The top 25 homegrown banks in the county posted a healthy gain in assets during the past year, but increased competition and a credit crunch are set to make things tougher going forward.
New banks entering the fray are adding to the competition, and are also bracing to survive in a tough environment.
Orange County’s top banks posted an 11% gain in assets to $5.7 billion for the 12 months ended June 30.
Last year’s list counted 21 banks. They saw a 21% increase in asset growth from the prior year.
The list ranks banks based here by assets, which include cash, loans, real estate and securities.
Information on assets comes from the Federal Deposit Insurance Corp.
Local employment at the banks was up 15%. The total job count was 1,038 jobs at 47 branches.
As the lending business cools for the majority of banks, the fight to gain in deposits remains a fierce battle.
“Deposits are relationships,” said JP Gough, chairman, chief executive and president of Orange County Business Bank.
Gough sees homegrown banks as only 2% of the market, with the larger national-based banks dominating.
No. 1 Pacific Mercantile Bank in Costa Mesa nabbed the top spot with ease as the county’s only homegrown bank with more than $1 billion in assets.
Pacific Mercantile grew its assets 12%, and posted a 21% increase in local workers to 127.
The last local bank in the county to grow to more than $1 billion in assets was Eldorado Bank, which was bought by California Bank & Trust, a unit of Utah’s Zions Bancorp.
Some see Pacific Mercantile as buyout material, especially with its valuation down due to credit fears in the market.
Its market value has declined some $60 million during the past year to about $140 million after the bank saw a drop-off in its stock.
Newcomer
Newcomer Pacific Premier Bank in Costa Mesa debuted on the list at No. 2 with more than $700 million in assets for the 12 months through June.
The company increased its assets 1% versus a year earlier.
Originally founded in 1983, the bank changed its business plan in 2000 when Steven Gardner took over as chief executive.
Last spring it converted its charter from a federal savings and loan bank to a California commercial bank.
The switch allows it to serve businesses, professionals and real estate entrepreneurs, Gardner said.
Gardner said he expects the bank to increase its lending business in 2008.
Having avoided the construction loans that have given a lot of its competitors problems, Gardner says his bank is able to focus on the future rather than do damage control.
“A lot of banks are struggling. We’re in a position to step in,” he said.
Despite its optimism, the bank will lay low in adding new jobs for 2008, he added.
No. 3 American Security Bank dropped a spot, despite a 10% gain in assets to $470 million.
Even though there’s been a general downturn in lending, commercial real estate has been a growth area for the Santa Ana-based bank.
The bank’s president and chief executive, David Blankenhorn, believes 2008 and 2009 will be difficult.
Blankenhorn said his bank is focusing on gaining ground in deposits as lending cools.
No. 4 Premier Commercial Bank in Anaheim saw a 19% boost in assets to $340 million.
Rather than compete with high certificate of deposit rate offerings, its strategy for gaining deposits is to push its sales team to form key relationships, according to bank chairman and Chief Executive Kenneth Cosgrove.
“It’s in-the-trenches kind of work,” Cosgrove said.
Best Growth
No. 5 Independence Bank in Newport Beach moved up a spot after posting its best growth yet.
The bank’s assets grew 43% to $318 million. It said new loans for apartment buildings were behind the growth.
Independence now is seeing some slowing. Toward the end of the third quarter it began to notice a decrease in loan demand, and is less optimistic about the fourth quarter, said president and Chief Executive Chuck Thomas.
“Typically our fourth quarter is the strongest, but we don’t see it that way this year,” he said.
As part of its strategy for gathering deposits, Thomas said the bank chose not to compete with CDs, but rather lean on its savings and money market accounts.
Independence has put its branch expansion on hold, but says it plans to boost its workforce by 15% next year. It grew local employment 21% to 34 people.
No. 6 Sunwest Bank in Tustin fell three spots this year.
The bank posted flat growth in assets to $295 million as it scaled down its lending business after becoming cautious.
“We made a conscious decision not to lend in construction in early 2006,” said Glenn Gray, president and chief executive of Sunwest Bank.
Gray believes his bank is in a good position to lend while other banks deal with problematic portfolios.
Sunwest focuses on niche markets such as home owner associations to provide steady business.
Another mover: No. 11 Los Angeles National Bank in Buena Park, which fell from No. 8 a year earlier. Its assets declined 3% to $196 million.
No. 12 Orange County Business Bank in Newport Beach saw an 11% increase in assets to $196 million.
Another newcomer was No. 25 Pacific Enterprise Bank in Irvine, which started in April and counts $30 million in assets.
Pacific Enterprise’s chief executive, Richard Ganulin, formerly worked at Liberty National Bank, which was eventually sold to Eldorado Bank.
As a new bank, Ganulin said he feels fortunate to be able to start from scratch without any bad loans in his portfolio.
“We’d love to make construction loans, but none of them fit our plan,” he said.
