With the opening of the stock market on Tuesday, shares of Ventura County National Bancorp started trading on the NASDAQ National Market System--the big leagues of over-the-counter market governed by the National Assn. of Securities Dealers.
Until now, VCNB, whose main unit is Oxnard-based Ventura County National Bank, had been a "pink-sheet" stock that was thinly traded and virtually ignored by analysts. By moving to the National Market System, the stock's visibility among investors improves greatly.
For William E. McAleer, president of the holding company and chairman of its bank, the new listing also could help his expansion plans for VCNB.
VCNB, which caters mostly to local, mid-size businesses with annual sales of $1 million to $50 million, has grown to $243 million in assets since it was founded by 11 local business people in 1982. VCNB is still a pipsqueak, but McAleer expects his bank to keep growing--with its assets hitting $450 million or $500 million by late 1990--in part by buying other banks.
"Our plan is to add another acquisition, or at least be able to announce one, before the middle of next year," he said.
"We're talking with four banks now," he added, declining to identify the potential partners.
Once VCNB finds a bank to buy, it might want to purchase it with its stock rather than cash. In that case, having its stock on the National Market System, where many more investors are available to buy or sell the shares compared with the pink-sheet market, could make VCNB's offer more palatable to the target bank's sellers.
For all of McAleer's growth plans, the likelihood is that, in the 1990s, VCNB will be bought. Beginning in 1991, East Coast banks will be allowed to buy California banks. In other areas of the nation where interstate banking has been introduced, tiny yet well-run banks like VCNB have been gobbled up. Of course, the bigger VCNB gets, the more likely its stockholders are to profit if the bank is acquired.
"I don't want to sell, because I need a job," McAleer said, adding that he hopes to keep VCNB independent. But the total value of VCNB's stock today is about $44 million, and VCNB's management would be hard-pressed to fend off any viable offer.
McAleer--who earned $185,000 in salary and bonuses in 1988--owns less than 1% of VCNB's stock, and none of the bank's officers own more than 5%. Together, however, the officers and VCNB's employee stock ownership plan own about 30%.
Even if it is not bought right away, VCNB must grow to survive in the early 1990s after banks from the East Coast and elsewhere set up shop here. "It's going to take that critical size in order . . . to compete," McAleer said.
VCNB already has bought two other business banks: Conejo Valley National Bank, based in Thousand Oaks, which VCNB bought in exchange for its stock in late 1986; and Frontier Group, owner of the one-office Frontier Bank in La Palma, which VCNB bought for $8 million in mid-1989. The Frontier deal gave VCNB a beachhead in Orange County.
But McAleer's sights are broader. "We have 19 areas within Southern California that we consider the areas of intense commercial-industrial growth," he said. Among them are the National City-San Ysidro and El Cajon areas near San Diego, and the Fontana-Upland region east of Los Angeles."
Not everyone agrees with McAleer's approach, including Marshall C. Milligan, president of Levy Bancorp, the Ventura-based parent of the Bank of A. Levy and VCNB's neighborhood rival. Milligan's bank, which serves consumer and business, is twice VCNB's size, with $582 million in assets.
"In contrast to VCNB, I don't believe in growth for growth's sake," Milligan said. "I frankly don't understand that strategy, and I don't understand the strategy of buying a bank in Orange County."
McAleer said he bought Frontier, which kept its name, for a simple reason: "We could immediately make more money with it." Frontier is a small bank ($70 million in assets) that had loaned out 52% of its deposits, compared to 85% at VCNB. Under VCNB's guidance, Frontier quickly put an additional $13 million of loans on its books and raised its pretax profit by $500,000, McAleer said.
Frontier also gives VCNB entrance into the huge Orange County commercial market, he said, dismissing suggestions that Orange County already has plenty of hometown business banks. "None of them are large," that is, with assets above $500 million, he said.
Whether McAleer can repeat that success in other parts of Southern California remains to be seen, but VCNB generally has maintained strong profits while it has grown.
In the first nine months of 1989, VCNB earned $2.1 million--equal to its profit for all of 1988--and its return on average assets, or ROA, in the nine months and in 1988 were 1.22% and 1.10%, respectively, well above the 1% reading that is considered an excellent performance. An ROA shows how profitably a bank uses assets at its disposal.