In Banking, Small Is Better Now

By Lou Hirsh, The Press-Enterprise

Inland banking experts say federal moves this week to strengthen the financial system, by directly infusing capital into some of the nation's largest institutions, should go a long way toward easing the credit crisis and restoring consumer confidence.

At the same time, smaller community banks and credit unions are taking steps to make it clear — through advertising, customer-service efforts and offerings like high-rate certificates of deposit — that they remain safe havens for consumers' cash.

"Most of the smaller banks are financially safe, so they're starting to tout that in their marketing," said Michael Natzic, a community banking specialist in the Big Bear Lake office of brokerage firm Stone & Youngberg.

For instance, he noted that Big Bear-based First Mountain Bank is apparently spending heavily on a stepped-up marketing campaign, taking out full-page newspaper ads where it does business, touting its history, community service and sound banking practices.

Costa Mesa-based Pacific Premier Bank, which has an office in San Bernardino, likewise ran newspaper ads during the weekend, featuring a message from its president and CEO, Steven R. Gardner.

"Our management has always operated the Bank in a safe and sound manner and we are well positioned today and into the future," Gardner says in one ad. "We do not engage in reckless lending practices and never will."

Leaders of First Mountain Bank and Pacific Premier Bank did not return calls seeking comment.

Larry Sharp, CEO of San Bernardino-headquartered Arrowhead Credit Union, said the cooperative is gaining new lending clientele among Inland small businesses without having to boost marketing efforts. It has recently been getting loan inquiries from established businesses with good credit histories that were turned away by big banks that have been tightening their lending.

As a result, Arrowhead has seen its small-business loans in the pipeline double in the past 12 months, going from nearly $7 million a year ago to nearly $14 million. "A year ago we were fighting for quality loans," Sharp said. "We're not fighting so much right now."

Riverside-based Altura Credit Union recently opened a branch in Hemet and has two more openings slated in the next five weeks. CEO Mark Hawkins said Altura continues to get the word out though advertising and community outreach, including working with its employees who deal with the public, that credit unions are a safe place to be, even though the member-owned cooperatives have never faced the dire credit conditions confronting big banks.

Hawkins said a bigger test of recent reforms is what they will do to help the Inland housing market, the region's core economic problem. While Altura does not do construction or exotic home mortgage loans, it has recently seen rising delinquencies from customers on home equity loans, tied in part to falling home values and job losses.

In the long run, shoring up the banking system and credit markets bodes well for the Inland area because it will allow more young people to buy homes, Hawkins said.

Sharp predicted the region could see benefits from recent reforms in three to four months, as larger banks put more loan money into the community as their credit and liquidity concerns are resolved.

Natzic said government actions of the past two weeks should go a long way toward calming investors' nerves in the Inland area and elsewhere. While nobody will know the full impact until legislation and federal investments are actually implemented over the coming months, he said this week's apparent stock market uptick is an important early indicator.