By CHRIS H. SIEROTY
ONTARIO, Calif. – Once important financial institutions, PFF Bank & Trust and 1st Centennial Bank have collapsed under the weight of problem home-construction loans, only to be taken over by more stable financial institutions.
Despite their closures and other financial institutions shoring up their loan-loss reserves, two new banks have established a footprint in the two-county region.
While First California Bank entered the region with its acquisition of 1st Centennial Bank, Comerica Bank continues its expansion plans with a new branch in Chino Hills. Betty Rengifo Tucker, executive vice president of Comerica Bank’s retail operations in California and Arizona, told The Business Press the company plans to open another branch in Rancho Cucamonga in the first quarter of 2010.
Comerica Bank has slowed its growth plans because of the economic downturn, but the company has actively been looking at areas throughout San Bernardino and Riverside counties for sites to open additional branches, she said.
“We make prudent decisions about expansion,” Rengifo Tucker said. “The Inland Empire is a vibrant community and we want to do business here. We are already successful in Ontario, which we opened in 2004 as part of our original expansion into Southern California. We are not looking to acquire another bank, but instead grow organically.”
The company judges success by how many customers open accounts, Rengifo Tucker said, although she declined to release figures on exactly how many accounts Comerica Bank has opened since the company opened its branch in Ontario.
“The opening of our second Inland Empire banking center gives Comerica Bank a strong local presence in a region comprised largely of high-net-worth individuals and small businesses,” said Rengifo Tucker, a Chino Hills resident. “Over the past four years, we have been advancing our strategy to diversify our customer base and extend Comerica’s reach into key high-growth markets like the Inland Empire.”
The new banking center in Chino Hills is targeting the high percentage of Asian-American customers and Asian-American-owned businesses in the community. To better serve its diverse customer base in Chino Hills, the bank hired a multilingual staff, fluent in Chinese (Mandarin and Cantonese) as well as Spanish, the company said in a release.
“We listen to our customers, and to do this effectively we need to speak their languages,” Rengifo Tucker said. “Hiring multilingual staff specific to the communities we serve is a high priority for Comerica Bank.”
In an interview, she said Comerica Bank intends to lend money to qualified applicants.
“While other banks and credit unions have reduced their lending, we are looking to form relationships with the business community,” she said. “We’re talking to small-business owners about how they might qualify for a loan. We’re also looking to make residential loans. We’re committed to the community and to the growth of the Inland Empire.”
Knowing what small-business owners want to accomplish is crucial even in a recession, she said.
“The roots that we’ve planted in these markets have not only helped us gain a foothold, but our bankers on the ground here in the Inland Empire provide us with a local market knowledge of the various businesses and industries that drive these local economies,” Rengifo Tucker said.
On Jan. 22, Comerica Inc. in Dallas, the parent company of Comerica Bank, reported $196 million in net income for 2008, down 71 percent from 2007. The bank set aside more money to cover potential losses on loans, received less interest income and had to cover an $84 million loss tied to auction rate securities during the year.
It also paid out $34 million in severance-related expenses during the year. The company has reduced its work force by 5 percent since the end of 2007 and is working toward cutting its head count by another 5 percent by spring.
“Mounting job losses and an economy headed deeper into recession have dampened business and consumer confidence,” said Ralph W. Babb Jr., chairman and chief executive officer, in a release.
Loan charge-offs and nonperforming loans both more than doubled for Comerica, driven by weakness from residential developers in California. The company increased its loan-loss provision to $192 million, up from $108 million in December 2007.
Looking forward, the bank expects 2009 charge-offs and bad loans to remain consistent with 2008 and it has set aside enough money to cover potential losses.
Meanwhile, First California Bank made inroads into the Inland Empire in January with the acquisition of 1st Centennial Bank in Redlands. The bank’s failure followed the acquisition and sale of Pomona-based PFF Bank & Trust to U.S. Bank, which cost the Deposit Insurance Fund $700 million for PFF Bank.
On Jan. 23, the Westlake Village-based holding company for First California announced that it assumed the insured deposits of the wholly owned subsidiary of 1st Centennial Bancorp after it was seized by the Federal Deposit Insurance Corp. The move added six branch locations and two loan production offices to First California Bank’s operations, which now include 18 branches spread throughout six Southern California counties.
“The current economic environment has created significant challenges for many banks throughout the nation,” said C.G. Kum, president and chief executive officer of First California Financial Group. “Although we are disheartened to see a bank in our community struggle, we are pleased that First California is positioned to help protect the depositors and financial health of the communities served by the former 1st Centennial Bank branch locations.”
Westlake Village-based First California also took over about $293 million of the failed bank’s assets. The FDIC estimated that the resolution of 1st Centennial will cost the federal deposit insurance fund $227 million.
As of Dec. 31, 2008, 1st Centennial Bank of Redlands had total assets of $797 million and total deposits of $678 million.
Before the bank was seized by regulators, the California Department of Financial Institutions had closely monitored the bank and had ordered it to increase its capital reserves to a safe and sound level. But efforts by the bank to do so were unsuccessful, the agency said in a release.
In December, First California Financial Group received $25 million as part of the government’s $700 billion bank investment program, or the U.S. Treasury Department’s Capital Purchase Program.
The program calls for the Treasury Department to receive preferred stock and warrants to purchase common shares in return for the investment. The preferred stock carries an interest rate of 5 percent a year for the first five years. It then increases to 9 percent after five years if the preferred shares are not redeemed.
The warrants allowed the government to purchase 559,042 First California shares for $6.26 per share. First California was considered “well capitalized” by regulatory standards before receiving the government funds.
“In spite of the challenging financial environment, First California has strong asset quality metrics, more than sufficient liquidity and solid capital positioning,” Kum said in a release. “The company’s receipt of funds from the government’s TARP program underscores the strength and soundness of First California, and allows us to increase our ability to provide prudent lending to consumers and businesses in the communities that we serve.”
By CHRIS H. SIEROTY