For nearly 63 years, the Security Pacific National Bank branch in this tiny Santa Catalina Island resort town had all the major business and personal accounts; it had all the small banking accounts, too. Security Pacific was the island's only bank.
That monopoly, however, was broken two years ago when a group of investors from Avalon, Long Beach and San Pedro established a small independent bank, the National Bank of Catalina, in town.
By emphasizing local ties--including three board directors who between them have lived and worked for more than a 100 years on the island--and an old-fashioned hometown attitude, tiny Bank of Catalina has more than held its own against its mammoth rival, Security Pacific. Now it has plans to venture off the island to the mainland.
In May, Bank of Catalina will open its second branch. The new office will be in Signal Hill and will focus on more lucrative business accounts. The bank has had a loan- production office in Long Beach since August, 1983, in anticipation of the move.
The bank's founders knew that they had something going even before they opened the doors of their three-story, Victorian-style building on Crescent Avenue on the Avalon beachfront on Dec. 31, 1982. In an initial capital offering they had hoped to raise $1.5 million at $10 a share. Instead, more than 190,000 shares were sold, raising nearly $2 million.
With the opening of the Signal Hill branch, 196,000 new shares of stock are being offered at $10.50 a share until March 17.
The bank now has about $15 million in assets, with more than $13 million in deposits from 1,700 customers in 2,200 accounts. It has made more than $10 million in loans since it opened and its officers say it has not suffered a single loss.
By comparison, Security Pacific is believed to have about $20 million in deposits but less than $2 million in outstanding loans at the Avalon branch. Security Pacific officials declined to give numbers for the branch.
The Findley Report, a Brea-based banking newsletter published by banking attorney Gary Findley and his father, Gerry, a banking consultant, recently gave the Bank of Catalina its A rating, which only 25% of the state's banks received this year.
"It is not very common for a 2-year-old bank to get such a rating," said Gary Findley. "But we think with the Bank of Catalina it has to do with the quality of management there. Their asset portfolio looks good and they don't make bad loans."
Gerry Findley said the Bank of Catalina has the potential to triple its assets within the next three years.
"The Long Beach-Signal Hill market is a natural extension for them," he said. "They are not going to go much further in the Avalon market. Long Beach-Signal Hill is a much broader-based market. I think they can be a $40-million to $50-million institution within the next three years."
Allan T. Gibson, president of the Bank of Catalina, said his bank has been successful because it understands the people and the community it serves. Part of giving that impression includes putting long-time, respected Avalon residents on the board of directors. Among them are Vincent Scaramucci, 70, Milton (Blackie) Schatan, 64, and Leo Zager, 71, all of them semi-retired from their long-established businesses in Avalon.
"It would have been impossible without local support," said Robert A. Stein, the bank's chairman, adding that more than 60% of the bank's stockholders are from Avalon.
Stein, who worked summers in Avalon as a busboy for Schatan and now owns Long Beach-based TST Inc., a holding company for three firms that manufacture aluminum products, said he decided to establish the bank after a marketing study that he commissioned in 1981 indicated that there was need for a community bank.
Bank of America considered opening a branch in Avalon about six years ago, but a spokesman said its market study indicated that the area was not strong enough to support a second bank at that time. Since 1965, there has been a savings and loan in town, the latest of which is Arrowhead Savings & Loan, headquartered in the San Bernardino County town of Blue Jay.
While noting that Security Pacific is a "fine" bank, Stein said his bank has succeeded because it is locally controlled and has a better chance at being "all things to all people" in Avalon than a large company does.
"We have a local board of directors and we have local authority to make loans without having to consult a head office," he said. "Banking is a relationship business. You have to prove yourself. I think we have proven ourselves."
Gibson, the bank's president, said one way that the bank has done that is by providing loans to islanders that they may not have received at other banks.
"Independent banks are notorious for getting deposits, but then not giving out any loans," said Gibson, a former regional vice president in Union Bank's Long Beach office. "We bring in deposits and loan it out fast.
"We try to get to know our clients. We understand that in Avalon there are special needs because business is seasonal. We know that during the winter, businesses need to start building up their inventories for the summer season. That's why we try to make the notes fall due at the end of the season."
Gibson said 30% of the bank's loans are made in Avalon, most of them of between $20,000 and $30,000. The remainder are made in the Long Beach-Signal Hill area.
One local businesswoman said it had been no trouble for her to switch banks.
"I love it very, very much," said Dodie Bogard, who owns two restaurants and a candy store in Avalon. "It is a bank with a heart. They know the problems of the town. Allan will bend over backwards for people."
Bill Salisbury, who owns the Channel House restaurant and is president of the Chamber of Commerce, diplomatically said he supports both banks. But he said he is impressed with the Bank of Catalina's commitment to the town.
"They are totally interested in this small community," he said, noting that the chamber is allowed to hold its meetings in the bank's community meeting room at no cost. "They're on a first-name basis. You can walk into the president's office and have a cup of coffee with him and just talk about whatever problems you may have.. . . You couldn't ask for better service."
Frank Ernest, who has been manager of Security Pacific's Avalon branch for 12 years, downplayed the effects of his new competition. Comparing the two banks is like "comparing Sears with a local department store," he said.
Ernest said the idea that his competitor is the only hometown bank is simply an advertising ploy.
"Islanders do like to support locally-owned and operated businesses," he said. "But although we may be a branch of a large corporation, we are still very much a hometown bank. We have all local people working here. We, too, understand the local problems and try to accommodate the needs of our customers."
Off the Island
Ernest said the fact that much of Bank of Catalina's loans and deposits are off the island shows that it is no more a hometown bank than Security Pacific.
On the positive side, Ernest said, criticism that his bank had been charging higher than usual rates because it had no competition has ended because the Bank of Catalina's prices are comparable.
"I have mixed emotions," he added. "It was quite nice to be the only bank for the past 63 years."