Pride, Profit Motive and Plain Spunk : 2 Financiers With Common Interests Founding Valley Banks

Like prizefighters who hang up their gloves only to don them again, Carl O. Schatz and Mark de Gorter are launching comebacks.

But instead of jumping rope, Schatz and De Gorter are jumping through hoops set up by banking regulators. At ages when many executives wind down their careers, they are charging back into banking by trying to start new banks in the San Fernando Valley.

Schatz’s proposed Bank of Encino and De Gorter’s planned First Citizens Bank in Sherman Oaks are expected to compete against the financial giants the way most independent banks do--by offering prospective borrowers fast decisions on loans and more personal attention. The two longtime Valley bankers also are counting on winning business from old friends and customers.

‘It’ll Be Easy’

“I’ve got so many friends around, it’ll be easy to do,” Schatz boasted. “It’s not a big deal, even though there are a ton of banks around.”

Schatz and De Gorter have followed similar paths. Both helped establish and served as presidents of existing Valley banks--Schatz at Independence Bank and De Gorter at Valley State Bank.

Eventually, they stepped down from those jobs under less than pleasant circumstances, particularly De Gorter, who is involved in a bitter lawsuit with Valley State. Then Schatz and De Gorter quickly set out to re-enter the banking arena, apparently driven by pride, the profit motive and plain spunk.

“We’re not the type of people who can sit at home or play golf all day long and let the world go by,” De Gorter said.

In personal style, however, the two bankers have little in common. Schatz, 62, is a gregarious man who can’t stroll far down Ventura Boulevard without trading a greeting with an acquaintance.

Friendly But More Formal

Dutch-born De Gorter, 58, is friendly but more formal, often pausing to think over a question before making a reply.

Schatz “is an aggressive, hard-driving guy,” De Gorter said. “I’m more low-key.”

Banking experts are divided on whether Schatz and De Gorter are coming back into banking at an appropriate time. Few other banks are being launched in California now.

The state Banking Department said it has approved only four bank charters this year, down from 18 last year, which also was a comparatively slow year for opening banks.

By all accounts, raising the needed capital now is an uphill struggle. Even though small banks’ profits have improved this year, investors have shied away from their stocks ever since many nose-dived after deregulation of the industry began in 1981.

A Building Trend

But Edward Carpenter, chairman of a Los Angeles bank consulting firm bearing his name, said Schatz’s and De Gorter’s proposed banks “are probably at the front end of a trend that will build up slowly.”

Carpenter said investors will be drawn back by the recovery in small banks’ profits, the voids left by bank failures and mergers, and pending and recently enacted laws permitting some interstate bank mergers. He also said the San Fernando Valley is “underbanked,” an area that is among the most lightly served by independent banks in Southern California.

At this point, Schatz and De Gorter have yet to take a deposit or make a loan since leaving their last jobs. Although Schatz has moved into quarters at 17002 Ventura Blvd. and had a sign reading “Bank of Encino, in Org.” painted on the window, he still awaits approval of a state charter.

Open in March or April

De Gorter already has a charter but needs to raise at least $2.4 million from investors outside of his organizing group before launching First Citizens. He said he hopes to open for business in March or April.

Although Schatz and De Gorter are aware of each other’s progress, neither considers the other a direct competitor. Even so, some professional rivalry may exist.

De Gorter, for instance, has noted how he, unlike Schatz, has already received a charter. De Gorter also said he “can’t believe” that Schatz already is paying rent for his bank offices, although he quickly conceded that Schatz may be doing so to tie up “an outstanding location.”

Schatz said he got the itch to found a new bank shortly after resigning as president of Independence Bank in September, 1984, just before his contract expired. He had become restless working for the Asian financiers who bought the bank in 1980 from him and other shareholders, he said, but his work as a consultant after leaving Independence wasn’t the answer. (Last month Independence was sold again, this time to Saudi Arabian financier Ghaith Pharaon.)

