John DeCero, who in 17 years went from starting a bank in Orange County with no assets to overseeing $17.5 billion, has retired as chief executive of Mechanics Bank.
“It was a difficult decision to make,” DeCero told the Business Journal.
“I’m very proud of co-founding a bank from scratch and taking the legacy institution to almost $20 billion in assets. I’m very proud of everyone at Mechanics Bank.”
During his time at Mechanics Bank, DeCero tripled its assets, making it the eighth largest with headquarters in California and the 108th largest in the nation.
While the bank, which was founded in 1905, is headquartered in Walnut Creek, DeCero spent much of his time in Orange County where he lives. The bank, with its local base at the Irvine Towers office complex, has more than 1,500 employees.
“John did a good job,” Mechanics Bank Chairman Carl Webb told the Business Journal. “The bank grew a lot during that period of time.
“He made the decision to retire. We respect that. It’s amicable. We’ll keep him on for a few years as a paid consultant.”
CRB Co-Founder
DeCero, a native of Chicago where he grew up, graduated with honors and a degree in management and finance from Augustana College. His long career in banking has also included time with Western Financial Bank, Comerica Bank and Citicorp.
He has a close connection with the Business Journal as it was where he met his future wife, Judy Chubb, who played a key role in building the publication’s banking advertising section.
The two had two children; Judy died in 2007 of cancer.
DeCero and the other co-founders of California Republic Bancorp—Jon Wilcox and Mark Rebal—had years of experience in commercial banking and car loans, including stints at auto-oriented financial services firm Westcorp Inc. in Irvine. Westcorp was acquired by Wachovia Corp. in 2006 for $3.9 billion.
They started California Republic in 2007, just as the financial crisis was beginning to unfold.
“We saw what was happening in 2005 and 2006,” DeCero said. “We felt there were going to be issues. We wanted to start a clean bank without issues.”
California Republic survived the 2008 financial crisis due to “a rock-solid deposit base” and “making good loans” with customers it knew, he said.
The bank would have become much bigger if other banks weren’t bailed out, DeCero said.
As it was, California Republic grew to the fifth largest OC-based bank with assets topping $2.2 billion and an additional $3.1 billion in auto loans that were originated through dealerships in 14 states.
At the time of its 2016 acquisition by Mechanics Bank, California Republic employed 233 locally and 500 total across five Southern California locations.
The Acquisition
Mechanics Bank, which dates its founding to 1905, was acquired in 2015 by Ford Financial, a private equity firm with $1.8 billion in commitments to community banks. The Dallas-based firm was founded by longtime banking executives Webb and Gerald J. Ford.
It placed Mechanics Bank under an interim CEO while it looked for other banks to acquire.
“We do bank mergers and acquisitions,” Webb said. “We buy more banks than we sell. We put them under one umbrella, and we run them as though we’ll own them forever.”
In 2016, Mechanics Bank paid $330 million to purchase California Republic. A sign of DeCero’s banking ability was Mechanics named him its president and CEO.
“He knew the Southern California market very well,” Webb said. “We were essentially a Northern California bank. CRB was our first foray into Southern California. He brought with him his familiarity with Southern California, particularly Orange County.”
In 2019, Mechanics purchased Rabobank N.A. for $2.1 billion; Rabobank had more than $13 billion in assets and 100 branches. At that time, Mechanics Bank had 44 branches and more than $6 billion in assets.
No Successor Named
When the 58-year-old was asked if he’s too young to retire, DeCero said he’s looking forward to “a new chapter.”
“This is the first time in my life since I was 12 years old when I started a paper route that I haven’t been working,” DeCero said.
“I have other interests.”
DeCero said he wants to focus on his family business run by his daughter Olivia DeCero, who manages an extensive portfolio of coastal residential real estate. He loves coastal properties, saying he had never seen the Pacific Ocean until he arrived in Orange County from his native Chicago.
DeCero’s last day was Feb. 15 and a successor hasn’t been named yet, Webb said.
When asked if Mechanics Bank was for sale, Webb replied, “This is not a robust bank M&A market right now” because of volatility due to recent interest rate increases and expected decreases this coming year.
When asked if he’s interested in any other Orange County banks, Webb said, “We’re always looking.”
Webb said he often analyzes Mechanics Bank against its competitors.
“We’re very proud of the banks that we put together,” Webb said. “I don’t know anybody I’d trade places with.”
Bank Safety
Mechanics Bank prides itself on being safe, as its webpage proclaims it’s “built to withstand business cycles without straining our financial condition and structure.”
Its webpage says its total risk-based capital is 16.17%, far above the 10% that regulators consider a well-capitalized bank.
Its Tier 1 Capital Ratio, another measure of financial strength, is 14.83%, more than twice the 6% recommended by the Federal Deposit Insurance Corp.
Former Chief Executive John DeCero said Mechanics is in the top percentile nationwide on several key banking metrics like return on equity, return on assets and efficiency ratio.
Last year when regional banks tottered after the collapse of Silicon Valley Bank and others, DeCero issued a statement.
“When a bank quadruples in size over three years, it’s hard not to make mistakes,” he said.
“The banks that failed recently were very highly concentrated in the technology, crypto and venture capital industries. Mechanics Bank will never be involved in these types of activities or industries.”
DeCero knows well the pitfalls of rapid growth because he built his bank from scratch to $17.5 billion in assets in less than 17 years.
Mechanics Bank Chairman Carl Webb told the Business Journal that the bank’s failures of the past year were “one-offs” and not indicative of systemic risks to the banking industry.
In the Business Journal’s Feb. 26 annual special report on banks operating in Orange County, DeCero wrote about the fears that loans for office towers are going bad. In the past four years, Mechanics has reduced its exposure by 50% to about 4.3% of the bank’s entire loan portfolio, he wrote.
“We’re fortunate that our balance sheet is made up of very high-quality assets, and we have very little loan exposure in the commercial real estate investor-office sector,” DeCero said. “Both the sector and our overall portfolio are performing quite well, which is also a tribute to our relationship-style of banking.”
