Larry Hartwig

“Sometimes you want to go where everybody knows your name.”

It was true for Sam Malone and Diane Chambers and their favorite bar, and it’s certainly true for bank customers with a million or so dead presidents on deposit. Escondido’s California Community Bank traces its origins to organizers who were once favored customers of North County Bank and other community lenders. California Community’s CEO Larry Hartwig tells how one of the $1 million-plus-on-deposit customers went into a Wells Fargo to cash a check, forgetting his wallet with the all important ID.

“They wouldn’t cash it because nobody knew him,” Hartwig says.

Shortly thereafter, the rejected customer became an organizer of California Community, an Escondido-based bank formed to take the place of the departed North County, First Pacific and Peninsula.

Hartwig entered the picture in the summer of 2002, having finished his turnaround assignment at Sacramento’s Feather River State Bank. A veteran of BofA in San Diego and $500 million-plus Southern California Bank in Anaheim, Hartwig had gotten his fill of Sacramento’s valley fog — “you couldn’t see your hood ornament” — 38 annual inches of rain and 110-degree summers. A visit to local bank guru Ed Carpenter hooked up Hartwig with Findlay Vanderby and the organizing group of California Community.

Hartwig joined as a consultant with the understanding that he would lead the bank once the application process was complete. An oversubscribed offering brought in an initial stake of $12.1 million, and by August 2003 California Community was open for lending.

California Community stands to run in the red this year, but Hartwig says a bump in interest rates will open the spread for community banks like his, and he expects to reach a break even point by the time the bank books $60 million to $70 million in assets.

“As the prime rate goes up, deposits go up by a rate of half that, so it widens your net interest margins,” Hartwig explains. “If rates continue to go up, loans that are needed to break even would drop to a smaller number.”

The bank’s portfolio of about 100 loans includes borrowers in the professions (doctors, lawyers, accountants), housing construction, commercial real estate and construction, manufacturing and distribution. There is some SBA activity, but Hartwig says it’s not a core product.

The bank plans a branch this year, and one every 12 months, along the Route 78, Interstate 15 and I-5 corridors.

Rosy scenario economic forecasts are in vogue, but Hartwig says energy prices, the Iraq situation and uncertainty over interest rates could put a few clouds on the horizon. “I wouldn’t rule out a decline in housing prices,” he says, as adjustable rate mortgages catch some homeowners short. “Seven point five (rate) mortgages is the cutting edge that cuts into demand and makes rental housing look like a better deal; that’s when you could get a pullback.”

Hartwig is having a good time building his own home, and says, “I don’t look at it as an investment, I look at it as a place to live.” He’s here long-term. “My wife threw out all the moving boxes.”