The dramatic reworking of the banking world that started in late 2008 has left the market in Orange County divided among big national banks, midsize regional players and homegrown community banks and thrifts. All tout their own strengths—be it size (large or small), breadth of services, personalized attention or financial stability. All are vying for business from companies, borrowers, investors and depositors here. Many see room for all three sizes of banks: “The more options, the better we all are,” said Hector Retta, Orange County regional president for Wells Fargo & Co. “In the end, there’s enough business for all of us,” said Sean Foley, regional president of U.S. Bank. Still, bankers are quick to point to what they say are their competitive advantages in a new era of banking here. Business Journal reporter Murray Coleman recently posed a question to bankers here about the local market.
How do you see large national banks and smaller community banks and thrifts evolving in Orange County?
Tom Meyer,
chief executive,
Fullerton Community Bank
The largest national banks will be busy over the next few years absorbing the major bank acquisitions they completed in the past 24 months.
A clear opportunity exists for local and regional banks in OC to acquire new customer relationships and gain market share.
I anticipate that local and regional banks—particularly those institutions that enjoy local decision-making—will continue to be more responsive and nimble to small and midsize businesses than the major national banks.
Raymond Dellerba,
chief executive,
Costa Mesa-based Pacific Mercantile Bank
The problem in OC is there are no big money center banks headquartered here. They’re back in the East or Midwest. You really can’t compare community banks to money center banks. The big banks are targeting different industries and places where they see growth.
Community banks are around to serve the county. They’ll reach into all types of businesses, but their markets are relatively narrow. So in order to compete in a slow economy, smaller banks are going to have to diversify into surrounding markets. We had to raise capital nine times through things like selling stock and making private placements in order to move into other Southern California markets.
That’s very hard to do right now.
Sean Foley,
Southern California regional president,
U.S. Bancorp
Community banks, regional banks and large banks all have roles to play in reviving and stimulating the economy. Although U.S. Bank serves all levels of business in OC, our services are complementary to community banks in many ways. In the end, there’s enough business for all of us and certainly a role for banks of all sizes as our economy recovers.
David Blackford,
chief executive,
California Bank & Trust
My sense is that the movement toward community banking in OC and other parts of the state and country is in part a response to the community’s desire for more from their bank.
Community banks are connected and understand the economic conditions in the local marketplace in a way that bigger national and regional institutions cannot. It is important to us to be a part of the fabric of the communities that we serve and to make them better places to live and work.
Scott Connella,
commercial banking executive vice president,
Southern California, Union Bank NA
To me, there’s always going to be an opportunity for community banks in terms of lending to individuals and small businesses. But if a company is growing, it can come to a larger bank and immediately find a set of services matching its present and future needs. Bigger banks also tend to be very volume-based, which creates more organizational efficiencies and more cost competitiveness in making loans. So going forward, a larger bank like Union Bank might be able to offer better rates to small businesses.
This market is big enough to support both types of banks. If you look at history, community banks and bigger national banks have been able to create their own niches throughout southern California. And I don’t see that changing to any huge degree going forward.
Hector Retta,
Orange County regional president,
Wells Fargo & Co.
There is a place in every community for quality financial services companies, large and small. The more options, the better we all are.
Without any doubt, Wells Fargo has grown to become a large national financial services company with the Wachovia merger. In OC, we’re organized like an independent bank. Management, marketing, foundation and communication decisions are made locally.
Even lending decisions to businesses with annual revenue of more than $2 million are made right here.
Being large also offers benefits. As the economy continues to improve, we are committed to continuing with our lending leadership to small- and middle-market businesses while offering quality financial and investment advice. You can also expect Wells Fargo to continue to invest in the communities we serve through volunteerism and financial contributions.
Greg Mech,
Orange County market president, regional managing director for global wealth management,
Bank of America Corp.
While the ongoing economic challenge may drive further consolidation in the industry, we expect community banks in OC to continue to have an important role in serving consumers and businesses.
Larger institutions, such as Bank of Amer-ica, will be better positioned to serve a broader base of customers and provide a more robust suite of product offerings, especially as client needs become more sophisticated.
Together, OC’s strong mix of community banks and larger banks provides a vi-brant and competitive market for financial services.
Glenn Gray,
chief executive,
Tustin-based Sunwest Bank
We are seeing community banks being considered more often by the OC business community because some old fashion principals, such as developing a solid business relationship, are important again.
When money was flowing freely in the 2003 to mid-2007 period, business owners and managers were concerned about the cost of their loans, the lack of personal guarantees and loose reporting requirements. Frankly they did not especially want a bank-er very involved in knowing their business.
Now that the big banks are contracting their balance sheets to meet capital ratio requirements and credit availability has been reduced, borrowers are more willing to meet the requirements typically required by a community bank.
It really comes down to knowing your customer, and given the opportunity, community banks do a better job of knowing their business customers. This paradigm shift is good for the OC business community as well as its community banks because it will reconnect the two and help OC recover from the recession as we recycle local deposits into local credit—the basic principal of community banking.
