California First National Bank wants to become more of a local bank.
Sure, the bank, known as CalFirst, is based in Irvine. But unlike most banks based here, CalFirst does most of its business nationally, raising money for parent company California First National Bancorp’s leasing business.
CalFirst generates deposits from people across the country by advertising rates for certificates of deposits and other accounts.
The money then is used to finance leases of computers, software, telecommunications systems, manufacturing gear and other items by businesses, universities and others.
As banks here struggle with bad loans and less demand for lending, CalFirst is looking to go after local banking, according to Chief Executive Peter Aharonyan.
“We see a need right now locally,” he said. “We have a lot of capital and want to put it to work.”
CalFirst had assets of $350 million and deposits of $228 million as of Sept. 30.
The bank’s publicly traded parent company had a recent market value of about $120 million. California First National Bancorp founder, Chairman and Chief Executive Patrick Paddon owns two-thirds of the stock.
History
The company grew out of Paddon’s Santa Ana-based equipment financier Amplicon Inc., which reorganized as California First National Bancorp in 2001.
With hardly any bad loans on CalFirst’s books, the bank contends it’s an ideal place to expand.
For the six months through June, CalFirst was the most profitable bank or savings and loan based in OC with a return on assets of 1.74% and net income of $2.7 million, up from $937,000 a year earlier, according to the Federal Deposit Insurance Corp.
The return largely was due to a $100 million investment CalFirst made last year in bonds and mortgage-backed securities, according to Aharonyan.
Having no branches keeps costs low for CalFirst. It has about 35 employees here, including 25 in sales positions.
Up until now CalFirst has avoided doing business locally because of “too much competition” and risk with commercial real estate loans, Aharonyan said.
Now CalFirst plans to go after local business owners looking to buy buildings for their companies.
It plans to target businesses in all types of industries with yearly sales ranging from $5 million into the hundreds of millions.
Marketing
In coming months, CalFirst wants to get the word out about itself locally through ads and networking, according to Aharonyan.
For the time being, CalFirst plans to stick to its marketing strategy of marketing, cold calling and mailings, rather than building relationships the way most local banks do.
In time, CalFirst may take a page from local banks here by offering business checking and credit cards.
About three years ago, CalFirst started making equipment loans—separate from California First National Bancorp’s leasing business—mostly to universities, nonprofits and municipalities. The loans range from $1 million and $10 million.
The bank decided to go after the universities because it felt they were underserved by lenders and have stable credit histories.
CalFirst holds its loans rather than selling them as bonds to investors. The strategy has paid off with a downturn in demand for bonds based on loans.
But like other bankers, Aharonyan said it’s been hard to find good companies to lend to during the tough economy.
Before joining CalFirst, Aharonyan was an executive vice president with AIG American General Life Cos., a unit of New York-based American International Group Inc.
