February 23, 2024
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Community bank recovery takes shape in region


A recovery is taking hold across the region’s mid-sized banks, marked by higher profits and climbing share prices.

Ventura-based County Commerce bank’s share price is up about 7 percent year-to-date, coming off of the bank’s most successful year so far. “Growing during an economic downturn is not easy, as you know,” CEO Joe Kruetz told the Business Times, attributing his bank’s stability over the last five years to a healthy loan portfolio going into the recession.

In Santa Barbara County, Goleta-based Community West Bancshares appears to have mounted a successful turnaround. The bank’s share price is up more than 44 percent this year after it reported a $2.3 million fourth-quarter profit, compared to a $8.6 million loss a year earlier.

“Our team’s success in executing our strategic plan on schedule allowed us to end a highly successful year with three quarters of profitability behind us and restore the bank to stable footing,” CEO and President Martin Plourd said in a statement. “Our 2013 focus is on addressing growth in a responsible manner that supports lending in the communities we serve and to continue to work diligently to improve asset quality and reduce problem assets.”

CEO Tom Dobyns of San Luis Obispo-based Mission Community Bancorp said he’s seeing a broad-based recovery taking hold in the Central Coast. Shares of the parent company of Mission Community Bank are up about 13 percent year-to-date. The bank hadn’t yet reported fourth-quarter earnings as of press time, but through the first nine months of 2012 had earned $451,000, compared with a $1.5 million loss in the first three quarters of 2011.

“It really was a turnaround year for us.” Dobyns told the Business Times.

He said he holds regular meetings with Central Coast business people across all sectors to gauge the health of the regional economy. “The trend is definitely up,” he said. “The phone is starting to ring more, people are curious, sales are increasing.”

Business leaders are also telling him that residential real estate is making a striking recovery. “It’s really hot here,” he said. “Sometimes there are six to 10 offers on homes in the $250,000 to $400,000 price range.”

Developers are buying land in anticipation. “They want to be first to market with product, which is primarily residential, when they really do see it turning around,” Dobyns said.
But small-business loan demand across the region still remains soft, the bankers said. When small businesses do take out new loans, it’s often not to expand but to make delayed purchases or improvements.

“The business segments in general, have tightened their belts. They’re skinnier and they’ve learned to live with that. They’re not starting to hire again,” Dobyns said.
Kruetz said that between Union Bank’s $1.5 billion purchase late last of Santa Barbara Bank & Trust — then the largest bank based in the region by far — and the impending purchase of Westlake Village-based First California Financial Group by rival PacWest Bancorp, the regional lending landscape has changed dramatically. The two largest players at the top have been swallowed up by bigger banks, leaving a host of mid-sized banks to lead the pack.

“I definitely think it’s an opportunity for a community bank when some of your peer banks are being acquired by larger banks,” Kruetz said. “We all know that it’s not as easy for larger banks to deal with the banking needs of small and medium-sized businesses.”

The bankers agreed that for the most part, the dust has settled on bank failures and consolidations in the region — although some strategic acquisitions could still be in play.

“It is still a stated objective to increase our footprint along the Central Coast,” Dobyns said. Mission Community purchased Santa Lucia Bank in late 2011, almost doubling its assets to $435 million.

Not including First California, the next two largest banks in the region as of the third quarter of 2012 were Paso Robles-based Heritage Oaks Bancorp and Santa Barbara-based Montecito Bank & Trust, each with about $1 billion in assets.

Montecito Bank & Trust is privately owned by a single shareholder, developer Michael Towbes. Publicly traded Heritage Oaks’ share price has slipped just over 1 percent this year, despite the bank almost doubling its earnings to $13 million last year.

Kruetz said the broad-based recovery is evidence that the fallout from the financial crisis has waned. “What is now helping other regional community banks become healthier is that they have written of their nonperforming loans and they have recapitalized,” he said. “They’re in a much healthier position because they haven’t had to write off more loans and answer to regulators why, because they’ve had to do that, their capital ratios aren’t where they should be.”