Closing of Bank of A. Levy Compounds Competition : Business: Institutions battle for customers after demise of Ventura County’s oldest and largest independent operation.

Shortly after the giant First Interstate Bank announced last year it would gobble up the 113-year-old Bank of A. Levy, Marshall Milligan--Achille Levy’s great-grandson--wrote an opinion piece lamenting the death of community banking.

“Community banking is a cottage industry designed to go the way of blacksmiths and butcher shops,” wrote Milligan, A. Levy’s president at the time. He predicted more mergers, buyouts and closings of smaller banks.

“Not that many people really value what we offer,” Milligan concluded. “We have faced that and, sooner or later, (other community banks) must do so as well.”

The 17 Bank of A. Levy branches across Ventura County closed their doors for the last time Friday. By Sunday night, workers expected to complete the sign changing and window painting that began earlier in the week. About 65,000 customer accounts were switched to First Interstate Bank over the weekend. And by today, Ventura County’s oldest and largest independent bank will be gone--along with about 100 jobs.

But a bevy of local bankers scoff at Milligan’s dire warning for the industry. They say the demise of community banking in Ventura County has been greatly exaggerated.

Even before Bank of A. Levy began tearing down its signs, other small banks rushed into the Ventura County market, most with designs on the small-business community. Nature abhors a vacuum, and independent banks hope mom-and-pop stores that banked with A. Levy abhor giant financial institutions.

And now, with the conversion complete, they expect even more former A. Levy customers to leave First Interstate Bank. While some customers have indeed left, First Interstate officials would not comment on how many A. Levy customers have been lost. Industry analysts said they expect First Interstate to lose about 20% of A. Levy’s customers.

To that end, a fierce competition for those customers has begun.

Santa Barbara County banks are making their first forays south across the county line, while San Fernando Valley-based banks are creeping into eastern Ventura County.

City Commerce Bank, which has three branch offices in Santa Barbara County, opened a loan office in Oxnard in November. In July, officials have plans to open a full-blown branch in the Esplanade Shopping Center.

“There will always be room for well-run community banks,” said Bradley Wetherell, the bank’s regional president.

Santa Barbara Bank & Trust officials went City Commerce two better. They recently opened branches in Camarillo, Oxnard and Ventura. They boast that they’ve hired most of A. Levy’s middle managers to staff their branches.

“We aren’t just putting out feelers,” said Michael Murphy, a bank vice president. “We have jumped in.”

The Bank of Montecito, along with the Sherman Oaks-based TransWorld Bank, have also made forays into Ventura County. And the county’s remaining community banks such as Channel Islands National Bank and Simi Valley Bank have begun an advertising blitz, trying to grab the county’s “locals only” customers.

Some have hit the pavement in an attempt to woo A. Levy customers their way. Briefcase-wielding loan agents from Ventura County National Bank have been banging on the doors of A. Levy customers hoping they’ll buy their sales pitch: “We can offer them the personal service and relationships the big banks can’t,” said marketing director Mary Martha Stewart.

Stewart’s pitch is a mantra being repeated by community bankers throughout the county. Even First Interstate--with 1,100 offices nationwide--is attempting to position itself as the bank next door.

“We like to look at ourselves as a large community bank,” said Harold Lewis, vice president and district manager of the 19 First Interstate branches in Ventura County.

“Everybody is pushing that fact,” said Keith Jillson, executive vice president and the chief financial officer of the two-branch Camarillo Community Bank.

He said community banks successfully used the same sales pitch when First Interstate Bank swallowed Bank of the Oaks last year.

“We were romanced by a couple of banks,” recalled Jeff Alexander, who as owner of the T. O. Corral feed store in Thousand Oaks banked with the Oaks. Alexander ended up taking his business to Camarillo Community Bank.

“I won’t bank with the big guys,” he said. “I don’t like being a number. I’ve got to have that personal relationship.”

But--as Milligan laments--customers like Alexander are becoming increasingly scarce. The smaller banks cannot keep pace with the technological advances made by larger institutions. Expensive government regulations are also taking their toll on the community banks.

“The regulators have made it very difficult for the community banks to do business,” said Fred N. Raio. Raio founded the Bank of the Oaks and presided over its sale to First Interstate. Before founding the Oaks, Raio opened the initial First Interstate Bank branches in Ventura County 30 years ago. He is now retired.

Raio said requirements mandating banks to make loans in low-income neighborhoods, along with laws requiring banks to keep increasingly more cash in reserve, are weathered more easily by the better-financed bank giants.

“We’ve all been tainted by the savings and loan mess,” he said.

That said, Raio insists there is still a place--albeit a smaller place--for community banks.

“There’s definitely a niche left,” he said.

But First Interstate’s Lewis has put community bankers on notice that the giant also plans to compete aggressively for mom-and-pop accounts. First Interstate’s market share in Ventura County is now second only to Bank of America.

“We are not finished with Ventura County,” Lewis said. “As they go after our A. Levy customers, we are looking at their clients too. They better watch their back door.”