Never Suffered Operating Loss

Schatz’s experience at Independence hardly was sour. He never suffered an operating loss during more than 20 years as chief executive of the bank and pocketed more than $3 million by selling his stock to the Asian group.

Other bankers and consultants say that Schatz’s track record, personal wealth and extensive contacts bode well for his ability to launch a bank.

“He had a big following, and that following has a lot of influence,” said Gerry Findley, a Brea-based bank consultant who did a study for Schatz’s venture.

Schatz, like many independent bankers, is counting heavily on being able to take away loan customers from bigger banks by providing faster and more personal service.

“We don’t have to take two or three weeks or a month to analyze credit,” Schatz said. “That’s really the name of the game in banking.”

Schatz said he also expects to draw some former customers, such as retailers and owners of small industrial companies, away from Independence.

Like De Gorter, Schatz said he plans to open his bank early next year, a schedule some experts say may be overly optimistic. Meanwhile, Schatz spends much of his time working on meeting regulatory requirements and raising capital.

To shorten the regulatory process, which requires organizers of new banks to prove that they have the financial resources, management and market for a bank, Schatz at first looked into buying a bank branch or acquiring control of an investment group that already had a charter.

The bank branch he wanted was sold, however, before Schatz could act, and he eventually cooled on the idea of buying his way into a group of investors he didn’t know well.

Chafes at Waiting

Although confident that state bank regulators soon will grant him a charter, Schatz chafes at the waiting. In the meantime, he said, he has taken up golf to ease his nerves.

Even though Mark de Gorter already has a charter for his new bank, industry experts said he may have a tougher time than Schatz in launching his financial institution. To begin with, De Gorter is counting on selling stock to the public at a time when investors generally are cool toward bank investments.

Furthermore, some say, his reputation was tarnished--perhaps unjustifiably--by the nearly $1 million in losses Valley State Bank suffered in 1983 and 1984. De Gorter, who resigned as president of Valley State in December, 1983, after having a “difference of philosophy” with the board, denies responsibility for the losses.

Lawsuit Allegations

Although De Gorter makes it clear he would like to put that issue to rest, it was revived in the courts this year. Valley State sued De Gorter, alleging that he falsely accused its current president, Jules Huppert, of improprieties such as making improper loans and trying to sell cocaine.

De Gorter counter-sued, claiming in part that Huppert was trying to injure his reputation and to hurt his chances to establish First Citizens, which would compete against Valley State. The countersuit maintains that De Gorter was wrongfully blamed for actions that put Valley State, which returned to profitability this year, temporarily into the red.

Despite the two years of losses, De Gorter cites the early growth of Valley State as evidence of his skill as a banker.

“I took it from a trailer into an $80-million bank,” he said.

Market Target

Unlike Schatz, who was a community bank president for years, De Gorter worked in various bank executive positions after moving to California from Holland in 1950. He left a vice president’s job with Crocker National Bank to become a bank president for the first time, at Valley State, in 1978.

De Gorter said First Citizens will cater to owners of small manufacturing and service businesses and professionals such as lawyers and doctors. He said the bank will pick up business left behind by such banks as Wells Fargo and Bank of America, which have closed their Sherman Oaks offices or moved from the area.

Melvyn Rifkind, a public relations executive who is a member of First Citizens’ board, said: “If you go to Encino, you don’t have to be a demographic expert to know there is a large number of banks. In Sherman Oaks, you have a different situation.”

Specialized Services

“Major banks prefer to deal in major corporations,” De Gorter added.

De Gorter said he plans to offer specialized services, including a courier to pick up major customers’ deposits, in providing a personal touch that the big banks lack. Like Schatz, De Gorter plans to operate only one branch.

“If it gets to be a $50-million or a $100-million bank, fine, but I’m not going to have five or six branches all over the Los Angeles area,” he said.

If not to establish a major financial institution, why is De Gorter starting a new bank?

“I just enjoy being a banker,” he said.