Banks Cross the Line to Seek Profits : Finance: San Diego institutions are tapping markets in counties to the north, with Temecula in Riverside County a prime target.
When Escondido-based North County Bank opened a branch in Temecula in 1985, the only competitors were the locally owned Overland Bank and branch offices of Bank of America, Security Pacific and Great American.
But the Riverside County town’s once-tiny financial industry has been growing in stature along with the area’s population, and most of the new banking arrivals are San Diego County institutions that have crossed the county line in search of profits.
Temecula isn’t the only destination for San Diego’s growth-minded institutions. Local banks and savings and loans have established footholds elsewhere in Riverside County and in Orange and Los Angeles counties.
Bank and S&L; executives said the northward migration is driven by the fact that San Diego County has relatively few locations left to support new branches. Still, local institutions have moved cautiously into neighboring counties. Executives said they have selected niche markets that should provide few surprises and a greater likelihood of success.
They have also built office staffs partly by hiring employees from out-of-county competitors rather than sending San Diego-based bankers into unfamiliar territory.
“That was the key for us opening in Riverside,” said First National Bank spokesman Ron Phillips, which opened a Riverside branch office last year. “We were able to bring on board experienced bankers who’d lived and worked in that market. Opening a branch is easier when you have that kind of” experience.
The county line proved to be no great hurdle for local institutions in Temecula, executives said. Its location near the county line on Interstate 15 makes it seem more of an extension of North County than a part of Riverside County, they said.
North County Bank moved into Temecula because the area shared many traits with North County, said Mike Gilligan, the bank’s chief financial officer. “We’ve had a tremendous response from the people up there. It’s grown fast. . . . We already have $35 million in deposits.”
ENB Holding Co., which owns Escondido National Bank and San Marcos National Bank, has also enjoyed rapid growth in Temecula. Last year, ENB expanded into Temecula through the addition of an Escondido National branch. But in July, ENB won regulatory approval to open a new bank, Temecula Valley National Bank, which absorbed that operation. The new bank, with assets of $32 million, opened a branch office in nearby Murrieta in August.
Temecula is “working out well for us,” said Harvey J. Mitchell, president of ENB. “We’re in storefronts in both Temecula and Murrieta, but we’ve bought property in Temecula and we’re starting work on a 10,000-square-foot main office building.”
ENB capitalized the new bank with $3.5 million of a $5-million private stock offering that was completed in May, Mitchell said. The remainder of the new capital was allocated to ENB’s two existing banks.
While 1989 marked San Diego Trust & Savings Bank’s 100th anniversary, it also marked the opening of a Temecula branch that became the first out-of-county branch for San Diego County’s largest independent bank.
San Diego Trust & Savings, with 50 branch offices, has largely saturated the San Diego market, President Daniel D. Herde said. The bank reviewed several out-of-county expansion plans but was most comfortable with the burgeoning Rancho California/Temecula area.
“We took a look and were encouraged by the market studies,” Herde said. “We felt that it was one area where we could manage comfortably . . . and it’s not far from Fallbrook, where we have a branch.”
San Diego-based Bank of Commerce opened a branch office this past summer in Temecula, an area President Peter Davis described as “almost an extension” of its market.
But distance was not an important factor for Bank of Commerce, which early this year opened a Small Business Administration loan-origination office in Glendale.
Bank of Commerce, which wanted to expand its SBA business outside San Diego, could have crossed over into Orange County, Davis said, but it opted for Los Angeles County because “Orange already had two or three big (SBA) players. . . . Rather than buck them with just one office, we decided to go to Los Angeles,” where there is less competition for SBA loans, Davis said.
In less than a year, Bank of Commerce’s Glendale office has become Los Angeles County’s sixth-largest SBA lender, Davis said. With its Los Angeles office up and running, the bank recently opened a full-service branch office in the city of Orange.
Once Bank of Commerce made the decision to attack Los Angeles, Davis looked for office space near the local SBA district office. By chance, the office, in downtown Los Angeles, was moving to Glendale, and Bank of Commerce is now located just down the hall from it.
In retrospect, Davis agreed that “conventional wisdom said that L.A.’s already got sufficient banking services.” Still, Bank of Commerce, which stuck to its SBA lending niche, is thriving despite the fact that it sits across the street from a Bank of America branch and within a stone’s throw of at least 10 other financial institutions.
Other local institutions have made their own moves out of San Diego County.
La Jolla Bank SSB, which recently changed its name from La Jolla Savings Bank, fulfilled its desire to enter the Orange County market when it purchased a branch office in Mission Viejo from San Diego-based Flagship Federal Savings & Loan. La Jolla Bank also plans to open a branch office in Indian Wells near Palm Springs.
First National Bank, which several years ago identified Riverside and San Bernardino counties as potentially lucrative areas, has a branch office in Riverside, and might eventually add offices along the I-15 corridor. It has also opened a loan origination office in Bakersfield.
BSD Bancorp, a bank holding company that owns Bank of San Diego, acquired Long Beach-based Coast Bank in 1982. BSD “would like to make acquisitions of other (out-of-county) banks,” said Vito Guarino, president of BSD Bancorp. “We know that out-of-county can be profitable because Coast has been our most successful operation over the past five years.”
Grossmont Bank has opted not to expand outside of San Diego County, but it has expanded its Western Trust Services with the acquisition earlier this month of a trust operation owned by Glendale-based Fidelity Federal Bank. The acquisition boosted Western’s trust asset total to $400 million, up from about $300 million, according to Grossmont President Donald K. Clague.
BANKS BRANCHING OUT
1 Temecula National Bank (owned by ENB Holding Co. of Escondido): Temecula, July,1990; Murrieta, July, 1990
2 Torrey Pines Bank (La Jolla)(now Wells Fargo Bank): Temecula, 1990
3 Bank of Commerce(San Diego): Temecula, May, 1990 (full-service branch)
4 San Diego Trust & Savings Bank: Temecula, Sept., 1989 (permanent facility in 1991)
5 North County Bank (Escondido): Temecula,1985; Murrieta (1991)
6 First National Bank (San Diego): Riverside, Sept. 1989
