The past decade hasn't been kind to San Diego's independent banks, but the present has brightened considerably for those that remain.
After harrowing times in the early '90s, community banks in California's third-largest city see profitability on the upswing. Returns on assets and equity are continuing a steady rise that began in 1992, and the eight banks' collective net earnings passed the $12 million mark last year, their highest level of the '90s.
"Many people look at the San Diego area as one of the best growth areas in California," said Donald K. Crowley, managing partner at Smith & Crowley Inc., San Francisco. "The San Diego market has a lot of emerging businesses ... and community banks are well positioned to take advantage of that."
Four years ago, however, things were anything but rosy. The recession's eight survivors posted combined losses of nearly $40 million. In 1992, the group's return on assets was negative 2.42% and its return on equity was an abysmally negative 33.7%.
Now, with California's economy booming again, the group has rebounded, posting earnings in 1995 of $12.5 million, ROA of 0.81% and ROE of 10.2%. Loan-loss provisions have declined significantly, and nonperforming asset ratios have been nearly halved.
"I think the difference is strictly loan quality," said John G. Rebelo Jr., chief executive of Peninsula Bank of San Diego. "People are more careful today. In hindsight, you can look at a lot of the credit extended and say we should have been more careful, but at the time it seemed reasonable."
Experience has also played a key role in the recovery, said Murray L. Galinson, chief executive of San Diego National Bank. "Maybe it's just that we've gotten a little smarter and we're doing things a little better."
The upper tier of San Diego independents appear the healthiest. Grossmont Bank, largest of the eight, with nearly $500 million of assets, earned more than $7 million last year, up from $5 million in 1994. Bank of Commerce, with $320 million of assets, made more than $2 million last year.
San Diego's banking community has changed dramatically in 25 years. In the 1970s, U.S. National Bank and Southern California First National Bank were the big locally based players, while Imperial Federal Savings and Great American dominated the region's savings and loan business.
That changed after the two banks were bought and both thrifts failed, leaving the San Diego banking market fragmented among much smaller players.
Even with the big boys out of the way, however, the road has not been easy for area community banks. The same real estate woes that pummeled the S&L industry also hammered local banks, causing the negative results of the early 1990s.
