Orange County’s economy has largely strengthened over the past few years of continued post-recession recovery. But is it now strong?
The Business Journal’s Jane Yu asked local bank executives how they see the economic environment and what the current conditions mean for their banks’ operations. They seemed to agree that it’s in a much more solid position than at any time since the recession started and expressed optimism that it will continue to improve, resulting in increased lending for business growth, home buying and consumer spending. But while the bankers said conditions are much brighter, they’re still not where they were before the downturn.
Here’s an edited version of their responses:
Vernon Aguirre
California Region Executive, Popular Community Bank, Rosemont, Ill.
It is a stronger economy, no doubt, than it was last year. We’re seeing indicators across the spectrum that the U.S. economy is improving steadily, if slowly. Consumers and business owners are more confident that we are in a sustainable recovery.
Our business customers are increasing lines of credit to prepare for expansion, but they are still cautious about taking on new loans. Businesses that survived the recession learned how to do more with less and established processes to run more efficiently.
They want to hold on to the gains they’ve made. They don’t want to pursue a growth strategy until the recovery strengthens. They want to be prepared for growth, but they don’t want to be premature in taking on loans.
We are staying close to our customers in Orange County, assisting with multiple banking needs. We’ve experienced healthy growth in our cash-management services in the past year, and we’re adding a cash management officer in Orange County. We have serviced several sizable refinancing deals and have completed several new financings for apartment complexes.
Our Southern California Region has a dedicated commercial real estate team of 15 professional lenders. Through 2013, we found that demand and rents are up, vacancies are down, and construction opportunities are increasing. Through 2014, we see construction and term residential lending as a particular growth area for us.
In the past year, we’ve seen our customers accelerate their adoption of mobile banking services. Customers in a younger demographic, under 40, appreciate mobile check deposits and the ability to save time and extend business banking hours through tablets and smartphones. As a community bank with close ties to our customers and the local economy, we find that our advanced mobile banking platform gives us a distinct advantage.
Scott Connella
Executive Vice President, Union Bank, San Francisco
The best way for us to gauge whether the national and local economies are strong is to listen to our clients. In my conversations with them, they have an increased confidence in the economy overall and in Orange County specifically, where they’re benefiting from an improvement in real estate construction and the trickle-down effect it has on housing-related industries.
Key to the county’s success is a good mix of fast-growing industries, such as healthcare, life sciences, insurance, electronics, finance and restaurant chains, along with tourism and automotive. Meanwhile, Orange County’s unemployment rate continues to fall compared to those of its neighbors. The rate here was 5.6% in November; 6.9% in November 2012; 8.2% in November 2011; and 9.3% in November 2010, while Los Angeles County’s figure last November was 9.4%.
Another example of optimism I’m seeing is renewed interest from several of our clients in capital projects investments they’ve been deferring for several years. These include new IT systems, additional plant equipment and building expansion—all signs of confidence in Orange County’s business outlook.
We also continue to help companies develop a global supply network by utilizing the tremendous resources of our parent company, the Bank of Tokyo-Mitsubishi, with its large overseas network in more than 40 countries and special expertise throughout Asia. One of our largest clients is using Union Bank’s foreign exchange capabilities to forward hedge the Chinese renminbi as a successful strategy, thanks to new international trade opportunities with China. The People’s Bank of China recently eased its currency trading restrictions, which is allowing businesses to send, receive or hedge renminbi through an offshore market. Orange County companies are clearly looking beyond the U.S. borders to expand, another sign of business optimism.
Overall, we are seeing more clients with consistent, quarter-over-quarter revenue growth, which leads to increased financing needs for capital investments, inventory purchasing and eventually hiring—all positive signs for the region and for our bank.
Joe Hensley
Orange County Market President, U.S. Bank, Minneapolis
I would characterize the economy as advancing. Orange County made solid gains in housing appreciation in 2013, erasing some of the losses from previous years and opening up the market for expansion. I would expect growth to continue in 2014 but at a slower pace.
The Orange County labor market showed slow but steady growth through 2013 and should continue into 2014. I think business and not government or fiscal policy will drive much of the growth in the next few years, which is good for Orange County in the long run because of its strong business community.
