Daniel Webb has worked in American banking for 30 years. But lately it has seemed like a different world.

Since 1992, Mr. Webb has run start-up Citizens Security Bank, one of just three locally based community banks on the western Pacific island territory of Guam.

"You have the opportunity to experience an international environment without having to learn a foreign language, deal in foreign currency, or learn foreign laws," said the 51-year-old native Californian.

Guam and its capital, Agana, where Citizens Security is based, are located more than 3,700 miles southwest of Hawaii and 6,000 miles west of San Francisco. The territory's people, culture, and economy are more closely tied to Asia than to North America. The island is only 1,500 miles southeast of Tokyo and 1,500 miles east of Manila.

A turnaround specialist who rescued several banks in California, Washington, and Idaho, Mr. Webb has had to learn about and confront radical cultural differences that make his business different from banking in the 50 states.

But he said he enjoys the challenge of being Citizens' president and CEO. The work provides the best of both worlds, culturally and professionally, he said.

"It's a Third World country, but with U.S. dollars, where English is the primary language, and with U.S. government oversight," he said in a recent interview at a California Bankers Association meeting in Santa Barbara.

The struggle to balance local culture with the regulations of a distant government demonstrates the complexity of territorial banking-an amalgam of international and domestic banking that can leave both banker and customer confused and frustrated. There are a dozen community banks and thrifts in six U.S. territories - the Virgin Islands and five in the Pacific.

Locally chartered by the Guam Banking Board and opened in 1991, $65 million-asset Citizens Security is regulated by territorial officials and the Federal Deposit Insurance Corp. Citizens Security must obey most federal laws and regulations, such as the Truth-in-Lending and Community Reinvestment acts. It is also judged on the same capital and lending standards, which present some problems for the small business bank and its customers.

Guamanians and Asians have much different financial and business habits than their American counterparts. They tend to be more entreprenurial. For example, while only 20% of start-up businesses succeed in California, the rate is often 70% on Guam, Mr. Webb said. That makes the banks more willing to lend to start-ups.

Also, Asian lending relies more on collateral than on cash flow and documentation.

"There's more of an Asian way of doing things," Mr. Webb said. "The proximity to Asia gives us a chance to interact with all sorts of Asian businesses."

However, that sometimes creates a catch-22 for the banks and their customers. To satisfy skeptical regulators, banks must demonstrate and document sufficient cash flow, even if the borrowers haven't had income in years and don't own assets other than the collateral. But the borrowers object because showing cash flow may bring the local tax collectors down on them.

Likewise, attracting deposits is also a battle against culture; loan demand often outstrips deposits by 2-to-1. "A lot of people are very leery of banks and tend to keep cash in a can in the backyard," Mr. Webb said. "We are really American bankers doing business as we would in the States, but we're dealing with a customer that has an Asian mindset."

In addition, despite warm climates and proximity to beaches, territorial banks have a tougher time attracting qualified personnel.

The Pacific islands are "a long way from anywhere. A lot of people don't know where (they are)," said Walt Schiller, senior vice president and chief operating officer at the Bank of Saipan in the Northern Mariana Islands. The territorial bank is now applying for FDIC insurance. Mr. Schiller came to the Marianas five months ago after 30 years with First Interstate Bancorp., Los Angeles.

There are also legal differences between the islands and the mainland. For example, although Guam's residents are U.S. citizens, they pay territorial taxes and not federal income taxes. That applies to the bank as well. In addition, territorial banks are technically considered foreign banks under U.S. banking laws, so their ability to branch in the 50 states is restricted.

Regulators do acknowledge the challenges. "We do attempt to recognize the economic circumstances and cultural differences in the trade areas served by these banks," said Don Pfeiffer, the FDIC assistant regional director in San Francisco, who oversees the territorial banks.

Despite the complications, however, competition for the business of Guam's 150,000 residents and more than 100 million tourists is already fierce.

The local institutions besides Citizens Security are $72 million-asset Guam Savings and Loan Association and $750 million-asset Bank of Guam, which has 10 branches on the island and operations throughout the other Pacific territories. It has an office in San Francisco, as well.

The local banks also face competition from Hawaii's two largest banks and institutions from Japan, Taiwan, and the Philippines.

Mr. Webb's experience at Citizens Security started a year after the bank opened its doors. In its first 15 months, the start-up grew rapidly to $50 million in assets. FDIC regulators worried that the bank was growing too fast.

Under a 1992 regulatory order, Citizens Security agreed to bring in more experienced management to handle its growing size. Mr. Webb, who worked at First Interstate and Wells Fargo & Co. before turning around several Pacific Northwest community banks, agreed to try his hand at territorial banking.

Upon arrival, he found that the bank's problems actually stemmed from a lack of appropriate documentation and systems. The bank has earned more than $300,000 yearly since 1992.

"My reaction was sort of like most people's," Mr. Webb said of going to Guam. "I knew it was somewhere in the Pacific, but I didn't know exactly where. I toyed with the idea as an adventure."

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