Corporate’s ‘Niche Banking’ Finds a Place for Retail Customers : Banks: Institution reaches out to small accounts as a hedge against bad economy, sudden loss of big deposits.
From the day Corporate Bank opened in November, 1982, it has catered to a select group of small but prosperous companies and their employees.
That business strategy has made the bank consistently profitable and well-regarded within the industry. It also ensured that Corporate grew slowly, another part of the original business plan drafted by founding officers Gary Wrigley and Richard Brown.
“We don’t feel that bigger is better,” said Wrigley, the bank’s chief executive. “A business person who has $200,000 to deposit isn’t going to wait behind a long line of (consumer) customers.”
Originally called Corporate National Bank, it was one of a number of new community banks in the early 1980s that focused on “niche banking,” which in Corporate’s case meant serving a specific group in a specific area, said Brown, the bank’s president.
But now, after leading a management buyout of Corporate last spring, Wrigley and Brown are trying something different.
The Santa Ana institution is opening a branch in Anaheim and relying on its new chairman, Stanley Pawlowski, to boost the bank’s assets by 50% and triple its customer base in the next year or so. The plan for the new branch is to attract a mix of business clients and retail customers, the term bankers use for average consumers looking for checking accounts, credit cards and car loans.
“We decided we needed some diversity,” Brown said. “We needed retail customers, but we weren’t set up to handle them here. Before Stan came along, we didn’t know how we were going to do it. We were going to look for someone with a good name and reputation. Stan was pretty much of a godsend.”
The loss of a few good customers or a bad economy could devastate a bank that relies on a small group of business clients, he pointed out. Besides, he said, a more diverse bank is also more appealing to potential suitors, in case Corporate should ever decide to seek a merger.
Wrigley is also enthused about the new direction. “People will bank with us because of Stan Pawlowski,” he said.
The veteran Anaheim banker, with a list of civic, charitable and religious activities as long as his sleeve, is eager to meet the challenge. Pawlowski beams as he talks about the new offices, hotels and shopping centers rising up in the heart of his town.
“The location is superb,” he said. “We’ll be in the hub of a major retail center.”
But it remains to be seen whether Pawlowski’s ideas will mix well with Corporate’s existing management.
“Wrigley is an excellent banker, and so is Brown. Stan has a helluva following, and they all have strong personalities,” said banking lawyer Gary Findley of Anaheim. “But who’s going to be in the saddle? Who’s really calling the shots?
“This is a team concept, and I wish them all the luck. They’re good people, but I’m just sitting back wondering how it’s all going to happen--an interested observer on how they’re going to work out their egos and internal politics,” Findley said.
Ego often scuttles bank mergers. Friction over what jobs top executives would get in a merged institution played a big role in killing a three-way deal in 1987 that would have merged Corporate and El Camino Bank, where Pawlowski was then chairman, into National Bank of Southern California in Santa Ana.
It was during that failed attempt that Pawlowski and Wrigley became well acquainted.
For now, Corporate’s headquarters branch at the northern border of Santa Ana will continue to cater to affluent customers with large deposit and loan accounts, while the Anaheim branch will be limited only by its size in what it will do.
Pawlowski, a former founding officer/investor in three Anaheim banks, hopes to recapture many of the former El Camino customers. The holding company for El Camino and Citizens Bank of Costa Mesa sold those community banks to Wells Fargo Bank in 1991.
In that regard, he is following in the footsteps of Paige V. Simpson and Robert Ucciferri, former chairman and president, respectively, of Citizens. Simpson, who is semi-retired, went to work for Bank of Newport to lure customers from the former Citizens headquarters being run by Wells. Bank of Newport set up a branch near the former headquarters. Ucciferri, heading up the much smaller Bank of Yorba Linda, is also tapping into the old customer base with a tiny branch behind a restaurant in Huntington Beach.
They are following an age-old creed for community banks: small businesses and people with frequent banking needs don’t want to bank at a large institution such as Wells Fargo; they like the personal service they get at smaller banks.
