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Tuesday, Dec 5, 2023

Service Outranks Size as a Survival Strategy

In a world where the strong are most likely to survive, local banks might be concerned about being consumed by the larger banks.

On the contrary, local bankers are seeing more opportunity in what they have to offer.

“Smaller banks rely on the relationship banking,” said James Boyce, president and CEO of Rancho Santa Fe National Bank, No. 5 on The List of Largest Area Banks. “With fewer banks, it’s actually an advantage.”

– Out-Of-State Banks

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Gobble Up The Locals

Last year, three local banks were gobbled up by larger out-of-state banks.

Minneapolis-based U.S. Bank, No. 4 on the The List of Largest Nonlocal Banks, acquired Bank of Commerce and Peninsula Bank of San Diego for combined local deposits of $900 million.

Valle de Oro Bank was acquired by Fargo, N.D.-based Community First National Bank, No. 6 on The List of Nonlocal Banks, with local deposits of $227 million and assets nearly $250 million.

In January 2000, North County Bank was acquired by San Francisco-based Wells Fargo, No. 2 on The List of the Largest Nonlocal Banks. Wells Fargo has total local deposits of $3.5 billion as of June 31, 1999, according to the California Department of Financial Institutions. North County Bank had $302 million in deposits and $337 million in assets by the end of 1998.

Nonlocal banks are ranked by the local deposits in San Diego County.

“Some people look at small banks as a convenience,” Boyce said. “They usually say, ‘I want to know my bank and the people who work there.'”

– Small Banks Offer

Personal Service

Smaller banks can deal with individuals on a one-on-one basis and can tailor their banking services to the needs of the customer, Boyce said.

Thomas Swanson, president and CEO of Fallbrook National Bank, No. 6 on The List, agreed the mergers opened new opportunities for smaller banks because of customer relationships.

“Bigger banks have tremendous technology, in which they can provide services to customers at lower costs,” Swanson said. “With smaller banks’ interaction with people, bigger banks have a hard time offering the service due to their size.”

Swanson said bigger banks have a higher turnover rate, which leads to unfamiliar customer relationships.

Fallbrook National Bank offers many banking services, such as checking and savings accounts and certificates of deposit.

– SBA Lending An

Additional Service

In addition to these services, the bank also offers Small Business Administration lending to all of California and Internet banks.

“Our employees understands the individual business owner and the market of a particular community,” Swanson said.

Fallbrook National Bank expanded into Temecula and Vista in 1996 and 1997, respectively. Swanson said his bank controls 25 percent of the market share in Fallbrook, which makes up nearly 70 percent of the bank’s total assets. The bank’s total assets are at $176 million.

“We will only expand into a new neighborhood after we find the right people who know the area,” he said. “Many banking employees from former merged companies would join this bank, which maintains the good quality relationship with the consumer.”

Swanson expects his bank will expand further in North County and into Riverside County in the next couple years.

“This bank spent the last four years to build internal operating structure ready for expansion,” Swanson said. “We will look forward into future offices elsewhere.”

For Rancho Santa Fe National Bank, expansions into other areas need to retain the small-banking relationship, according to Boyce.

– Southern California

Banks Ready To Merge

Currently, Rancho Santa Fe Bank plans to merge with Palm Springs-based First Community Bank, which is expecting a shareholder approval vote for both banks May 31.

Both banks will operate under a Rancho Santa Fe-based bank holding company called First Community Bancorp, which was formed six months ago, Boyce said. The banks will retain the respective names, management teams and community focus after the merger.

“By operating like this, our banks can operate in a more efficient environment,” Boyce said.

Boyce said both banks could share costs and offer more banking services to the customer. One of the services called VIPBanker is an Internet-based banking program for businesses and customers to allow access of accounts with electronic bill-paying. The program also allows imaged statements to be delivered electronically, including copies of written checks.

– Acquisitions Leave

Room For New Banks

As smaller banks have been acquired, newer small banks also took their place.

Palomar Savings and Loan changed its charter to a commercial bank known as Palomar Community Bank, No. 9 on The List of the Largest Area Banks, in November 1999.

“The change allows us to be more profitable as a bank,” said Richard Sanborn, president and CEO of Palomar Community Bank.

As a new local bank, Palomar Community Bank offers improved customer service such as allowing customers to use any ATM without a charge, Internet banking, courier service to pick up business deposits, and a loan officer to travel to a customer’s business.

“We want to be the epitome of customer service,” Sanborn said.

With only one branch in Escondido, the bank’s near-term goal is establishing itself in the community. Sanborn said his bank already is drawing a lot of customers from the former North County Bank.

“These people don’t want to be a number, but they want to be treated like a person,” Sanborn said. “Most customers are unhappy with big banks because it’s transactional banking rather than relational banking.”

Boyce of Rancho Santa Fe Bank agreed smaller banks need to maintain the synergy with each customer.

“After all, one cannot build a relationship with an ATM machine.”


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