Thanks to a robust economy, start-up Pacific Liberty Bank in Huntington Beach was able to squeak out a profit in only its tenth month of operation.
Though monthly earnings of $21,532 in March may not sound too appealing to most investors, start-up banks typically do not see a profit for about two years. And the bank followed March with three more months of profitability; it now has $30 million in assets.
“We had nice growth because of the pent-up demand in our marketplace for a community bank,” said Pacific Liberty president and chief executive Rick Ganulin.
“They were able to get in good quality credit,” said Gary Findley, editor of The Findley Reports, a local banking newsletter. Findley said the bank reached profitability because it achieved a low cost of funds and it was able to issue some quality loans.
Ganulin said it was also due to the efficiency of his employees.
“We keep the costs under control,” Ganulin said.
Pacific Liberty also has grown without the help of any advertising.
“We’ve done it with networking. We’re at every function in Huntington Beach,” Ganulin said.
However, the bank’s community involvement has earned it some unexpected notoriety. Huntington Beach Mayor Dave Garofalo is an investor and board member, and developer George Argyros, who is building a hotly debated Wal-Mart in the city, is an investor as well. This has sparked charges by Wal-Mart opponents of a conflict of interest on the part of the mayor, who voted to approve the Wal-Mart project.
But Ganulin credits Argyros and Garofalo with raising the profile of the bank.
“It has raised awareness of who we are,” Ganulin said.
The bank draws a lot of its business from its 360 shareholders, Ganulin added, 60% of whom are now customers of Pacific Liberty.
“With continued mergers and acquisitions, small businesses are actively seeking an alternative (to big banks),” Ganulin said. Continued consolidation of the banking industry has picked off several smaller banks, leaving communities fewer banking options.
Pacific Liberty is one of several independent banks that have sprung up in Orange County in the past 12 months. Orange Community Bank was started by Larry Sallinger, former president of Orange National Bank, after Orange was acquired by Citizen’s Business Bank. Pacific Mercantile Bancorp opened its doors last year and is headed by Ray Dellerba, former president of Eldorado Bank, which was acquired by Commerce Security Bancorp Inc. in 1998. Privest Bank was started by former Eldorado chairman, J.B. “Ben” Crowell. And South County Bank was started in Rancho Santa Margarita by Tom E. Yott, who previously was executive vice president of Cerritos Valley Bank in Norwalk.
“The South County region is way under-banked,” and there are few community banks left, Yott said.
Meanwhile, the larger banks are taking steps to retain the customers who want a community bank feel.
Kim Burdick, the senior executive in Orange County for Bank of America, said that bank is trying to appeal to customers who want a community bank relationship. It has been training its employees, “to make sure the conversation is about the customer instead of all about the product,” Burdick said.
He added that Bank of America keeps its ear to the ground by surveying 30,000 customers a month to keep up with changing attitudes.
Pacific Liberty started its organization in April 1998 and took nine months to raise enough capital to open the bank.
“It was very laborious,” Ganulin said.
Investor disinterest in the financial services sector coupled with the strong performance of the stock market is making it tough for bank start-ups to find capital, he said.
“It is not the easiest thing to do (raise capital). The banks in organization will do fine. We’re just a bit cautious because the ability to raise capital is getting harder,” Findley said. n
