The entrepreneurs were now in five markets in three states. Tight operating controls and quality assets produced profits from day one for San Francisco Bancorp. And the source of the thrift and loan holding company’s success would increasingly be summed up in two words: jumbo mortgages.1
While still spending much of his time working out of the Sunnyvale office of Westcoast Thrift & Loan in 1981, Herbert noticed an intriguing trend. One Silicon Valley entrepreneur or corporate officer after another was coming in and looking for a home mortgage, despite the fact that rates hovered around 20 percent during this inflation-plagued period. But instead of seeking the typical mortgage size at the time, which usually topped out at under $90,000, they wanted to borrow around $250,000. Though larger than the typical size, often that was only 50 percent of the appraised value of their homes.
Herbert and Green rejected the first few requests out of hand. Then Herbert had a change of heart. “What are we missing here?” he asked Green. “Why don’t we do a couple of these and see how they go? Can’t bankrupt the whole bank.” At the same time, Westcoast encouraged this new crop of clients to buy certificates of deposit through the thrift and loan, which bolstered its deposit base.2