U.S. Bank remained well capitalized and strong through the downturn, which means we are well positioned as the economy recovers. We have continued to invest in technology and new product development that will create new opportunities for our business and consumer customers in 2014.
Small-business lending is very robust. Our goal is to continue to expand the Small Business Administration lending segment by offering more small-dollar loans to help businesses expand inventory, buy equipment or otherwise augment their business.
At the consumer level, as housing continues to recover, we expect to continue to finance new home purchases for consumers, along with financing for other big purchases, whether it’s auto, recreational or personal financing.
Our investments in technology—particularly in mobile—have opened new channels to banking services. For example, U.S. Bank customers can use photo banking services to deposit checks, set up online bill pay and transfer balances. Our growing mobile channel complements branch, phone and Internet banking and allows us to serve multiple generations.
Dominic Ng
Chief Executive, Chairman, East West Bank, Pasadena
The Orange County economy has been relatively strong compared with those of the state of California and the country. I think that has a lot to do with the general environment of Orange County. There are a lot of different kinds of businesses across a variety of industries, such as technology, life sciences and entrepreneurial businesses. We see a lot of what we call small and midsize businesses growing and flourishing here.
The recovery here can be seen in the county’s unemployment rate and the housing market. These days, it’s not unusual to hear that there are multiple offers on a home in some of the more desirable areas, such as Irvine and Newport Beach, and buyers are even bidding above the initial listing price. In addition, the county’s housing recovery pushes the average wages a bit higher. More professionals want to move to OC, and as a result, more human resources and professional talent are available in OC. So that allows more high-paying jobs to be created, and when that happens, consumer power becomes stronger, and that in turn creates more business in the consumer market.
That means a few things for East West Bank. First, we are geared toward serving the growing consumer market. Consumers’ getting more affluent would only help us grow the retail deposits. Orange County is a significant region for us. We have eight branches here, and they are sizable and growing faster than our other branches. We are strategically located in areas that have a lot of Asian consumers. So we have six branches in just Irvine. And then we have locations in Anaheim and Westminster. These are areas with strong Asian representation. That works well for our retail operations.
Secondly, we are very much committed to serving the small, middle-market and privately held businesses. Many of them are in Orange County. Our commercial business is going strong in OC, and on this commercial segment, the majority of our clients are not Asian.
Moreover, East West Bank has prided itself as the financial bridge between the East and the West. We have the ability to offer services in China and the U.S. and also Hong Kong, outside of mainland China. There are a lot of businesses in OC doing trade with and investments to and from China. East West Bank specializes in international trade and U.S.-China trade investment.
Paul O’Mara
Senior Vice President, Wells Fargo Bank, San Francisco
We have a stronger economy, but it would be a stretch to label it a strong economy. For example, in my business, our customers still are not utilizing their credit lines at the levels of pre-recession. Far too many people are still working in jobs that do not make full use of their abilities, and many others are still trying to find work. I am still seeing some hesitancy by our clients to expand from a capital perspective, as well as in terms of hiring full-time employees.
With that said, the economy is improving on nearly every front. More industries are growing today than any other time since the recession ended 4 ½ years ago, and we are optimistic about the economy’s prospects in 2014.
Conditions are brightest in the technology and energy sectors, but we have also seen quite a turnaround in the entertainment sector, with motion picture, television and Web programing growing solidly. Tourism is doing well, and the rebound in housing prices and the stock market has helped drive gains in consumer spending. The coming year should see additional gains in homebuilding and a real turnaround in commercial construction.
The economy’s brighter prospects are great news for Wells Fargo and Orange County and will help support loan growth in a variety of areas. Wells has the No. 1 share of middle-market customers in the U.S. Our strong balance sheet and capital position allow us to lend consistently through all market conditions.
Allen Staff
Orange County Market President, Bank of America, Charlotte, N.C.
Signs are certainly pointing to a strengthening economy both nationally and here in Orange County, as reflected by our strong fourth quarter that had a net income more than double that of the fourth quarter of 2012. Given Bank of America’s large customer base across all sectors and markets, the growth we experience is generated by the economic strength of our customers.
Given this, indicators of economic growth can be seen in several measures, starting with external indicators like drops in unemployment. In November, Orange County had unemployment rates down around 5.5%, beating both the national unemployment rate of 7% and 8.5% in California.
