Last year, as the private bankers at First Interstate Bank of California prepared to enter the lucrative San Diego market, they ran into San Diego Trust at almost every turn. , "We developed a prospect list, and it turned out that most of the names on the list were San' Diego Trust clients," said John Macon, First Interstate's senior vice president of private banking.
Rather than battle the local leader, First Interstate came up with an easier solution. It simply bought the $2 billion-asset bank, closing the deal two months ago. And, as executives of both banks tell it, the two organizations go together like champagne and caviar.
Catapulted to Third Place San Diego Trust and Savings Bank, the largest trust operation based in San Diego County, has added $3.8 billion in client assets to the $85.5 billion that First Interstate previously administered for trust customers. That has timed up First Interstate's position as the largest trust banker in Southern California.
In private banking, meanwhile, First Interstate has vaulted to No. 3 in San Diego County, behind Wells Fargo and Bank of America. Until the acquisition, First Interstate was a distant also-ran.
First Interstate has also gained San Diego Trust's broker-dealer unit and Pacifica family of mutual funds.
All in all, San Diego Trust has "some great capabilities that we did not have in-house," said Russell K. Snow Jr., executive vice president in charge of First Interstate's trust and private banking groups. The two companies, he added, are "very symbiotic."
Meanwhile, Mr. Snow and others say, the process of melding the two organizations is going very smoothly, with surprisingly few defections of customers and staff from San Diego Trust.
First Interstate had been trying to crack the San Diego's trust and private markets for some time - and it's easy to see why.
The area has roughly 250,000 affluent households, 35,000 of which have trust relationships, according to PSI, a Tampabased research firm. But First Interstate had almost no market presence until opening a trust and private banking office in the city last summer.
Ultimately, First Interstate decided that buying market presence would be more sensible than building it. The company agreed last August to buy San Diego Trust in a stock swap valued at $340 million, or 2.55 times book value.
Though analysts called the price steep, First Interstate clearly won an elegant entry to San Diego.
San Diego Trust - the main unit of San Diego Financial Corp. - was founded in 1889 and has long-standing ties to local families and business. It operates 53 offices, all but one of them in the San Diego area.
On the trust side, "merging our trust operations expands the range of services and capabilities for clients of both banks," said Harvey K. Sefion, San Diego Trust's executive vice president.
The merger "makes us unquestionably the premier trust institution in San Diego County," he added. And the move made First Interstate's private banking center in San Diego the largest of six throughout the state.
Like San Diego Trust, First Interstate's upscale banking operations are heavily steeped in tradition and cater to some of the wealthiest Californians. And statewide, the operations have been a force to be reckoned with
From 1992 to 1993, trust sales doubled, said Daniel J. Wroblewski, senior vice president and manager of business development and marketing for the trust and private banking group.
Mr. Wroblewski said the private banking group's sales are "way ahead of budget." The private banking and trust group's combined fee income doubled in the last 18 months.
Through April, private banking assets are up 12.7%, versus the same period last year.
And growth projections are very optimistic.
By yearend, First Interstate predicts that private banking assets will grow 39% compared with 1993.
Mr. Wroblewski credits stronger marketing and a broader product line for spurring this growth.
Retirement Planning
Last year, for example, it launched Plan Master, a plan management service for 401(k) retirement programs, a minitrust service for customers with less than $500,000, and Investor Line, a line of credit secured by securities for private banking clients.
Now the bank is developing an enhanced individual retirement account product that allows for estate planning. And more products are in the works.
Enhancements Offered
By acquiring San Diego Trust, First Interstate can also offer enhancements to its defined contribution plans.
For example, 401 (k) plan participants will be able to select investment products such as stocks, bonds, options, and annuities.
The management structure for First Interstate's trust and private banking group remains much the same, with Mr. Snow responsible for all institutional and personal trust, investment management, and private banking services.
Vernon C.' Kozlen continues as manager of the trust division. And Mr. Wroblewski heads up business development for both groups.
