The credit crunch might not be over, but it’s loosening its grip in Orange County, where banks and their balance sheets indicate steady increases in lending and an appetite for acquisitions.
The improved picture includes homegrown banks and big, national institutions with significant operations here.
Costa Mesa-based Pacific Mercantile Bank is seeing “reasonable growth” in all lending categories, according to Chief Executive Raymond Dellerba. The bank is the third-largest based here, with just more than $1 billion in assets. It had $759.8 million in total loans in the first quarter, up 3% from the same period a year earlier.
The mortgage-lending division has been strong for Pacific Mercantile, according to Dellerba. The bank made $144.2 million in residential mortgage loans in the first quarter, nearly tripling its total a year ago.
Another bright spot comes from the bank’s Entertainment Industries Division, which works with independent film and television productions and has $100 million in commitments, according to Dellerba.
Pacific Mercantile recently got a $26.3-million capital infusion from Irvine-based Carpenter Community BancFund as part of a stock sale in April. It was the second round of investment by Carpenter and its affiliates, and gave the private equity fund a 26% stake in Pacific Mercantile Bancorp Inc., the bank’s holding company.
“With the capital provided by the new investors, we can hire new employees to expand the bank and earn our way out of previous challenges,” Dellerba said.
Pacific Enterprise Bank in Irvine has targeted small businesses with government-sponsored programs, according to President Brian Halle.
The bank made $210.2 million in loans in the first quarter, up 30% from a year prior.
Loans to small businesses accounted for more than half of the loans. That’s up from $79.6 million in lending to small businesses during last year’s first quarter.
Pacific Enterprise is among the top Small Business Administration lenders in OC, with roughly $7.2 million in total loans, according to recent data compiled by the federal agency’s Santa Ana office.
Caution
The gains are tempered with ongoing caution over the slow-paced recovery here and clouds of uncertainty hanging over the financial system in Europe, where a slip back into recession could ripple around the globe.
Those factors keep Chris Walsh, chief executive of Tustin-based Sunwest Bank, from putting the credit crunch in the past.
“I don’t think it’s quite over yet,” Walsh said. “But I think we’re getting close to the end. Banks are eagerly poised to lend money to a qualified borrower, but we’re still looking at the balance sheet, cash flows, and underwriting properly.”
Some of the recent stirrings have come from companies that have maintained credit capacity, Walsh said.
“People who had lines of credit the last two, three years—now they’re using it for opportunistic reasons, they have something to buy. They’re optimistic, but not overly optimistic.”
Banks are being choosey, too—something Michael Smithers saw firsthand when he sought a $525,000 loan to expand the Goddard School, a private pre-school in Ladera Ranch. He said he was turned down by several banks, including one he had done business with for years, before San Francisco-based Union Bank said yes.
Smithers said he has “excellent” credit, and the rejections “blew him away.”
Union Bank made the loan to Smithers after several visits to the school. It is one of a number of banks based outside the area that also see healthier prospects for lending in Orange County.
Union Bank has seen its overall portfolio improve, with its Orange County office mirroring its companywide growth.
“Our portfolio actually was flat or down until last fall,” said Irvine-based Senior Vice President Heather Endresen. “From last fall to now, we’re experiencing good portfolio growth. And as we are improving [overall], OC is improving faster.”
Endresen oversees SBA programs and other government lending for the bank, which is owned by Tokyo, Japan-based Mitsubishi UFJ Financial Group Inc. Union Bank had $52.35 billion in loans overall at the end of March, up 11% from a year prior.
Los Angeles-based City National Bank is in the process of hiring 30 bankers throughout California to focus on small businesses.
“At least five of those bankers will be dedicated to helping business owners in Orange County,” said Kevin Dunigan, executive vice president and regional executive for OC.
City National recently added Allen Ilano as a senior vice president in its Irvine office to lead the bank’s small-business team. He arrived from Citibank, the banking arm of New York-based financial services firm Citigroup Inc., where he spent more than 10 years, including a stint as business banking director for Orange County.
City National’s lending increased to more than $14.15 billion in the first quarter, up 9% from the year-earlier period. The totals aren’t broken down by regions.
Irvine-based Opus Bank, which last year became the largest bank based in OC, thanks largely to two acquisitions, has more on its shopping list.
“We’re continuing with more acquisitions,” Chief Executive Stephen Gordon said. “Two are California-based, and one is a non-bank, bank-like entity.”
Opus has grown its number of branches to 45 and total assets to $2.45 billion since a recapitalization in late 2010.
Opus had $1.56 billion in loans in its portfolio as of the first quarter, an eight-fold increase from a year earlier. Last year’s acquisitions accounted for about $1.51 billion of the total.
About 90% of Opus’ loans are secured by real estate, according to the latest quarterly report filed to the Federal Deposit Insurance Corp.
“Healthy bank acquisitions are beginning again,” said Endresen at Union Bank, which also announced in March plans to acquire Santa Barbara-based Pacific Capital Bancorp for $1.5 billion. Pacific Capital has $5.9 billion in assets and operates 47 Santa Barbara Bank & Trust branches throughout Central California.
