Boutique Banking No Haven From Problems with Loans

Private banking divisions across the country are feeling the squeeze from bad loans. And Bank of San Francisco, which opened its doors 12 years ago as a boutique bank for the affluent, is no exception.

"I'm not happy. I'd like to be making a lot more money," said Donald R. Stephens, chairman and chief executive officer of the $403 million-asset bank.

The institution said last week it expected to report a loss for the third quarter after posting net income of only $686,000 for the first six months. In the first half of 1990, it earned $1.6 million.

The bank attributed the decline to a significant increase in non-performing assets based on sagging real estate values.

Most private bankers have been reluctant to disclose data on nonperforming assets but say deliquencies have risen significantly since the recession began.

Mr. Stephens said Bank of San Francisco is in the process of working through or collecting on bad loans and reviewing its entire loan portfolio. It wrote off one bad load this quarter, a $700,000 credit that the bank said was lost because fraudulent information was supplied by the borrower.

Spurred by the weak real estate market, the bank also said it look a charge to reduce substantially its mortgage banking business. There are no other plans expected to reduce the scope of the bank's business.

Mr. Stephens said the bank is focusing on making its new trust business and its Sacramento private banking office profitable.

While some bankers have expressed concern about the economic health of the western United States, Mr. Stephens said he saw signs of a turnaround. Still, he said it would be several quarters before the bank's earnings improved markedly.

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