Banks and other lenders and financiers are set to face some regulatory changes in the coming year as the finance sector’s slow recovery continues.
The industry, which employs about 105,000 people in the county, is projected to grow jobs by about 1% in 2011, according to a forecast by Chapman University.
That’s good news for a sector that lost thousands of jobs in the mortgage meltdown and financial crisis that started in 2007.
Return to Profits
More local banks are projected to return to profitability next year, but overall expectations are tempered.
“Cautiously optimistic” is heard a lot in finance circles these days to describe the landscape next year.
Most community banks have significantly cut down problem loans. But some still have balance sheets riddled with bad commercial real estate lending.
Others face more stringent capital requirements from state and federal regulators. A few are under regulatory orders to improve operations.
That could force some to combine or be bought by more healthy banks. More consolidation is expected among banks, especially with a few major holding companies in the area sitting on some $1.5 billion to purchase troubled banks.
“You’re going to clearly see greater consolidation of the banks in Orange County and Southern California,” said Steven Gardner, chief executive of Pacific Premier Bancorp Inc., the parent of Costa Mesa’s Pacific Premier Bank.
Management and investors at smaller, healthier banks will become more realistic about valuations, Gardner said, as their counterparts at struggling banks become more eager to find partners to take on unwanted liabilities.
“That’s going to drive consolidation as well as ongoing bank failures,” Gardner said.
Insurance
Smaller banks could get some help from the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted this year.
Details of the law still are being defined. Most banks in the region are set to see lower insurance premiums as a result.
Insurance premiums at Pacific Premier, like many of its competitors, have gone up significantly as the Federal Deposit Insurance Corp. fund has dwindled because of bank failures.
In the third quarter, Pacific Premier paid $383,000 in FDIC premiums, up nearly 40% from a year earlier. In 2007 and 2008, the bank didn’t break out insurance premiums because they were so nominal.
Lending standards will continue to be tight next year, according to banking executives. But new stipulations of the Small Business Jobs Act could spur more Small Business Administration loans.
The law, signed in September, pushed the maximum loan size from $2 million to $5 million. It also opened the SBA 504 program to include refinancing and guaranteed low, fixed rates.
Fees were waved through the end of 2010 and could be into 2011, according to bankers.
Venture capitalists and private equity firms, which were relatively quiet in 2010, are expected to fund more deals next year, as some new local funds are set to be introduced.
PERSON TO WATCH
STEPHEN GORDON
Stephen Gordon made a splash in his return to Orange County banking in September after leading a $460 million recapitalization of Opus Bank, which has its executive office in Irvine.
Now the former New York investment banker is hunting for acquisitions, whether they’re banks that are healthy, struggling or seized by regulators.
Gordon said he hopes to grow Opus, which has its on-the-books headquarters in Redondo Beach, to 75 branches across California, up from five now, all in the South Bay area of Los Angeles County.
His acquisition target is wide: banks with $250 million in assets to more than $2.5 billion.
Gordon said he’s in talks with interested banks, including some based in the county.
He said he expects to announce an acquisition soon.
—Chris Casacchia
COMPANY TO WATCH
CHASE
JPMorgan Chase & Co. is relying on a familiar blueprint to nab business here from its big bank rivals.
Since taking over Seattle-based Washington Mutual Inc. in late 2008 in a $1.9 billion deal, Chase has added more than 200 local employees as it tries to unseat Bank of America Corp. and Wells Fargo & Co. for the county’s banking crown.
Taking over WaMu—formerly the largest savings and loan operating in the county—gave Chase a sizable slice of the local market. But it has a way to go to catch up to the two biggies.
Chase has about $6.3 billion in local deposits, or 8.5% of the market, according to second-quarter figures from the Federal Deposit Insurance Corp.
Charlotte, N.C.-based BofA leads with $16.2 billion, or 21.8%. San Francisco-based Wells is at $15.7 billion, or 21.2%.
Chase brought in Paul Kaufman in 2009 from Chicago to lead local business banking, which now employs 42 people. He plans to hire another 20 staffers by the first quarter.
“Chase is here to dominate the market,” Kaufman said in an earlier interview.
—Chris Casacchia
