Building Banking for Small Businesses: Insights from Rosa Cucicea, Senior VP of Clean Energy Division at River City Bank

Expert advice for managing risks and building relationships in banking for small and mid-sized businesses.

With the weaknesses in banks exposed recently, we thought it was time to check in with Rosa Cucicea, Senior VP for the Clean Energy Division of River City Bank, a regional bank founded here in 1973.  You can view our discussion with Rosa below.  She had a lot of insights in how to respond to the recent upsets and some positive messages for clean tech startups.

River City Bank serves customers in a small to middle range, those with $2 million to $30 million in annual revenue.  They have innovated a number of ways to serve this segment of the market and Rosa gave a lot of good tips.

First, she gave the clearest explanation of the problem at SVB we have heard.  Obviously, banks make money from loaning depositors’ money to others and paying depositors interest for the use of their money.  The key is to lend money at rates higher than what depositors are paid.  Pretty simple.  The key is not to fail to repay the depositors what they are owed.  

Most bank failures have occurred when loans go into default and there is not enough money to go around.  As a result, banks like to put a lot of money into government securities that have almost no default risk.  Those securities however can decline in market value when interest rates increase.   To manage this risk, a bank tries not to get saddled with much long-term debt in this bucket, so the possible drop in value is contained.  

River City holds a portfolio of such securities that have an average term of about 18 months.  If all else fails, the government pays off the debt at the end of the term.  If the bank has adequate reserves, it can avoid selling the securities at a loss if interest rates rise.  The SVB situation was a different.  Its average duration of their government securities portfolio was about 7 years.  To make that work, SVB needed a big reserve—but it didn’t have enough.  In trying to sell equity shares to build a reserve, they spooked sharp-eyed depositors that something was wrong, and—POOF—that created the run on the bank.  

Tip #1.  Be aware of the average duration and size of the portfolio of government securities portfolio your bank holds.  That comes from asking questions and reading annual and quarterly reports.

Tip #2.  Spread your deposits in a number of accounts each under the FDIC limit if possible.  River City has a product that will do that for you, for example.  Diversify.  River City for example has had a net increase in deposits since the SVB problem was exposed.

Tip #3.  If you need a loan to smooth out the uneven cash flow in your business, look for federal and state loan guarantee programs to make lending you money a more attractive proposition to a bank.  (The Infrastructure Act and the Inflation Reduction Act makes more of this available than before.)  California has a Climate Tech guarantee program you should check out.

Tip #4.  Start developing a number of banking relationships in advance of your needs.  Get to know what terms are out there, who is in charge of the lending decisions, and share with them what you need.  Do this even if you are pretty sure you are not bankable right now.  Paint a picture of your future and find out who could possibly help.   Networking is almost always a good idea.

She had a lot more to say, so don’t miss the opportunity to tune into the whole session to get the full message. You can follow up  with her directly at Rosa.Cucicea@rivercitybank.com.  She is specifically focused on clean tech companies and wants to meet more of them.

“Ideal Zev” Trains Sacramento Residents for Electric Vehicle Jobs; First Class Graduates Soon. Women and Recent Immigrants Among Participants. No Education Prerequisites; Virtual Training Available.

A group of 20 Sacramento area residents will soon be the first graduates of a unique state-funded program preparing them for jobs working with electric vehicles.

The program dubbed “Ideal Zev” aims to train 100 Sacramento residents to work in the fast-growing clean vehicle industry. The first graduating class is populated with recent immigrants from Afghanistan and Russia. The second class group – which is also underway – targeted women.

Community Resource Project is the leading gaggle non-profits implementing the California Energy Commission-funded program. Clean Starts is spearheading participant recruitment.

On a recent weekday, one of the program trainees Mohammed attended a meeting of the Sacramento Electric Vehicles Club at the California Automusem. There the former state department contractor gave a detailed presentation on electric vehicles. After the meeting, he exchanged information with a local businessman installing charging stations, a business Mohammed would like to start someday.

The ladies’ class is still learning the terms for the critical components. On a recent morning, a dozen women started the session identifying EV terms on a crossword puzzle, before downing bulky grey virtual reality headsets to practice changing an EV battery (and other tasks) in a virtual environment.

Observing the class is somewhat comical seeing the students move about, squatting, reaching, and manipulating virtual vehicle parts. Some are wearing baggy sweatshirts, others traditional Arab headcoverings.

The review session ended with a spirited game of EV Jeopardy with two of the three teams in a neck-and-neck battle for first place. The prize: pride.

The upcoming classes start in April, May, and June. Each has a slightly different target group. Class 3 seeking people with some background in construction or electrical starts on April 4. Class 4 seeks people with an automotive background and starts May 12. Class 5 is for youth between the ages of 18 and 25 and starts June 19.

There are no education prerequisites and those that don’t fit the class grouping description are still encouraged to apply.

Trainees receive 144 hours of training, learning about electric vehicle manufacturing, repair, and charging equipment installation.

The rapid adoption of electric vehicles is part of California’s strategy to curb emissions in response to climate change. In 2035, car dealerships will not be able to sell new internal combustion engine vehicles in California.

