San Diego Feeling the Pinch of Turmoil at Financial Institutions
Banks. You can’t live with ‘em and you can’t live without ‘em.
It’s been an ugly six years for financial institutions all over the state, with bank mergers, thrift failures, the California recession and the ascendance of mutual funds all taking an enormous toll on branches, jobs and deposits.
But the carnage has been especially bloody in San Diego County, where big local lenders have disappeared altogether and more than 200 bank, thrift and credit union branches, or 30% of them, have closed down. And the nation’s top bank regulator was told Friday that everyone from home builders and high-technology firms, housing advocates to arts groups are feeling the ill effects in the form of tighter money and less civic involvement.
Along with the mass disappearance of bank branches, jobs in San Diego County’s deposit-taking institutions have fallen by 8,000, or 26%, since 1990. And $10 billion, or 27%, of all checking, savings and business deposits--the lifeblood of any local economy--have fled the county.
Panelists at a hearing co-chaired by federal Comptroller of the Currency Eugene Ludwig and San Diego Mayor Susan Golding heard the downsides of the rapidly changing banking industry, a business that may be gaining in technological proficiency but that, by all accounts heard Friday, is losing the personal touch.
The contraction of financial services in San Diego has been dramatic. Three huge locally based thrifts--Great American Bank, HomeFed Savings & Loan and Imperial Savings--failed, while healthy home-grown banks, notably San Diego Trust & Savings, were gobbled up in mergers.
The upshot: The largest locally based bank in the nation’s fifth-largest city--and the state’s second-largest--is Grossmont Bank, with only $473 million in assets, or half of 1% the size of Wells Fargo Bank whose assets are $108 billion.
San Francisco-based Wells Fargo is now the county’s biggest banking presence, with 77 branches. The result is weaker local lending authority and philanthropic support that hurts local economic growth and cultural activities, speakers said.
A symbol of the change is the San Diego Trust & Savings Bank headquarters building downtown. Once a beacon of banking stability, the 107-year-old structure has changed hands three times in two years--bought by First Interstate Bank in 1994, which was then absorbed by Wells Fargo, which sold it to Home Savings, which last month closed it as superfluous.
The industry’s shrinkage and its impact on local businesses and consumers prompted Golding to ask Ludwig to co-host the hearing. During the four years she has been in office, Golding said she has received a steady stream of “concerns, complaints and fears about the mergers and consolidation and what that means.”
Testimony focused on the practical impact of the contraction. For San Diego home builder Sherman Harmer, it means that the loans for subdivision development that he used to get from now-defunct Great American Bank and Security Pacific Bank are no longer available from any California-based lender. He applies to Taiwanese, Canadian or Japanese lenders for financing, which covers less of the development cost than before.
The end result: fewer lots get developed, pushing up prices.
Laurin Pause, chief financial officer for Torrey Science, a satellite telecommunications manufacturer, said small businesses have more trouble getting business loans than in 1990, partly because banks are more risk-averse--but also because staffing cutbacks resulting from consolidation mean fewer loan officers have hands-on knowledge of small borrowers.
“We borrow from Silicon Valley Bank, which doesn’t even have a branch office in San Diego,” Pause said in an interview. “When the company needs petty cash, I go to an ATM.”
And Michael McCraw, president of nonprofit loan guarantor California Southern Small Business Development Corp. of San Diego, said electronic loan-scoring formulas that big banks now use in lieu of loan officers are “unforgiving” toward small, minority-owned businesses’ loan applications.
“Most large lenders now look just at TRW credit reports, and a small-business man may not be perfect. . . . That’s hurting small business,” McCraw said.
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The Incredible Shrinking Banking Industry
Bank mergers, the recession and the siphoning of deposits by mutual funds have caused a dramatic decline in bank, thrift and credit union branches. San Diego has suffered disproportionately large cuts.
(please see newspaper for full chart information)
CALIFORNIA BANK BRANCHES
1995: 7.0 (In thousands)
SAN DIEGO COUNTY BANK BRANCHES
1995: 539
Note: The annual figures are for June of each year. Branch totals include all deposit-taking institutions: commercial banks, savings institutions and credit unions.
Sources: State Banking Department, Sheshunoff Information Services
