The San Fernando Valley it seems is fertile ground for commercial banks that cater to the middle-market. A void created by the industry consolidations in the late 1990s is quickly being filled by new banks organized to service that market and existing banks that have moved to increase their presence in the Valley. It’s no wonder, considering that the vast majority of the Valley’s businesses fall in the category of $5 million to $50 million in revenues, the sweet spot for commercial banks serving the middle-market. And, in recent years, many of those companies have seen their own businesses grow, leading to increased lending opportunities. Perhaps because of the business climate, these banks say that that they largely remain unaffected by the increased competition. “There’s such a huge amount of those businesses in the San Fernando Valley,” said Carl Raggio, president and CEO of Western Commercial Bank, which was formed in Warner Center in 2005. “We do feel the competition, but probably not as much because there are so many businesses.” Indeed, despite the competition, commercial banks in the San Fernando Valley are generally reporting record profits and strong asset and deposit growth. Three of the four largest commercial banks in the region saw their net income grow by double digits for the six months ended June 30. At First California Bank in Camarillo, First Private Bank and Trust in Granada Hills and First Commerce Bancorp in Encino net rose 72 percent, 46 percent and 20 percent respectively. The region’s largest bank, First Bank of Beverly Hills, based in Calabasas, saw its assets more than double to $1.4 billion in the same period. “We’ve continued to grow very well over the last five years,” said Jack Feldman, CEO of First Commerce Bancorp. “We’re well ahead of budget on assets, deposits and loans to income year to date.” Bankers attribute the increases to the strong demand by these middle market businesses for services that cater specifically to them. “Sometimes the bigger banks don’t have the decision-making ability that business people like to see,” said Raggio. “The entrepreneurs of the world like the fact that an independent has a chief credit officer, and they know they can make a phone call and get an answer.” Other factors, however, are also mitigating the competitive pressures for these independents. Recently formed business banks like Western Commercial and California United Bank have a roster of board members, prominent in the community that can be extremely helpful in steering business their way. Also helping to boost profits of local banks is the real estate market, which has provided a steady stream of lending opportunities in recent years. Several of the local area banks, including First Bank of Beverly Hills, First California Bank, First Private Bank and Trust, California United Bank and Western Commercial Bank cater to the commercial real estate market. Some say that this specialty has helped to insulate these banks from the increased competition, and as the real estate market cools, so too will the demand for their services. “I can tell you that a lot of these banks are experiencing their growth not through the middle market, but it’s more real estate driven,” said Ray Boyadjian, senior vice president for the Western division middle market group at Comerica Bank. Aware of the cyclical nature of the real estate sector, some of these banks say that they have moved to diversify their product offerings. “Our concentration was more heavily in real estate,” said Rich Taylor, president and CEO of First Private Bank. “But for the last year and a half or two years we’ve been getting into other areas, which has taken the burden away.” The more diversified some of these smaller banks become, however, the more likely they are to butt heads with larger, regional banks. And larger banks can be expected to step up their activity in the commercial lending sector, particularly as the demand for residential lending cools. “With the volume of refinancing of residential loans likely to continue to ebb through 2006, the promise offered by business lending will mean that competition will be intense from the large banks to lure away quality business customers from the small and middle-size banks,” wrote the authors of a report on the state of the banking industry published in 2005 by California Bankers Association and Carpenter & Co., investment bankers that specialize in commercial banking. Local banks believe that their advantage, quick and easy access to decision makers, is of primary importance to their banking customers. But other say that as business customers become more sophisticated they are demanding, not personalized service, but personalized products that fit the needs of small business operators. “What they care about is how are you going to take care of my needs,” said Boyadjian. “How aggressively can you structure a loan, and how are you going to price it? Whether they shake hands with the bank’s CEO, I don’t think that matters.”
