‘Back-Lot’ People Are Center Stage at Western
No one at Western Security Bank is looking to become banker to the stars. The grips, lighting technicians, sound editors and video production people will do just fine.
The tiny, one-office Toluca Lake bank, which will be 5 years old in March, doesn’t have the might to compete against multibillion-dollar banking rivals, and so is building its business in part with loans to the plethora of entertainment companies in nearby Burbank that do technical work on films, television shows and record albums.
“The back-lot people,” is how Herbert G. Prinz, Western Security’s 43-year-old president and chief executive, describes them.
So far Western Security’s strategy seems to be working. It is posting impressive numbers as a result of its entertainment-related lending, plus loans to professionals such as doctors and lawyers and a conservative but burgeoning real estate loan business for smaller projects such as apartment complexes with 30 units or less.
For the six months that ended June 30, earnings for Western Security Bancorp, the bank’s holding company, nearly doubled from a year earlier to $261,929. Assets June 30 were $62.6 million, up 20% from a year earlier.
During 1987, the bank’s earnings grew 77% to $342,274, and assets grew 20% to $53.1 million.
Most important, Western Security’s return on average assets, a key indicator of a bank’s performance, has been improving as well. For 1987, it was .71%, improving to .93% for the six months of this year. A 1.00% return is considered excellent by banking experts.
The business pages are full of horror stories, of course, about small banks or savings and loans that grow too fast, acquire bad assets and get stuck in dead-end real estate projects.
Banking consultants and Western Security executives cite the bank’s selective policies on borrowers and controlled growth as the reasons for its continued profits.
“A lot of banks go out and grow, grow, grow and go broke. They’ve done things the right way,” said Brea banking consultant Gerry Findley, a publisher of banking newsletters.
Prinz said Western Security targets low-risk businesses needing loans of $2 million or so and that most of the loan business is referred by customers.
Bankers who run small banks often say their smallness is a plus because it enables them to provide better service to customers. But often the lure of selling out and joining a bigger bank overtakes their quest to remain independent.
Last year, for instance, Charter National Bank, a one-office bank in Encino, merged with a bigger bank because it figured that bigger meant better. Prinz said Western Security has turned down a couple of buyout overtures.
Western Security was founded by about 50 people, mostly from the Burbank area, including actress Abby Dalton, who once starred in television’s “The Joey Bishop Show” and, more recently, appeared on “Falcon Crest.”
Other bank investors included the owners of a carwash, a former MCA senior vice president and a judge. There are 243 stockholders in all, none of whom owns more than 7%, and the stock rarely trades.
John C. Bell, a developer whose family made its fortune raising horses, is chairman. Prinz was hired from Transworld Bank in Encino, where he worked in branch administration.
Despite its rapid growth, Western Security still has touches of a small bank. A “deal bell” is rung when someone makes a loan. Although the first floor is a retail branch, Prinz said Western Security does most of its business on the second floor in the corporate offices, which are kept open longer than the traditional banking hours of 10 a.m. to 3 p.m.
“Most of our customers can’t be coming down here at 2 or 3 in the afternoon,” Prinz said.
Western Security’s headquarters are in a greenish, four-story building on West Alameda Avenue in Toluca Lake, an area that has always had a touch of Hollywood influence. Bing Crosby’s old estate nearby was once featured on post cards.
Western Security is a few blocks from the Burbank Studios and new office buildings that bear the names of some fast-growing entertainment operations, including DIC Enterprises and the Disney Channel.
The bank has set up an entertainment division to keep pushing loans to the entertainment industry. So far the bank has had its share of success. Inside the second-floor offices hang pictures of such famous customers as singer/actress Sheena Easton and the Pointer Sisters singing group.
One recent Western Security ad in the Hollywood trade publications featured a picture of a Dodge City-style bank with the bank’s name on it.
Entertainment-related lending now makes up about 25% of the bank’s $40-million loan portfolio. It’s an area that Prinz believes will grow, in part because a large number of small- to medium-sized companies in the Burbank area are involved in pre- and post-production movie and television work.
Among the bank’s area clients are B & B Sound Studio, which does the sound editing for the television show “Moonlighting,” and Matthews Studio Electronics, which won an Academy Award for technical achievement for a remote camera system that it developed.
Prinz said another reason he believes there is opportunity in making loans to companies that support the entertainment business is because some bankers shy away from it. He said many bankers believe there may be no business like show business, but that it’s too unpredictable for them to risk money on.
But Prinz argues that while big movie projects may be risky for financial backers, the same isn’t true for support businesses. Even when a movie bombs, he said, companies doing technical work get their money.
“They all get paid. It’s the investor who doesn’t get paid,” Prinz said.