Within Bank of America, we’re seeing an increase in credit spending and a decrease in net charge-offs and delinquencies. Also, average deposits of our customers continue to grow nationally and locally. For example, companywide, we saw an increase in the fourth quarter of nearly $20 billion from the third quarter as customers continue to show stronger liquidity. The bank’s wealth and investment management business had a record year, which was certainly reflected here in Orange County.
According to our Fall Merrill Edge Report, the mass affluent in Orange County are shifting their financial priorities from shorter term debt obligations to longer term investments, which can be an indicator of consumer confidence in the economy. Lending to local small, midsize and large companies was up over the previous year, demonstrating revenue strength and business growth for these companies. Finally, commercial real estate in Orange County continues to gain momentum.
As for us as a company, Bank of America enters this new year with one of the strongest balance sheets in our history. Capital and liquidity are at record levels, credit losses are at historic lows, our cost-savings initiatives are on track and yielding significant savings, and our business lines are seeing good momentum.
Jack Sun
Senior VP, District Administrator, Cathay Bank, Los Angeles
We have experienced a great demand of commercial real estate loans since the last year. Population growth is expected to continue, as desirability factors pull people into the County. As the economy stabilizes, cautious homeowners are beginning to spend more, which should help Orange County’s economy get on the right track.
More and more jobs are expected to be added this year, with estimates ranging from 30,800 (LAEDC Kyser Center for Economic Research) to 35,000 (Chapman University). Demand for jobs in leisure, hospitality, construction, health care, education, professional, scientific, and technical services are the fastest-increasing, while the manufacturing sector is being held back.
The New Year holds promise for Orange County, with its quickly-growing economy speeding ahead of the nation’s average growth. Orange County will continue to expand in this year.
Betty Uribe
Executive Vice President, California Bank & Trust, San Diego
The Orange County business community has a new, thoughtful optimism about the economy. At California Bank & Trust, we are seeing that many businesses now have a stronger orientation toward investment in business growth than they did two or three years ago, and their approach appears to be more innovative.
The overall business community is benefiting from the diversity of our regional economy and growth in healthcare, tourism, real estate and other sectors. As a result, we expect to see increased demand for credit by both small businesses and commercial enterprises.
Businesses are innovating in their usage of technology and ways to expand their market reach. Our business customers are increasingly using online and mobile banking to research banking products, make and receive payments, deposit remotely, and obtain statements. California Bank & Trust continues to make significant investments in online and mobile banking solutions to help clients manage their finances from their device of choice. Our website has an extensive business resource center covering a range of topics, from starting your business to financing, marketing and more. Also, we are launching a completely revamped website early this year, providing customers with an enhanced user experience.
Daniel K. Walker
Chief Executive, Chairman, Farmers & Merchants Bank, Long Beach
There’s never been a time when everyone agrees on the state of the economy. Whether economic indicators point up or down, bulls and bears will argue their positions. At Farmers & Merchants Bank, our primary view of the 2014 economy is one of enthusiasm. Businesses overall are doing better, and the optimism of today’s businessperson is leading to even higher levels of confidence. Many economic issues that thwarted growth and brought down previously thriving companies and individuals are not as difficult as we move into the year.
Because we feel confident, F&M has enhanced its position of strength through several strategic hires, including the newly created position of chief banking officer. We also have opened two branches in superbly located communities: Corona del Mar and Downey. Our new Corona del Mar branch at the well-traveled intersection of Pacific Coast Highway and MacArthur Boulevard is indeed a new crown jewel in our network of 23 branches in Orange and Los Angeles counties.
In Southern California, having a strong and stable banking partner is a key ingredient of an economy on the mend. And F&M is pleased to be a vital banking partner to an increasing number of businesses and individuals. Its most
recent financial report, issued Jan. 16,
shows significant gains, including solid loan growth, which is particularly meaningful, given our conservative lending standards. Our standards are stringent, yet solid deals are getting done.
One current example from F&M’s lending portfolio demonstrates our region’s vitality. F&M is delighted to have the opportunity to finance the next growth phase for our friends at Discovery Science Center, whose groundbreaking was Jan. 29. The community’s enthusiastic support of these visionaries, who continue to inspire our youth to pursue careers in the world of science, is proof that for both businesses and nonprofit organizations, this is a time for growth and momentum.
