevada.

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