Barely half a dozen customers were waiting when the failed Saddleback National Bank in Laguna Hills reopened at noon Friday as a branch of Landmark Bank.
And when those few customers walked in, they saw familiar faces because Landmark is hiring the defunct bank's tellers and other front-line employees to help operate the new branch.
"There doesn't seem to be any big panic," said Craig Collette, president and chief executive of La Habra-based Landmark. "Of those who came in, it was business as usual."
In the early hours, Landmark lost only one customer--the holder of a long-term certificate of deposit. Saddleback, trying to attract deposits, had offered long-term CDs at interest rates ranging from 11% to 14%, Collette said. Landmark is honoring 30-day CDs but is reverting approximately $3 million in certificates of deposit with longer terms to current--and much lower--market rates.
Federal regulators seized Saddleback Thursday afternoon and declared it insolvent. A spokesman for the U.S. Comptroller of the Currency's office blamed the bank's demise on high overhead costs and bad loans that resulted in nearly $3 million in losses since the bank opened in August, 1983.
Saddleback had assets of only $13.7 million when it was seized, and 33% of its $12.2 million in loans at the end of 1985 were delinquent. The $12.9 million on deposit at Saddleback was in about 1,100 accounts.
Saddleback depositors have 18 months to open new accounts at Landmark or elsewhere and until then can continue to use their Saddleback National accounts, which Landmark will honor.
"Our hope is to keep all the accounts, but realistically, if we could keep three-quarters of them, we'd be doing real good," Collette said.
Landmark has been trying to penetrate the professional and small-business market in Laguna Hills since it opened a branch two years ago in nearby Lake Forest.
Freeway a 'Natural Barrier'
But, Collette said, his bank found that Interstate 5, which separates the two communities, to be a "natural barrier" that banking customers do not cross.
One reason might be that the professionals and small businesses in the Laguna Hills Mall and spread along the west side of the freeway are already well served by at least five banks and 12 savings institutions in a five-block area between the freeway and affluent Leisure World, the nation's largest gated retirement community.
Unlike the other financial institutions, however, Landmark will not actively seek customers from the 21,000 Leisure World residents.
"People from Saddleback Community Hospital and the small businesses are what we like," Collette said. "Most of Saddleback National's accounts were business accounts, and we've got two people going out to the businesses to convince them that (they) should stay with Landmark. We're also contacting them by phone."
But J.B. Crowell, president and chief executive of Eldorado Bank--which has a Laguna Hills branch a block away from Landmark's new office--said there probably is not enough small business in the area to sustain a business-oriented banking operation.
Landmark hopes to make the new branch work through aggressive marketing and by slashing overhead. It is bringing in three of its own employees to replace the six highest-paid Saddleback executives and is trying to renegotiate the lease for its plush office to trim about $3,000 a month from the current $12,000 monthly rent.