Peninsula Bank turned 10 years old last month, somehow having avoided most of the growing pains, adolescent awkwardness and midlife crises that have afflicted so many of its three dozen local competitors in the last decade.
The low-profile but highly profitable bank has never lost money since its founding in 1975. It has maintained a 25% annual growth rate in assets and has a loan loss record that is among the best in the industry.
Last year set another record for net income, reaching $938,320, or $1.50 a share, compared with $866,925, or $1.39 a share, the previous year. And at the March board meeting, the semi-annual cash dividend was increased to 18 cents per share from 15 cents.
"They don't do any fancy stuff," said Gerry Findley, author of the Findley Reports, a research service that analyzes independent banks in California. "They just make money."
Even in the deregulated world of banking in the 1980s, Peninsula hasn't varied its approach to the business.
The founding nine directors still sit on the board, and the four senior officers remain in the same offices they had in 1975.
Most of the original 300 shareholders have kept their investments, although they could have made a tidy profit by selling their shares: $100 in Peninsula stock purchased in 1975 is now worth nearly $600.
The bank prides itself on not "cold calling" for new business, a common practice at most other banks.
Virtually all new customers come through referrals from its board of directors, shareholders and client base. In 10 years, Peninsula has opened just two branch offices, both within a few miles of its Point Loma headquarters. And yet it has grown from just $1.25 million in assets to more than $88 million, making it the ninth-largest San Diego County-based bank.
Peninsula has a textbook community bank portfolio, with a 30%, 30% and 40% mix of consumer, commercial and real estate loans.
Last year, when many of its local competitors wrote off millions in bad loans, Peninsula charged off only $100,000--less than one-quarter of 1% of its total loans.
"They have defied all the statistics," said Peter Q. Davis, president of the Bank of Commerce. "I share in the industry's awe" over the bank's success and remarkable stability.
"There's no magic formula," said John Rebelo, president of Peninsula. "But the one thing our board and management has is patience. We started with the idea that we'd be around for a heck of a long time. If we can do a little better this year than last year, it will compound into something our shareholders will be happy they invested in. Other banks want to do it overnight. If they can . . . more power to them."
But too often the results of trying to get rich quick in banking can be disastrous. Six California institutions folded, and 79 banks nationwide were seized by federal officials and declared insolvent last year--a post-Depression record for bank failures.
Three San Diego-area banks--First Western, Balboa and Southwest banks--have been ordered to raise additional capital by federal regulators, who were concerned about their rapid growth and loan losses.
In addition, BSD Bancorp, parent of five area banks, agreed to sell its Bank of La Costa subsidiary to raise new capital. The banking company suffered a nearly $1-million loss in 1984 when problem loans on the books ballooned to $4 million.
Despite the grim industrywide statistics, Peninsula has never been stronger. Its capital increased to $5.3 million at the end of 1984, and loan losses fell to less than half the rate of the previous two years.
"We don't try for any fantastic years," Rebelo said. "But we try to make them all good years . . . and to do better each year. Banks shouldn't be glamorous. They should be the foundation of the economy, without peaks and valleys" in their performances.
One trap Peninsula avoided has been long-term loans. From its inception, Peninsula wrote three-year call dates into its real estate loans, as a hedge against rising inflation and money costs.
"To this day the average maturity on our real estate loans is just three years," Rebelo said.
The other key is that Peninsula obeyed the golden rule of banking: Know your customer.
"If a customer is from the area, we should be able to get a handle on them quickly," Rebelo said. "A majority of the time we know (the customer) or can find out who they are from our board or shareholders."
Rebelo and executive vice presidents Larry Willette and Loren Burrell were all born and raised within a mile of the bank's headquarters.
"We're more a community bank than the other independents" or small local and regional banks in the county, Rebelo said.
Most of the San Diego-based banks that have opened during the last five years restrict a majority of their business to serving commercial and wealthy individual customers. Others rely in part on "brokered deposits," or the purchase of large block of cash from institutional investors from outside the market area.