Metrobank in Los Angeles hasn't been immune to Southern California's economic troubles. Unemployment from base closures and commercial real estate problems have dragged on its earnings.
So why did Comerica Inc., the Detroit regional, offer to pay 1.7 times book value for the $1.3 billion-asset Metrobank? Because Comerica wants to build a high-powered business banking franchise in California. And, in Los Angeles, business banking is Metrobank's game.
Metrobank had the largest amount of business demand deposit accounts as a percentage of total deposits - a whopping 49.17% - in the hotly competitive Los Angeles market. For regional banks that want to gain the nimble, growing small businesses - called "gazelles" nowadays - that are Metrobank's bread and butter, 1.7 times book isn't so huge a price, after all.
Only seven of the 80 or so independent community banks in Los Angeles County have greater than 40% of their deposits as commercial demand deposit accounts.
The most successful Los Angeles small business banks such as Metrobank were founded in the 1970s or early 1980s. They spawned dozens of clones in the market in the late 1980s, making Los Angeles one of the most competitive markets for small and midsize business relationships in the country.
Imperial Bank, a $2 billion bank with 42% of its deposits in commercial accounts - driven by a specialty in the title and escrow business - does it by staying focused.
"We have a tunnel vision," said Robert M. Franko, chief financial officer. "We don't go after banking business simply because the industry thinks it's in fashion."
"Every one is zeroing in on this part of the business," said Gary Nudell, chief credit officer of American West Bank, a small Encino institution that runs a close second to Metrobank in its concentration of commercial demand deposit accounts.
What's made the difference for American West and other Los Angeles successful business banks, Mr. Nudell said, is hyper-attentiveness to clients.
"The simple fact is that entrepreneurs like to have a banker that's involved," he said. "No customer who calls this bank has to provide an account number. We know them by name."
Mr. Nudell said, however, that the large California banks have been giving community banks a run for their money in recent years as tapping midsize businesses has become one of the few solid ways to generate new loans.
"They've been very aggressive in their pricing and credit terms," he said. "They've taken potshots at some of our best customers. Every time we go see a small-business customer, it seems like a Wells Fargo car is driving out of the driveway as we drive in."
Where American West can't compete on price, it tries to compete on service and innovation.
"And we prospect," he said. "We don't advertise, just prospect."