It so happens that Corporate leased its new Anaheim quarters from Wells Fargo. The new branch, scheduled to open March 2, will operate from a long-vacant Wells Fargo office.
At the time of the sale to Wells Fargo, Pawlowski had to choose between retiring after more than 40 years in the industry or moving to another community bank. He began talking to local bankers.
“I was still only 62 at the time,” he said. “I figured I had a lot of good years of banking left in me.”
He approached Wrigley and Brown about joining forces after he read a newspaper story last year that Corporate’s financially beleaguered chairman and sole owner, Anaheim developer James A. Carter, had reached an agreement to sell the bank to a group of managers and other investors. At the time, Carter lost an estimated $9 million after federal thrift regulators seized another financial institution he owned--Beach Savings Bank in Fountain Valley.
Wrigley and Brown, who were going to finance part of the $9.4-million purchase, instead invited Pawlowski to join them.
Each investor group accounted for 20 investors, and each investor paid $175,000 to raise $7 million. Carter, who bought out original investors for about $5.5 million in 1986, sold out for $9.4 million. As payment, he took a small bank subsidiary and a cash dividend. The transaction thus reduced Corporate’s assets and capital slightly.
Pawlowski went to work quickly last spring, picking up a group of customers itching to get out of the big-bank atmosphere at Wells Fargo.
In his first few months on the job, he brought in $15 million in deposits and $4.5 million in loans. The deposits alone--most of them business accounts that didn’t earn interest--replaced large certificates of deposits for which Corporate was paying high interest rates. So the bank didn’t grow much, but its profit margin increased greatly.
In fact, except for a small loss in its first six weeks of operation, Corporate Bank has posted healthy profits every year for a bank its size.
The bank earned slightly more than $1 million last year, with $93 million in assets and $6.7 million in capital at the end of December, according to unaudited figures.
Its typical customer is a small, family-owned manufacturing company that has $40,000 to $50,000 in a checking account and $200,000 in loans. The company is located within 5 miles of the bank, has annual sales of $1.2 million and about 15 employees, many of whom also bank at Corporate.
“There are a lot of those in Orange County,” Wrigley said. The bank also has a courier service for customers farther away.
But things will change a bit now.
“What (Corporate) has done over the years is good,” Pawlowski said. “But it has to be a bank to all people now. It has to offer what clients bring. What the Anaheim branch is going to do is take whatever comes in the door,” he added.
The major change will be in the mix of customers.
Corporate has 3,200 customers, mainly companies, and counted $84.4 million in deposits at the end of last year.
In Anaheim, Pawlowski is expected to attract about 7,000 customers, mostly retail, and $50 million in deposits.
“It’ll be a little different operation,” Wrigley acknowledged.
Corporate Bank: New Strategy for Growth Since it opened in November 1982, Corporate Bank has catered to a select group of small but prosperous companies. Now, after a management-led buyout last spring, the bank is opening a branch in Anaheim that is expected to triple its customer base and boost its assets by 50% in the next year or so.
Vital Statistics Headquarters: Santa Ana Number of employees: 47 Chairman: Stanley Pawlowski Chief executive: Gary Wrigley President: Richard Brown Shares outstanding: 500,000 Number of shareholders: 40 Purchase price: $7 million, or $14 per share Trading activity: Not actively traded
Steady growth Except for two spurts during a period of heavy mortgage lending in the late 1980s, Corporate Bank’s assets have grown slowly and steadily. The drop in 1991 assets was a result of the management buyout of the bank. Assets, 1991 (unaudited figure): $93 million
Capital ratio Regulators require that capital--investor money representing the final reserve against losses--be at least 6% of total assets. The capital ratio now stands at 7.2% after the expense of the buyout. Capital, 1991 (unaudited figure): $6.7 million
Profits growing Keeping loan losses at a minimum has helped Corporate post healthy profits for a bank its size. Profits, 1991 (unaudited figure): $1.043 million Source: Corporate Bank
