Glendale Federal Bank is formalizing its ties to community groups in the Golden State and the process could enhance its efforts to boost small- business lending.
The $15.2 billion-asset thrift, based in Glendale, Calif., created five community advisory councils that will each focus on a different market segment: Los Angeles, Orange County, San Diego, Central Valley, and Northern California.
Each council will be made up of 8 to 10 members drawn from various charities, local businesses, real estate concerns, and civic and business associations.
The councils will help Glendale Federal's top executives assess the financial needs of the communities where it operates, make sure the thrift meets its compliance standards, and act as a liaison between top executives and the public.
Glendale Federal's chairman and chief executive officer, Stephen J. Trafton, was unavailable for comment Tuesday, but said in a statement that early discussions with council members "have already led to positive feedback to the bank and have resulted in additional goals and objectives being incorporated in our business plans."
"For a long time, Glen Fed has had a very local focus," a spokesman said. "We saw the need to have a more formalized process. The councils allow for greater community access to senior management."
Advisory boards are not new. Many banks have had such groups for years as a way to better coordinate fair-lending, community-reinvestment, and charitable activities.
They have a second function as well: making contacts in the community that could lead to new business later on.
"The boards generally pay for themselves in terms of their marketing and revenue opportunities," said Thomas Theurkauf, an analyst at Keefe Bruyette & Woods.
Like many thrifts, Glendale Federal is trying to diversify its business by expanding into small-business lending, analysts said. Making formal ties with community and business leaders could help create momentum.
Glendale Federal executives acknowledged that the councils could have that affect.
"They will give us a bird's-eye view to these communities and help ensure that we have developed the right product mix for that area," said Wendi Chavis, senior vice president and director of urban affairs.
Other banks have longstanding community relations boards that function with a broader mandate. BankAmerica Corp.'s advisory committee takes up issues affecting the San Francisco bank's sprawling, multistate territory.
The practice is not limited to the West Coast. Chase Manhattan Corp. runs five advisory boards, divided along the bank's businesses. Chase has a metropolitan region board that takes up issues relevant to its business near New York City. And it has an international advisory board that focuses on its foreign activities.
But some banks prefer to keep their community liaison efforts less formal. Los Angeles-based Sanwa Bank encourages its top executives to sit on the boards of local charities, associations, and other community groups, a spokesman said. But it has no plans to create a separate, formal council.