The rapid adoption of electric vehicles will only sharpen the shortage of technicians who can work on electric vehicles and charging infrastructure, industry officials say. The number of needed technicians is expected to grow by 23% by 2024, with median pay above $60,000 annually.

People seeking more information about the program or applying can do so here.

Revolutionizing Energy Efficiency in Commercial Buildings with Artificial Intelligence

Artificial intelligence is revolutionizing the way energy is managed in commercial buildings.

Here’s a shocker:  About 30% of the energy used in commercial buildings is simply wasted.  While billions of dollars have been spent by building owners to install energy management systems to cut waste, these systems are not well-utilized because they are not “tuned” to get the best results.  So, commercial buildings represent a huge potential source of carbon emissions reductions and cost savings that is largely untapped.  Recognizing this potential, BrainBoxAI is applying artificial intelligence to existing buildings to improve their energy and emissions performance dramatically.

In our March 7 Perspectives webcast, Blake Standen, CEM, CMVP Standen (Global Senior Manager of Sales), and Bob Sobczak (Senior Director of Sales for California, based in Cameron Park) made a great presentation on what BrainBox AI can do.  Here is the bottom line:

• 40% reduction in carbon footprint
• 25% reduction in HVAC costs
• 60% improvement in occupant comfort (no hot and cold spots, adequate air changes, etc.)
• 50% improvement in equipment life

BrainBox does not need to install new equipment.  It just adds a layer of control to the equipment already there. At least for now.

Only offering a commercial product since 2019, BrainBox has grown to 150 employees and serves a global market with approaching 200 million square feet worldwide.  They are based in Montreal where they found a pool of AI programmer talent but now have targeted California for a serious push after focusing in the US mostly on the East Coast.  BrainBox is getting to market in three ways:  Direct sales to building owners, through system installers and integrators that adopt the BrainBox product, and with large OEMs that provide the building energy systems.

As the product stands, it allows buildings to participate in utility VPP programs adding to grid resources, as well as exploiting rate signals to achieve even more savings for the building owner. A cellular network and a VPN provide the communication architecture.  Future additions could add predictive maintenance, for which some temperature and vibration sensors may need to be added, along with an expansion into other types of buildings.  It wasn’t discussed, but systems like this could be easily adapted to manage EV chargers in building parking lots as part of the overall VPP scheme.

BrainBox has raised $45+ million to date to propel its launch into the commercial market and is now planning to raise more to keep that momentum going. Their largest investor is ABB and they have an impressive slate of other investors and partners.  They haven’t started managing buildings in our region yet, with Sobczak being added to the team only last November.  This is probably pretty fertile territory for them.

California leads the Nation in EV adoption. Over 40% of all EVs sold are sold in California. Much of this results from ambitious targets and zero emissions goals. But where is the charging to support them? A critical bottleneck in EV adoption is the availability of charging infrastructure. We have seen significant installs of DC fast chargers but not Level 2 chargers, which are necessary for day-to-day charging needs. It appears California is falling short of its goals for Level 2 charging infrastructure, leaving EV drivers struggling to find convenient charging options.

The California Energy Commission (CEC) has set an ambitious goal of installing 250,000 Level 2 EVSE (Electric Vehicle Supply Equipment) chargers by 2025. This goal was established in response to Governor Gavin Newsom’s Executive Order N-79-20, which mandates that all new passenger cars and trucks sold in California be zero-emission by 2035. The CEC estimated California would need at least 1.5 million charging ports to meet the demand for electric vehicles. The CEC has approved $2.9 Billion for ZEV Infrastructure.

However, as of 2022, the number of Level 2 EVSE chargers in California is significantly lower than the CEC’s target. According to the CEC’s dashboard, there were only 71,599 Level 2 EVSE. This is less than one-third of the CEC’s target for 2025, and a significant shortfall from the 1.5 million charging ports required to support the expected growth in EVs.

This lack of charging infrastructure has a profound impact on EV adoption. With a limited number of Level 2 chargers, drivers often face long wait times and difficulty finding available chargers. This creates a significant barrier, as range anxiety and charging inconvenience are among the biggest concerns for prospective EV buyers. It also affects the state’s efforts to reduce carbon emissions.

To address this issue, the CEC is taking steps to accelerate the deployment of Level 2 charging infrastructure. In July 2021, the CEC approved a $384 million plan to fund the installation of 38,000 Level 2 charging ports across California. The Federal Government is providing support too. The Infrastructure Investment and Jobs Act (IIJA) has $7.5 Billion for charging infrastructure. These plans aim to expand the existing charging network and make EV charging more accessible to Californians.

Much of the State funding has been allocated. The CEC reports over 100,000 charging stations have been funded but are not in the total counts. Counting the funded charges, California is on the path to reaching its ambitious goals. However, based on the CEC’s own dashboard, California falls significantly short. Hopefully, with the CEC’s recent funding plan and private investment, California will be able to rapidly expand its charging infrastructure and support the growing number of electric vehicles on its roads.