Wells Fargo

Tostadas, Tortilla Chips, and Bank Loans:
Wells Fargo and Salinas y Salinas
Power Point to accompany Opportunities and Challenges of Workplace Diversity by Kathryn A. Cañas and Harris Sondak
Prepared by Levi Baker, Kathryn A. Cañas, and Harris Sondak
Case Overview
The Situation
Background on Salinas & Salinas
 Challenges in Company’s Early Years
 S&S Management Value System
 Albert Gomez, Commercial Loan Officer
 John Murillo, VP of Community Banking
 Background on Wells Fargo
 Latino Influence on U.S. Economy and Culture
 A Complicated Financial History
 The Salinas Family and Wells Fargo
 A Major Capital Expansion for S&S
 Gomez’s Assumptions and Analysis
 Discussion Questions
The Situation
Albert Gomez, a Wells
Fargo loan officer,
developed a relationship
with the Salinas family for
over 3 years.
Salinas y Salinas
requested a $4.25 MM
loan for a new state-ofthe-art tortilla factory.
Wells Fargo almost lost
the account due to
mistrust of the former
The Situation
Management’s perception of high risk because of lack
of familiarity with the Latino business culture.
Management’s perception of bias due to the close
relationship between Gomez and the Salinas family.
Background on Salinas y Salinas
Financial data at the time of the loan request:
Annual revenues: $5.1 MM
Compensation rate on revenue: 25%
Net income over past 3 years: 10%
Plant running at full capacity 24 hours a
day, 6 days a week
Market growing at a rate of 3%
Challenges in the Early Years
Family finances mixed with business
Major competitors:
– Prices fluctuated within the commodities market.
– S&S had no hedging strategy.
– S&S lacked direct control of the supply-chain.
S&S Management Value System
Spiritual values
Positive “can do” mindset
50-cent fine
Trucker gospel
Albert Gomez
Business Banking Commercial Loan Officer
“A Rising Star in Business Banking”
Ranked top 10 for commercial loan officers.
Put himself through school at USC.
Grew up in East L.A.; speaks Spanish and English
John Murillo
Vice President and District Manager, Community Banking
Murillo took Gomez to meet with the Salinas
family. The initial meeting lasted several hours,
and Spanish was spoken throughout the
Murillo estimated S&S assets as follows:
 Apartments
 Trucks
Wells Fargo Company (NYSE: WFC)
Background Information
$370 billion in assets
134,000 employees
5,800 branches in North America
Bank motto: “Out-local the nationals and out-national the
Top executives committed to serving the Latino market
Murillo catered to the Latino market by offering:
Signage in Spanish
Background music from Spanish radio stations
Decorations and artwork consistent with Latino cultural background
A welcome atmosphere for children in the store
Latino Influence on U.S. Economy
and Culture
Latino population increased
53% in the 1980s and 58% in
the 1990s.
 In 1991, salsa trumped ketchup
as top selling condiment in the
 U.S. Hispanic spending
projected to grow at 9% until
2020, outpacing 6% average.
 Consumer market projected to
climb from 7% to 13% in 2000.
A Complicated Financial History
Non-professional atmosphere in the S&S
Salinas family mistrust toward government
institutions, including large financial banks.
Poor credit due to default on cosigned
“family” loans.
Tax minimization strategies that lowered
income reporting, thereby reducing credit
Multiple income-earners, as opposed to
traditional lending protocol (two incomeearner standard).
The Salinas Family and Wells Fargo
Although S&S showed no profits, Gomez secures 100k
line of credit.
 Salinas family agrees to hire professional accountants
and avoid tax minimization.
 S&S hires corporate attorneys to limit personal liability.
 S&S qualifies for a line of credit to expand existing
 Raphael Salinas scouts out a nearby property and
applies for a large-scale loan.
A Major Capital Expansion for S&S
Raphael Salinas believed that he had tapped only
5% of the total Latino market in L.A.
 The new facility would expand from 5 to 17
production lines, tripling revenues.
 Increased production could meet the demand of
large mainstream distributors.
 The property was located nearby, allowing
employee retention.
Gomez’s Assumptions
9.18% APR with a 2% spread
20-year new building loan
Straight-line amortization over 20 years
Quarterly compounded interest
No loans outside Wells Fargo
Depreciation of 590K per year
Allowed Salinas family residual personal
income of about 75 % that could be used to
service loan
Discussion Questions
Why was the personal relationship between Murillo
and Gomez and the Salinas so important?
Why have Murillo and Gomez been so successful in
working with the Hispanic community?
Why was careful attention to the Latino market a
significant aspect of Wells Fargo’s strategy?
What cultural factors did Gomez fear would undermine
the confidence of his managers in the Salinas’
What other examples can you identify of cultural
misunderstandings that might hinder a business
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