These are the best of times for San Diego bankers, and not the worst of times for bank customers. Despite a slight rise in the Federal Reserve's discount rate, credit is readily available and bank capital is high.

    Even Los Angeles Federal Reserve Branch Chairman Anne Evans' musings on these pages three months ago - to wit, San Diego/Tijuana would deserve lower interest rates in a more perfect world of fair monetary policy - has fallen predictably on deaf ears.

    In this case, bankers are especially deaf. Borrowers, not the lenders, would like lower interest rates.

    There's plenty of credit available to businesses, plenty of liquidity in the banking system now. And I think there are very aggressive credit decisions being made now," assures Grossmont Bank CEO Allan Severson, who, since First Interstate Bank acquired San Diego Trust & Savings Bank three years ago, has enjoyed the status of presiding over San Diego County's largest locally based bank. "I don’t think any kind of dispensation is an issue. There's plenty of competition in the marketplace. We get a lot of competition from non-banks, too."

    Indeed, if Federal Reserve System Gov. Laurence Meyer walks away with any impression from his visit with San Diegans May 8, it should be that pressure must be applied to regulate and tax non-banks such as credit unions as heavily as banks are regulated and taxed. This is not an unfamiliar message from bankers across the country; it’s just more poignant coming from San Diego where, for decades, the region's largest local financial institutions have not been banks.

    Until the demise of homegrown Central Savings, Imperial Savings, Great American and HomeFed Bank - all savings and loans, not real banks - San Diego’s largest financial institutions were S&Ls. And following their demise, this region's largest financial institutions have been credit unions - until, that is, George Haligowski last year established La Jolla as the headquarters for ITLA Capital Corp., parent of Imperial Thrift & Loan. Still, ITLA's assets stood at $810 million at Dec. 31, 1996, rather small by San Diego’s former S&L standards of $2 billion to $18 billion.

    Credit unions are a good deal for consumers, or at least those who use them. Their superior competitive position - as non-profit organizations they don’t pay income taxes - allows them to pay higher interest on deposits and charge lower interest on loans. To compete, real banks, which pay real corporate income taxes, must spend more on marketing while squeezing their own spread between the cost of funds coming in (interest paid on deposits) and the interest earned on funds lent out.

    That suggests the breaks enjoyed by credit union members occur at the expense of many more bank customers who pay for the bank's expenses.

    The megabanks, with cost efficiencies created by their bigness, can better afford to compete in this game than the small community banks. The small community bank is where consumers' hearts are - that friendly neighborhood service is something every banker wants to brag about. But community banks, those with assets less than $500 million, are decreasingly where consumers' money resides.

    Community banks in California lost nearly $22 billion in deposits from 1991 through 1996, while credit unions gained nearly $13 billion in deposits in the same period.

    Credit union growth is clearly at the expense of community banks," advises David Burgess, author of the California Bankers Association's "State of the Industry - 1997" report.

    That 74-page report, incidentally, is available for $10 by contacting Shannon Williams, California Bankers Association, 201 Mission St., Suite 2400, San Francisco, CA 94105. Or call her at (415) 284-6999. Or e-mail her at swilliams@calbankers.com. Or fax her at (415) 284-6998. And you'll learn a great deal about what drives banks and bankers.

    What the CBA report won’t tell you is that community banks also appear to be losing deposits to the larger regional and even larger megabanks. The CBA's silence is understandable: It represents big and small banks and wouldn't go out of its way to offend big members.

    But an interview with the CBA's John Stafford was revealing enough. California banks with deposits of $500 million to $2 billion, known as regionals, gained nearly $2 billion to $24.6 billion in deposits from 1992 through September '96, roughly the same period that the community banks lost $22 billion in deposits, Stafford says.

    And the big banks, those with deposits exceeding $2 billion, gained more than $44 billion to $251.3 billion in deposits during this period.

    Before you speculate that all those deposits are coming from community banks, see Page 49 of the report for the other big factor," says Stafford. He's right. Page 49 notes that assets of California savings and loans have declined from about $350 billion to $240 billion from 1990 to 1996.

    But let's get real.

    San Diego’s community bankers' primary competitors are the big out-of-town banks - Bank of America, Wells Fargo and Union Bank of California - and the big out-of-town S&Ls, Home Savings and Great Western. The most effective marketer in the past year has been Glendale Federal Bank, which isn’t a commercial bank - it’s an S&L - and isn’t really the cozy little neighborhood lender that its advertising campaign would have you believe. It enjoys assets of $14.5 billion with headquarters in Glendale, just east of Los Angeles.

    Like the "Stagecoach Bank" that it derides, GlenFed supports a large bureaucracy. And the bigger the proposed loan, the farther away the decision will be made.

    Scripps Bank, the homegrown community bank with deep roots in La Jolla and assets exceeding $300 million, was named the friendliest small-business lender in the entire state by the U.S. Small Business Administration, not because of its volume of SBA-guaranteed loans but because of its proliferation of small loans to small business borrowers without SBA guarantees. And Bank of Commerce President Pete Davis was named Financial Advocate of the Year by the SBA precisely because of his SBA loan-processing efficiency. But you won’t see Scripps or Bank of Commerce, with assets of $375 million, sponsoring the SBA's and Greater San Diego Chamber of Commerce's Tribute to Small Business Luncheon May 23.

