Patrolling the Economy’s Front Lines : Banks: Chris Gilliams oversees a $33-million loan portfolio during a stressful period for the industry.

Chris Gilliams, with his hair slicked back, looks a bit like former Laker coach Pat Riley. But the resemblance ends there.

Gilliams, 39, is a fast-talking, fast-walking commercial loan officer at California United Bank in Encino, and he revels in a business that others might find boring. He pores over financial reports, spouts numbers off the top of his head and develops computer programs to track clients’ accounts. When he’s in his office, the phone rings constantly. When he calls on a client, he talks a persuasive game.

During a recent visit to Robert Lopez, president of Nickerson Lumber & Plywood Corp. in North Hollywood, Gilliams discussed the bank’s need to raise the interest rate on Nickerson’s $1-million line of credit by 1 1/2 points. Although interest rates have generally been falling, growth in deposits--the source of funds for bank loans--have slowed because escrow and title companies are making fewer deposits, Gilliams said. Other sources of funding are far more expensive.

Lopez said he intended to shop around for a lower rate. “He may have a hard time doing that,” Gilliams said, “because we priced Bob below market in order to get his business. He doesn’t know that yet. He’s going to find out.”

Lopez wasn’t convinced. “All bankers say that,” he said.

Gilliams smiled. “I think he and I will run into each other again,” he said.

These are tough times in the lending business. Fearing that banks with troubled real estate portfolios could go the way of the embattled savings and loan industry, government regulators have been cracking down on the lending excesses that prevailed through much the 1980s. Now that the recession is in full swing, even banks known for conservative lending practices have had to tighten their belts.

Gilliams is one of 10 commercial loan officers at California United and his territory is the Valley. The loan portfolio under his management stands at about $33 million, ranging from a $10,000 car loan to a $4-million line of credit.

Loan officers such as Gilliams are responsible for finding new clients, approving loans and monitoring the loans once they’re made. The economy’s front-line soldiers, loan officers see firsthand the effects of a recession on individual businesses.

California United Bank, formerly Lincoln National Bank, had assets of $476 million as of Dec. 31 and has been one of the Valley’s most prosperous banks for the past several years. Catering to small- and medium-sized businesses, it never became heavily involved in risky real estate loans and has earned a reputation as a conservative, well-run, small bank.

Even so, California United recently reported that earnings declined 28% to $1.28 million in the fourth quarter that ended Dec. 31 from a year earlier, mainly because it more than doubled its provision for possible loan losses. The bank is now reining in on new loans and more frequently requires that loans it does make be secured by business or personal assets.

“I’ve looked at easily more than 10 deals in the past year that we weren’t able to do” that in better times might have been approved, Gilliams said.

The bank has also tightened up repayment programs, Gilliams said. Where it might have issued a 5-year note to a borrower a few years ago, a loan might now be due in three years. That means money a client might have intended to buy equipment now must go to repay a loan.

Gilliams said he also keeps a close watch on sales and past due receivables, and if he sees a troublesome trend he immediately puts pressure on the borrower to lower his debt and cut costs.

Nickerson Lumber, which sells to manufacturers and movie studios, had several years of steady growth. But last year sales were flat, partly because RV manufacturers--a big source of orders for Nickerson--hit hard times. With sales leveling off, Gilliams told Lopez that expenses should come down, and one way to do that is to reduce debt.

“Prepare yourself now” in case things get worse, Gilliams counseled.

Back in his office, Gilliams noticed an overdraft on a problem account with another client and immediately put out a call. An overdraft is a bank term for a bounced check, but in the case of a business it might mean that employees don’t get paid.

For many clients, overdrafts are common and the bank quickly covers the temporary shortfall. But Gilliams was concerned by this businessman’s continual overdrafts in light of his shaky financial condition and refusal to cut back on a lavish lifestyle.

Gilliams reached one of the client’s business associates. “If I got (the client) on the phone right now he’d start cursing at me,” he said. Gilliams told the associate that the overdraft problem had to end and that he wanted to have lunch with the client soon so he could lay down the law.

“As a lender, you sometimes have to get tough,” he said after hanging up. “You get used to the stress.”

The oldest of 11 children, Gilliams grew up in New York City and earned a degree in accounting from Pace University. After graduation he moved west and landed a spot in Union Bank’s training program, a breeding ground for many local bank executives. In 1987, Gilliams was hired by John Keating, California United’s chief executive and another Union Bank alum.

Gilliams believes that most businesses can survive the recession if they’re well managed. He points to one client, a whirlpool bath company that’s been hurt by the slowdown in housing construction. Its annual sales have fallen from $8 million two years ago to $6 million, but it has consolidated two plants into one, laid off staff and Gilliams believes that it will make it through the slump.

But some companies don’t make it. One former California United client, an appliance distributor, was heavily leveraged and had little capital, but the death blow came when the Federated Department Stores filed for bankruptcy protection last year and stuck the client with $250,000 in unpaid bills. The bank ended up putting the owner’s residence and other assets up for sale to pay off the debt.

“We feel bad about that customer,” Gilliams said. “But it’s not our money we’re lending. It’s the little old lady who lives down the street who’s got a deposit in our bank.”

Gilliams hopped in his 1985 Chevy Camaro--”It’s paid for,” he quipped--and fought the traffic on Ventura Boulevard. He wanted to pay a visit to a longtime client, TriWest Insurance Services in Sherman Oaks.

TriWest is an insurance brokerage that earned about $5.9 million in commissions last year and is in good financial shape, Gilliams said. Nonetheless, Sy Maxwell, TriWest’s co-owner, said layoffs in the construction industry mean that insurance premiums are down and insurance companies have been cutting commissions paid to agencies. Maxwell said he’s trying to drum up new business and has avoided layoffs, but he’s tightened his belt and kept pay raises down.

But Gilliams stopped by to discuss another matter. A few years ago, California United agreed to loan TriWest money to invest in office buildings. It’s now on its third building, and the investments have been profitable.

But there’s a problem. California United made a $600,000 loan to TriWest two years ago to build a new office for the company. TriWest later decided not to move in and sold the building in April. As part of the deal, TriWest took back a note from the buyer for $450,000.

The note, which is the bank’s primary source of repayment on its loan, is now due. In normal times the buyer would have been able to refinance, Gilliams said, but lenders are now shying away from small office buildings and the buyer has been unable to get a loan. Banking regulators are now warning that TriWest’s loan must be paid off quickly or it will be classified as substandard.

Gilliams said he sympathizes with the regulators. But “all they’re looking at is the credit files,” he said. “They don’t look at the people.”

Nonetheless, Gilliams stays optimistic. “I read the papers, but I also see what’s happening in my own little world. We’re not Massachusetts, we’re not the Midwest. For most of my clients, they’ll weather the storm.”