When it comes to recruiting, Russell Goldsmith, chairman and chief executive officer of City National Corp. of Beverly Hills, compares his bank to a professional football team.
"Sometimes you draft to fill a position, but sometimes you just draft for talent," he said.
City National has been doing a lot of the latter.
As the California market consolidates, the banking company has hired highly skilled officers from its merging competitors, whether or not it has openings for them.
As a result, City National, a $5.8 billion-asset company primarily known as a banker to Hollywood's elite, now competes in an array of new businesses, including lending to agriculture, apparel, and high-tech companies and in private banking and foreign exchange.
These efforts are largely staffed with experts snared from banks in undergoing a merger integration.
"Every significant bank merger in California has been helpful to us talentwise," Mr. Goldsmith said.
That includes the state's two most recently announced merger deals: BankAmerica Corp.'s with NationsBank Corp. and Wells Fargo & Co.'s with Norwest Corp.
Though consolidation has helped City National grow internally, it has made it difficult for the bank to expand through acquisition.
Mr. Goldsmith insists that all of the bank's purchases be immediately accretive to earnings-a goal that is hard to achieve in today's red-hot M&A market.
"The bank would like to expand through additional acquisitions, but at the current prices, it is very difficult for them to do so without diluting their stock price," said Joseph K. Morford, an analyst with Van Kasper & Co.
So City National continues to use high salaries and its emphasis on relationship banking to attract talent from its merging competitors.
The bank has also capitalized on the ever-increasing connections its employees have with other Golden State banks.
"Because of where a lot of our bankers come from, they know the best people in the Southern California banking industry," Mr. Goldsmith said.
"After a merger we become the first attractive alternative for lots of people."
In 1996, City National created an agribusiness group by hiring four lenders from First Interstate Bancorp during its takeover by Wells Fargo.
The bank also snatched from First Interstate an executive vice president for investment products and a senior vice president for human resources.
President and chief operating officer George H. Benter Jr. was hired in 1992 from Security Pacific Corp., which was merging with BankAmerica Corp. Chief credit officer Bob Moore also came from Security Pacific.
More recently, private banking senior vice president Ron Stavert was lured from Wells Fargo, soon after it unveiled its merger deal with Norwest in June.
And regional managers were swiped from BankAmerica, which announced in April plans to merge with NationsBank.
"This bank has really taken advantage of the consolidation of the bigger banks," Mr. Morford said.
"They have hired away many experienced officers."
City National has built a reputation as a stellar performer-its stock price climbed over 70% last year.
And with 37 branches situated in major Southern California markets and strong relationships with wealthy individuals and business customers, the bank is certain to have caught the eye of acquisition-minded competitors.
"In terms of their franchise and what they would bring to the table in terms of deposit-base and customers, they are a very attractive takeover candidate," said Mark Morgan, an analyst with Dain Rauscher in Minneapolis.
First Security Corp. and Zions Bancorp., both of Salt Lake City, could both be interested in a bank like City National, he said.
But City National would probably command a high price, Mr. Morgan added, because the Goldsmith family holds 18% of its stock.
Meanwhile, Mr. Goldsmith said, increasing City National's size is not a major concern.
Once a bank can offer the broad range of products and services demanded by businesspeople and entrepreneurs, "you have to question whether added size can really make a difference," he said.
City National is large enough to offer business loans of up to $40 million "without breaking a sweat," he added.
The person running a small or midsize business, "the investor, or the guy who runs a law firm doesn't necessarily gain anything once a bank gets bigger," he said.
In fact, Mr. Goldsmith argues that City National's size puts it in a unique position in the Southern California market.
The banking scene there is becoming "hourglass-shaped," with several large banks at one end, hundreds of community banks at the other, and a few midsize in the middle.
"We're in that sweet spot in the neck of the hourglass," he said. "We're big enough to provide our clients with everything they need but small enough to really value them, focus on them, and develop strong relationships."
Mr. Goldsmith said he expects to gather new business customers who have become displeased with the service at Wells Fargo or BankAmerica.
However, he said, he does not expect see as many disgruntled customers as he did during the Wells-First Interstate integration.
"I wouldn't think the BankAmerica and Wells deals are going to generate the very visible dissatisfaction that Wells-First Interstate did," he said.
"For business clients, moving all of your accounts from one bank to another is a big pain in the neck."
"But it is going to be a very distracting time at those banks," Mr. Goldsmith said.
"As customers see their service deteriorate and see their banker focused on internal conflicts, as Wells and Norwest sort out which philosophy they are going to follow, you will see defections."
