Savvy Banker Maps Strategy for Citizens’ Buying Spree
The very name and title--Paige V. Simpson, bank president--conjure up the image of an Oxford-educated financier, but the blunt-speaking man from the small town of Atwood, Kan., never even graduated from college.
Simpson, however, has worked his way up from messenger boy to bank president during his 50-year career. In the process, he has become the dean of Orange County banking.
More than ever, his knowledge and experience are being put to the test.
For it is Simpson who has been plotting the moves and orchestrating the bank-buying spree of multimillionaire Richard Pratt, an Australian industrialist bent on building a $1-billion banking company stretching from Long Beach to San Diego.
The company is Citizens Holdings, created in 1986 to buy out Simpson and other shareholders of the small but profitable Citizens Bank of Costa Mesa.
Pratt and his associates liked what they had heard about Citizens Bank and its president. They decided to keep everyone in place and even put Simpson on the board of Citizens Holdings so he could help develop the company’s strategy.
This year, that strategy has led to the purchase of El Camino Bank in Anaheim and to tentative agreements to buy Eldorado Bank in Tustin and Rancho Santa Fe National Bank in northern San Diego County, purchases that would give the holding company about $600 million in assets, making it Orange County’s largest bank holding company.
‘Knows Orange County Banking’
“The Pratt people couldn’t have picked a better person,” said Philip Inglee, president of Liberty National Bank in Huntington Beach. “Paige knows Orange County banking probably better than anyone, and he knows the cast of characters better than anyone.”
Simpson, in fact, was the first person Inglee asked for advice when he came to the county to help open Liberty National in 1982.
But as highly regarded as the 69-year-old Simpson is in the industry, his path to the top represents an anachronism, especially in these deregulated days of competitive banking.
Getting on the management ladder at major banks now, he said, requires a knowledge of high-powered finance, which usually means a master’s degree in business administration. For independent banks, a university degree is a minimum requirement, he said.
“You didn’t have to be very smart to make money in banking before deregulation,” Simpson said in a recent interview. “The law said what you could pay in interest rates, and you couldn’t pay any interest on checking accounts.
“Today, with deregulation and repeal of the regulation on interest rates, you not only are allowed to pay interest on everything, you have to,” he said.
The amount banks paid in interest, for instance, was insignificant before deregulation, he said. But with the competition for interest-checking accounts and other money-earning deposits for consumers, interest expense is now the biggest or second-biggest cost at most banks.
Changes in Banking
“So it’s a different game, and it requires more talent to compete,” Simpson said.
Banking has changed in other ways since deregulation began in the early 1980s, said Craig Collette, president of Landmark Bank in La Habra.
“Years ago, people could rise to the top from the operations side, like tellers and back shop people,” Collette said. “Now, there’s more emphasis on the sales and lending area. So you’re more likely to see junior lenders rise through the ranks to become chief executive officers, and you see little crossover between operations and lending sides.”
With knowledge and experience on both sides of banking, Simpson has a “good sense of where banking is going,” Collette said.
Right now, according to Simpson, banks are trying to build up their share of the market in a competitive race for deposits and loans. Some banks are primping themselves in the hope of being acquired, especially after 1991, when banks nationwide can march into the California market. Other banks want to beef up their operations to compete against any newcomers.
Citizens Holdings is in the latter category, Simpson said. It has no plans to sell out in 1991. Instead, it is looking for well-run, profitable banks with high rates of returns. That means, at the moment, banks with $150 million to $350 million in assets.
And, under Citizens and Simpson’s strategy, the company is allowing those banks to operate autonomously with the same managers and under the same names.
While some bankers believe the economies of scale for such an unusual organization will eventually lead to a single entity--much like a multibank operation became Central Bank of California--Simpson and Citizens say that is not their plan.
Areas for Savings Identified
The company has identified a number of areas “where there are tremendous economies of scale” without merging the banks, said Eugene Schutt, president of Citizens Holdings. Among those areas are insurance coverage, legal, international banking, securities fund management, data processing, premises management and internal audits.
Simpson outlined the strategy at a meeting with Pratt and his associates last year in Australia. When Simpson got back, he told executives at a dozen banks either directly or indirectly that Citizens liked their banks and might want to open talks about acquiring them.
“We have a great deal of confidence in (Simpson’s) judgment and contacts,” Schutt said.
Simpson has worked hard to reach the top of the ladder.
When he came to California as a 17-year-old, he got a job as a messenger boy at the old First National Bank of San Diego, now part of California First Bank. For his age and education, he said, “there was not a lot to choose from.”
To make banking a career, he knew he needed to learn more. So he started taking classes at night through the American Institute of Banking, then the largest adult education program in the nation.
Taking a class at a time, one night a week for 18 years, Simpson went through every course the institute had to offer except those on trusts. During two years in the Navy in World War II, he also managed to squeeze in three semesters of credit at an Iowa college.
He ended up teaching banking for the institute for nine years, and, in 1964-65, he became national president of AIB.
Year of Contacts
“I spent that year as AIB president running all over the country, meeting with young bankers and making speeches,” Simpson said. “That particular year enabled me to make a lot of contacts that have brought a lot of business to us.”
Some of those young bankers are now older bank executives who have been telling customers moving to Southern California to set up their accounts with Simpson.
In many ways, Simpson is a product of the good-old-boy network, one that fosters the idea of bankers helping each other out.
He still is active, for instance, in a now less-prominent AIB. He also served five years as a director of the California Bankers Assn. and a year as its treasurer. And he has been president of the Independent Bankers Assn.
He also is a regular at the Santa Ana Country Club and its bridge tables.
His industry activities have displayed his savvy in making contacts.
“You should see him working the room at a convention,” Inglee said. “He does it really well.”
At work, Simpson’s schooling helped him rise through the ranks. He became a branch manager in 1957 and was later named a vice president and member of First National’s management committee. He left in 1971 to head First National Bank of Fresno, but left months later to help start Citizens Bank.
He ended up being the largest single shareholder in Citizens with about 7% of the stock when it was sold in 1986 to Citizens Holdings for $12 million.
“He can’t believe a Kansas farm boy can be such a success in California,” said William Gregory, a retired First Interstate Bank executive who is one of Simpson’s good friends and his golf partner. “But Paige has made the most of his abilities.”
Gregory said his friend is an “outstanding” administrator and public relations manager. As an administrator, Simpson delegates duties and supports his managers, he said. And his personable style can make a borrower feel as if he owns the bank, Gregory said.
Simpson’s three-year contract at Citizens ends next March, but he said Pratt has told him he is welcome to stay another three years.
“I’m not excited about not working,” he said.
CITIZENS HOLDINGS AT A GLANCE When Citizens Holdings completes its proposed acquisitions of Eldorado Bancorp and Rancho Santa Fe National Bank, it will be Orange County’s largest bank holding company. Citizens already owns Citizens Bank of Costa Mesa and El Camino Bank, Anaheim. The combined price of the four acquisitions is $75.5 million. Following are totals for the four banks at March 31:
Assets $589.5 million
Deposits $531.2 million
Total loans $382.6 million
Number of branches 19