    That's because they couldn’t match - or didn’t dare try to exceed - the sponsorship fee being paid by Wells Fargo. Who can compete with a $102 billion megabank that not only acquired the California assets of Great American but also acquired the megabank, First Interstate, that acquired San Diego Trust? Effectively, it seems, only GlenFed's ad agency.

    Oh, Doctor," the ultimate insult to San Diego bankers - and the tens of thousands of provincial customers who actually try to keep their business local - is the selection of Glendale Federal as "the official bank of the San Diego Padres." What the Texas-immigrant owners of the Padres probably don’t get, and Glendale Federal certainly doesn’t care to get, is that San Diegans don’t like Los Angeles. Bad call.

    And then, from local bankers' points of view, there's the niggling competition from medium-size banks such as City National and Silicon Valley, both with single offices in the Golden Triangle, both with respectable local staffs. Tom LaHay, a longtime San Diego banker, is executive vice president of City National Bank at its Villa La Jolla Drive office. Rita Pirkl, who started up HomeFed Bank's health care lending group, is executive vice president of Silicon Valley's Oberlin Drive office. She also oversees the Irvine office.

    City National has assets of $4.4 billion. Silicon Valley has assets slightly less than $2 billion. That's big now by San Diego standards, modest by San Diego S&L standards of the early 1990s, and small by any other big-city standards.

    Both are making inroads in an area where most San Diego community banks have either dropped the ball or have yet to get into the game - high tech and biotech. City National boasts of a "real hiring coup" in Beth Kinsey, former senior vice president at Silicon Valley. Silicon Valley boasts of 350 San Diego clients, almost exclusively in the higher technologies, electronics, telecommunications and life sciences.

    Grossmont Bank, with roots in La Mesa and East County real estate and construction lending markets, moved corporate headquarters two years ago to La Jolla Village Drive and Regents Road, right in between City National and the future Silicon Valley office.

    Synergy Microsystems is a good Grossmont client. Radiation Medical Group is a good Grossmont client. But the higher technologies make up a "small percentage" of Grossmont's business, says Al severson. "There's been some increase, but basically the high-tech companies are funded by venture capitalists because they've not established an operating history of making money yet, and they haven't yet established a solid balance sheet they can take to a bank."

    Scripps Bank President Ron Carlson concedes that financing biotechs is "a rare thing" for Scripps, but it has been more aggressive than most in finding good high-tech electronics credits, partly due to Scripps' proximity to high-tech spin-offs from UCSD. He estimates that about half of his $90 million business loan portfolio is in the high-tech arena.

    Those (loans) are for firms that have gotten off the ground and are generating cash flow, enabling them to service their debt," he says, eschewing fancy footwork such as accepting equity warrants as collateral, a practice that Silicon Valley has used to make inroads where only venture capitalists had dared tread.

    He says Scripps has not hired talented executives with expertise in high-tech lending. Rather, Scripps has "developed our own ability to successfully lend to high techs by doing it, by helping an engineer working out of his garage, making him an equity loan on his house, and then when he generates receivables we can extend a line of credit to him."

    So, let's review: These are the best of times for San Diego bankers because their capital reserves are high, no one's in danger of collapsing, interest rates are OK, and they have plenty of money to lend compared to five years ago. They're good at making conventional small business loans and SBA loans, but challenged to meet the needs of San Diego’s growing higher technologies.

    On the other hand, local bankers are being assaulted by non-bank lenders such as credit unions, and especially by the replacement of San Diego’s big S&Ls with the unrelenting pressure of megabanks that have megabranches and megamarketing dollars that disproportionately benefit Los Angeles and San Francisco.

    San Diego-based bankers are being thwarted in their ability to grow faster into larger institutions that will better stimulate the San Diego economy.

    What can regulators do?

    For starters, approve with haste San Diego National Bank's new application to acquire 10 local branches of Regency Savings Bank, making SDNB the new largest locally based bank with assets approaching $1 billion.

    Regulators can also stimulate discussion and provide incentives to create two more banks headquartered in San Diego with assets exceeding $1 billion. If Glendale Federal and the Padres like each other so much, how about spinning off GlenFed's 20 San Diego branches into a freestanding institution chaired by John Moores?

    What can San Diegans do?

    Learn which locally based banks can best serve your needs. Interview two or three presidents or branch managers. Take them to lunch; they're hungry. Then use the right one. Currently, Grossmont Bank enjoys the highest single loan limit, about $13 million, among San Diego-based banks.

    You wouldn't go to Bank of Commerce for a home loan, but it’s a good place for speedy SBA loan processing. Peninsula Bank understands marine-related businesses, real estate and other specialties. Valle de Oro understands El Cajon.

    If your need is greater than the locals can accommodate, consider the mid-size regional banks with staffs who tend to jump when you call. Bigger than a regional but smaller than a megabank, San Francisco-based Union Bank of California's roots go deep in San Diego; that’s good.

    They all understand a good credit history.

    If you must use the megabanks, and that accounts for probably fewer than 10 percent of San Diego businesses, do.