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Tuesday, Oct 4, 2022
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Small Northern California Thrift Enters Valley Market

By LINDA COBURN Contributing Reporter Why would a bank from Santa Rosa, with branches in San Rafael and Palo Alto, want to enter a major metropolitan market like the San Fernando Valley? Luther Burbank Savings opened its first branch office in Southern California in Encino on Aug. 13. A second branch in Toluca Lake, in the space where Panda Express used to be at the corner of Riverside and Alameda, is planned for a December opening. “We really feel we have something to offer that our competitors don’t and that is a sense of security,” said John Biggs, Luther Burbank COO. “In part the problems the big banks are now having is due to their public ownership.” He continued that being a privately-held institution, “We have the option to run our business the way our owners feel best serves our customer base and their investment needs.” It’s a strategy that has worked for them. LBS owns no real estate and non-performing assets are an almost-undetectable 0.09 percent. Technically, LBS is a thrift or savings and loan, not a bank. Thrifts are only chartered to offer specific products and services. They can take deposits and they can lend money to individuals purchasing single-family or multi-family homes. That’s it. They don’t offer credit cards, home equity lines of credit or auto loans. As Biggs puts it, “We are a traditional real estate lender.” LBS does not originate loans for the secondary market and they don’t offer any exotic loan products. They’re also very choosy about who they lend money to. “We are very strict about only working with the ‘A,’ the prime borrowers,” said Biggs. “We’ve never gone down the credit ladder of going into lesser quality borrower relationships.” This means LBS has side-stepped the problems so many other institutions are having with the secondary market collapse and the sub-prime loan mess. What do you expect from a company whose namesake is a botanist best known for developing a potato? (This is not the same man for whom the City of Burbank is named that would be pioneering dentist David Burbank who was instrumental in bringing the railroad to the town.) “The Valley and Encino (in particular) is a target market that we picked because we really feel the business we do is not well-served by a lot of the other banks in the area,” said Biggs. Most of the area’s community-based savings and loans are gone, swallowed up by larger institutions. According to the FDIC, since 2005 the number of savings institutions in the state of California in total has dropped from 31 to 24 and the number of employees in that sector has plummeted from 84,868 to just 26,960. But there are still plenty of places to buy a CD or get a loan to buy a house, especially if you are the type of customer that LSB is seeking those in the industry say. James D. Hicken, president of the newly-opened Bank of Santa Clarita thinks it’s not going to be easy for Luther Burbank. “They’re moving out of their small town environment into metropolitan Los Angeles and that’s a totally different marketplace,” he said. Developing strong relationships with customers is a major factor in the success of an institution like LSB. “They’re going to find that banking in Encino is not like banking in Santa Rosa or some place like that,” Hicken said. The loyalty and ease in building relationships does not exist as readily (in the San Fernando Valley) as in those communities.” Biggs isn’t going to be scared off that easily though. LBS has been making real estate loans in Southern California for eight years, said Biggs. They opened a loan center in Manhattan Beach two years ago, he said because the sheer volume made it more efficient to do so. “We have a lot of ties to the area,” Biggs said adding that he was a resident of Los Angeles for 30 years. Luther Burbank Savings At a Glance Data as of: 6/30/2007 Deposits $1,591,011 Loans $2,548,258 Branches in California 4 Branches in Southern California 1 FDIC Insured since 1983 Return on Assets 1.6% Efficiency Ratio 30% Real Estate Owned $0 Non-performing assets 0.09% Headquarters: Santa Rosa, Calif.

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