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Banking – Local Financiers Prepare to Launch Two Banks

Banking Grows Alongside Expanding National Economy

Local financiers are preparing to launch two new banks, one of them a traditional brick-and-mortar thrift, while the other is based on the Internet.

They’re called 1st Pacific Bank and Bank of the Internet USA. They will commence operations sometime in the next several months, said their presidents.

One banking industry observer sees their formation as part of a national trend going back six years, with more and more banks being started as the national economy continues to expand.

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“In 1998, which is the most recent year for which I have statistics, there were 194 new banks chartered across the country,” said John Hall, a spokesman for the American Bankers Association in Washington, D.C., on April 20. “This compares to 50 banks chartered in 1994 when the economy was still coming out of a recession.”

Rob Hildt, president of 1st Pacific Bank, said the California Department of Financial Institutions approved the formation of his bank late last month. A July opening is planned for two locations in the county , one at 7728 Regents Road in University Towne Centre and the other will be at 3500 College Blvd. in Oceanside, Hildt said.

Small Business Emphasis

He said the bank’s prime marketing emphasis would be small business, real estate and construction loans. It will also provide consumer-banking services as well.

The bank will also offer courier delivery service.

He said the bank branches will have a total of about 18 employees. The management still needs approval by the state’s department of financial institutions of its stock-offering prospectus. Once that approval is granted, possibly early this month, the bank will start raising money, he said.

“We will be holding 60 to 90 investment meetings commencing upon the approval of our offering circular,” Hildt said. “The stock will also be traded over-the-counter on the Nasdaq bulletin board.”

He said three former members of the boards of directors of local banks are also on the board of directors of 1st Pacific Bank. He declined to disclose their names, wanting to wait until the state approved the bank’s prospectus.

‘Frustrated’ By Industry

Hildt said he had been working for the past year and a half to organize the bank. Before that, he was part of the management team at Home Savings of America and helped start its business banking department when he worked at its Irwindale headquarters. That bank was acquired in 1998 by Washington Mutual Bank.

“I became frustrated with the way the financial services industry was headed with all the mergers and acquisitions,” Hildt said. “I think people feel disenfranchised with big banks and they deserve specialized and personal service.”

To remedy that feeling, 1st Pacific Bank will assign an official to every customer’s account to handle his or her business, he said.

“We will also provide certain types of lending, such as construction loans under $1 million, that many larger banks are unwilling to handle,” he said.

There are plans to eventually offer Internet banking as well, he said.

Online banking will be the primary focus of Bank of Internet USA, said President Gary Evans. His bank in formation is still awaiting approval from the state to begin business, he said, adding that he expects to open later this spring.

The bank has six employees. When it opens, it will have about 15 people on staff, he added.

“We will be one of the first West Coast Internet banks, however we will also have a retail office on El Camino Real in Carmel Valley,” Evans said. “Unlike some Internet banks, we will encourage people to call us on the telephone so that we can walk them through our World Wide Web site.”

Online Banking

The bank in formation is privately owned, Evans said. Jerry Englert, who has invested in other start-up companies in San Diego including Bank of Del Mar, is the chairman of the board.

“We’re going to have online banking where people can go see bank statements and transfer funds,” he said. “We’re also going to specialize in real estate lending and will take loan applications online.”

Direct deposit for payroll and government checks will also be offered. The bank will provide postage-paid envelopes for other checks, he said. They also plan to offer classes at their local branch to people interested in learning how to bank online with the bank, he said.

Evans was president of La Jolla Bank until mid-1996, helping that thrift become in 1994 one of the first banks in the world to offer online services on the Internet, he said. He started drawing plans for Bank of Internet USA after leaving that post and also took time to co-author “Financial Institution Internet Source Book,” which was published in 1997 by McGraw-Hill Cos.

Digital Financier

“I also used that time to learn Internet technology and Internet marketing,” Evans said.

That led him to develop The Digital Financier, a financial information Web site at (dfin.com), he said. It’s a niche portal for financial professionals paid for with advertising and book sales, he added. That in turn encouraged him to develop plans for an online bank, he said.

Hall, of the American Bankers Association, said while there are many acquisitions of community banks by larger, nationwide banks that doesn’t mean that there isn’t a vibrant market for community banking services.

This is because many people prefer a community bank where loan decisions are made by someone they see in person, Hall said.

“Some people like a large bank with its large network of branches, but for others a community bank is their preference because they can have faster decision-making,” Hall said.

“Smaller banks, because the cost of technology has declined in recent years, can also offer high-tech services such as online banking that the bigger banks offer, but they also keep their personal, face-to-face advantage.”

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