Peninsula Bank Doesn’t Create Waves, Just Profit
In an industry in which no news is good news, Peninsula Bank of San Diego has steadfastly avoided making headlines since its founding in 1975. The bank has had no huge loan problems, no disastrously rapid growth and no misguided diversification.
What the independent, locally owned Peninsula Bank has done--quietly, stolidly and with a minimum of fanfare--is be consistently profitable.
It has done that while confining its business to the Point Loma market, an area in which the bank’s directors and executives have spent most of their lives living and working.
The approach has been a successful one. For 12 years Peninsula Bank has received a “premier” rating from Findley Reports, the Brea-based bank publishing and analysis company. Peninsula’s 12-year run as a top performer is the longest of any bank’s in the state.
Shareholders Rewarded Handsomely
The rating is derived from a composite of four performance standards: asset growth, return on total assets, return on equity and loan losses as a percentage of total loans.
Because of Peninsula’s performance, the bank’s shareholders have been rewarded handsomely. Investors who have held on to their $1,000 investment in Peninsula Bank shares in 1975 now own stock worth $9,960, a 67.3% compounded annual increase, said Gerry Findley, editor of Findley Reports.
Buying Peninsula stock, however, which trades over the counter these days at about $20 a share, is no simple task. The bank’s 420 shareholders are generally reluctant to give up their shares, and would-be investors must go on a waiting list to buy.
Since the bank went public by selling stock at $10 a share in 1975, the bank has had 11 stock dividends of 5% as well as a 3-for-1 stock split in 1979. The company has issued a $.44-per-share annual cash dividend for the last seven years.
Resisting the lure of growth opportunities in other parts of San Diego, Peninsula has only three branches--in Point Loma, Ocean Beach and on Morena Boulevard at University Avenue. The bank has grown steadily but unspectacularly to an asset size of $154.9 million as of June 30.
Peninsula Chairman John Rebelo, Findley and San Diego banking figures each stressed similar qualities when asked to define Peninsula’s blueprint for success.
San Diego native Rebelo, the son of Portuguese immigrants and once a professional baseball player, attributed the bank’s success to its philosophy of staying away from loans and borrowers it doesn’t know or understand.
“If someone comes down here from North County for a loan, chances are that the application has passed through three or four banks to get to us. That raises all kinds of red flags,” Rebelo said.
For Findley, Peninsula’s secret is its stable management, which knows its market area and its residents. Rebelo and Peninsula Vice Presidents Larry Willette and Lawrence Alameda all grew up in Point Loma and have known many of the bank’s customers for decades. Typical of the home-grown talent, Rebelo grew up in a house a block away from the bank’s Rosecrans Street headquarters.
Except for one board member who quit two years after the bank’s founding, all but one of Peninsula’s founding board members and executive officers are still with the bank.
Has Stubbornly Resisted Growth
“They have a continuity there that allows them to perpetuate and maximize the internal harmony of the organization,” Findley said.
Peninsula has stubbornly resisted growth except under the most controlled circumstances. The bank has made no acquisitions to expand its deposit base, nor has it ever accepted brokered deposits, the so-called “hot money” that led many banks down the path of doom in the early 1980s.
Brokered deposits are “jumbo” certificates of deposit with terms of 30 days to one year that are risky for banks because they are made by depositors with minimal loyalty to the institution. Because the deposits are often pulled after maturity, banks have difficulty matching them as short-term liabilities against longer-term loans or assets.
Minimal Ratio of Bad Loans
The conservatism of Peninsula’s lending policy is vindicated by its minimal bad-loan ratio. Last year, the bank charged off as uncollectible only 0.3% of its loan portfolio, below the 0.8% to 1% typical of the industry. The bank’s loans are currently only 65% of deposits, also a conservative ratio.
Rebelo, Willette and Alameda, as well as Executive Vice President M. Loren Burrell, got their training at the old First National Bank of San Diego.
They left to form Peninsula Bank shortly before the bank was sold to Bank of Tokyo and renamed California First Bank.
Another First National alumnus is Don Clague, president of Grossmont Bank, also a perennially top-ranked independent bank. Clague said Peninsula’s success is due in part to the bank “staying within a predetermined trade area and not getting carried away by opportunities of wild growth.”
For the six months ended June 30, Peninsula reported a profit of $753,837, up 8.7% from the year-before figure. The bank’s $154.9 million in total assets were up 17.5% from the previous year. Deposits of $144.2 million were up 17.8%, and total loans of $92.5 million were up 6.5%.
