Robert Horsman, CEO of San Diego National Bank, says the bank’s opening of several branches helped its deposit growth. The bank improved its return on assets from 1.53 to 1.88, the No. 1 ranking for banks headquartered in San Diego County. (photo/lambertphoto.com)

Ah, spring. The crack of the bat against ball, the seventh inning stretch, the 20-minute wait for a hot dog can only mean that it’s time once again to rank San Diego County banks. Like baseball, banking lends itself to comparison through statistics.

In baseball, stats have been elevated to a religion, thanks to a new cult of laptop-toting general managers. In banking, the established bank’s batting average is called its return on assets, or ROA. An established bank that sports an ROA of 1 percent or higher is hitting around .300. Banks with fewer than three years in the industry generally haven’t yet turned a profit. It is their back story that makes them interesting, such as a previously successful chief executive and/or board; a hot market niche; or a successful out-of-town big brother holding company. The figures cited here (see opposite page for full chart) come courtesy of Highline Data.

As of Dec. 31, 11 San Diego banks three years and older reached the 1 percent ROA mark.

San Diego National reclaimed the gold by improving its ROA from 1.53 to 1.88, moving past last year’s bronze winner First National Bank (1.62 to 1.85), silver medalist First National Bank of North County (1.99 to 1.57), and last year’s golden bank, Imperial Capital (2.06 to 1.78). This year First National took the silver and Imperial Capital the bronze.

Other established banks with ROAs of more than one included Community National Bank (1.70), Sunrise Bank of San Diego (1.60), First National Bank of North County (1.57), California Bank & Trust (1.50), Rancho Bernardo Community Bank (1.47), Southwest Community Bank (1.22), San Diego Community Bank (1.20) and Armed Forces Bank of California (1.17). Banks poised to reach 1 percent ROA this quarter include Regents Bank (0.97) and First United Bank (0.95).

It was tough earning the No. 1 ranking this year.

“We opened several new branches and that helped with our deposit growth,” says SDNB CEO Robert Horsman. “The challenging part is gathering good loans. It’s very competitive and it’s definitely a borrower’s market.”

Even de novo banks (those in operation three years or less) are becoming profitable. These include Security Business Bank, which grew its asset base 75 percent in 2004 to about $92 million; Torrey Pines Bank, part of Robert Sarver’s Western Alliance Bancorp., which gained 64 percent to reach $257 million in assets; and San Diego Trust Bank, which grew 160 percent to about $53 million.

“This market’s been strong, the economy is strong, and the banking industry is healthy,” says Mike Perry, CEO of San Diego Trust. With new banks in less of a hurry to branch and by running lean at the outset, de novos have been able to shave north of 40 percent off the $100 million in assets once considered necessary to break even. San Diego Trust ended last year with a $23,000 profit on an asset base of $53 million.

“We’ve seen the new banks as a group in Southern California doing much better than any class of new banks since 1975,” says Ed Carpenter, local bank consultant and president of Carpenter and Co. “We’ve also seen existing banks having record years.”

Downtown-headquartered Security Business Bank grew assets by 76 percent and turned a small profit in 2004. “Business is good,” says CEO Paul Rodeno. “We love being Downtown, and our North County office is doing well; clients are glad we’re above the (Interstate 5-805) merge.” Rodeno says the bank also has made “key hires” in the Vista and East County markets.

Perhaps the most surprising development in the San Diego market is relative tranquility after years of contraction and expansion. East County’s Cuyamaca Bank was acquired by Escondido’s Community National Bank in October; Cuyamaca’s former CEO Bruce Ives is leading the formation of a bank that has gained regulatory approval to open in Coronado. Carpenter says the unnamed bank is in the pre-stock offering stage.

“There will be some expansion, but the rate of new banks in San Diego County is expected to slow,” Carpenter says.

The only opening in town in 2004 was Point Loma Community Bank, the third in the San Diego market majority owned by Lansing, Mich.-based Capitol Bancorp Ltd. (Sunrise in UTC and Bank of Escondido are the others.)

In La Jolla, de novo Legacy Bank is merging with Landmark Bank, another newish bank with a strong La Jolla presence. Both of these formed from the leadership of Scripps Bank, sold to US Bank in 2000. “The case could be made for combining these banks; they had some duplicate coverage in La Jolla so it probably makes sense to combine them and realize some economies of scale,” Carpenter explains.

Community National Bank is acquiring Rancho Bernardo Community Bank in a transaction expected to be completed in the third quarter. It would produce an institution with more than $822 million in assets.

More good news for de novos: interest rates are still low enough to be attractive to borrowers and de novos have been able to expand rapidly without too much risk to the quality of portfolios. “The small banks have been able to maintain their margins,” Carpenter says, “and we’ve seen no increase in classified loans or write-offs and that’s a very good sign.”

Even established banks with asset bases of $500 million or more showed substantial growth: $2.3 billion Imperial Capital Bank grew 30 percent, $530 million Southwest Community Bank grew by 57 percent, and $640 million Community National picked up 34 percent, including its acquisition of Cuyamaca.

Frank Mercardante, CEO of Southwest Community Bank, attributes the surge in business to expanded markets in Orange and Riverside counties. (photo/lambertphoto.com)

At Southwest, CEO Frank Mercardante attributed the surge in business to expanded markets in Orange and Riverside counties, and a big Inland Empire find in San Bernardino.

Mercardante says the only community bank in downtown San Bernardino, once known as the Bank of San Bernardino but by last year known as the Business Bank of California, was sold to Union Bank. “I had the good fortune of knowing a lot of the people there because I had worked at the former community bank, so I was able to hire some of those people and capture a lot of that business.”

But what about “the bubble?”

Carpenter discounts the effect of a real estate bubble on commercial banks that lend in large part to business. “They’re not so sensitive to any bubble because they’re invested in commercial real estate,” Carpenter says. “If they make a home loan they sell it in the market, so if there was some sort of a bubble, it would be likely to affect the savings and loans.”