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Banks Target New Hires with Established Business

By DAN BEIGHLEY - 10/12/2009
Orange County Business Journal Staff

At a time when personal wealth has been dented and faith in financial institutions shaken, banks have two viable options for growth: buy other banks or hire bankers with a stockpile of clients.

There are plenty of banks and bankers to go around, as many failed or failing banks look to trim costs or eliminate surplus positions.

Younger banks in particular are tapping displaced bankers as a way to grow.

The idea is that these bankers will bring the relationships they’ve made with them, which means more deposits for their new employers.

Core deposits are a key part of a bank’s stability, unlike deposits in certificates of deposit, which often see high rates of turnover from investors constantly moving money from account to account to chase better rates.

“Veteran bankers spend their careers developing a loyal customer base,” said Shawn M. Cardin, executive vice president with Irvine-based Plaza Bank.

That makes them more desirable than younger bankers, as the overall number of jobs in the industry shrinks.

Tustin-based Sunwest Bank tacked on $150 million in deposits it gained through four hires it made at the beginning of the year.

“(Customers) are really banking with the person,” said Chief Executive Glenn Gray.

Gray says he’s looking to hire more, especially those with experience in bank takeovers as Sunwest eyes more troubled banks.

So far, Sunwest has bought Flagstaff-based First State Bank and MetroPacific Bank of Irvine, which should tack on more than $150 million in assets, putting its total at close to $550 million.

Together the buyouts added more than $160 million in deposits—$88 million from First State and $73 million from MetroPacific.

Less Risk

But not every bank is willing to take on the risk of a troubled bank as a way to increase deposits, so most are competing for established bankers.

Newport Beach-based California Republic Bank sees recruiting bankers as a better way to go than buying banks.

“It is a lot easier to acquire good people with relationships than trying to acquire an entire bank, especially today with most banks having so many skeletons in their closets,” said John DeCero, vice chairman of Califor-nia Republic Bank.

He also cautioned that there’s often a lot of talk about people bringing over big relationships. In his experience, few actually deliver what they’d hoped, he said.

California Republic has gathered more than $200 million in deposits since it first opened two years ago.

Plaza Bank, with nearly $160 million in assets as of the second quarter, says it is “aggressively” recruiting seasoned bankers.

It recently hired Al De Grassi after he entertained several offers.

“A top performer like Al can deliver approximately $10 million in deposits and an additional $15 million to $20 million per year in commercial and industrial lending,” said Cardin.

Cardin came to Plaza Bank from failed New York-based investment bank Lehman Brothers Inc.’s small business finance unit, where he made commercial real estate loans.

Two-year-old First Foundation Inc. in Irvine has hired two bankers after finding the market much easier to find talent now than when it first started.

“With many of the larger banks having downsized during the recession, it has left many qualified bankers either without jobs or fearing job security,” said Scott Kavanaugh, chairman and chief executive.

First Foundation has about $170 million in assets and is part of Keller Financial Group., a wealth manager in Irvine.

It added about $110 million in deposits during the past year, with the new hires adding a “meaningful” amount of that, Kavanaugh said.

New York-based JPMorgan Chase & Co., which added a commercial banking unit to go with the failed Seattle-based thrift Washington Mutual Inc.’s branches that it bought here, has added three bankers that came from competitors.

The local experience will help the company expand its commercial banking, which is a new field for it here, according to market President Paul Kaufman.

Kaufman wouldn’t say if his recent hires brought deposits with them from former competitors.

The three came from San Francisco-based Wells Fargo & Co., Minneapolis-based U.S. Bancorp and Charlotte, N.C.-based Wachovia Corp.

Some see recruiting bankers to bolster deposits as mostly a game for smaller banks.

Larger ones depend more on their company names for deposits, said Scott Connella, market president for San Francisco-based Union Bank NA, formerly known as Union Bank of California.

It’s also more time consuming for larger banks, as their customers’ finances often are more complicated, he said.

Connella has hired three bankers this year after three from his staff retired.