The History-Making Success of Torrey Pines Bank
Most current news stories about banks are not good news. At a time when the housing market downturn and the resultant lending crisis have many banks struggling to stay afloat, Torrey Pines Bank in San Diego is a rare bright spot. Founded in 2003, Torrey Pines has experienced remarkable growth in its first five years. From a single office with just seven employees, Torrey Pines now operates seven strategically located offices and employs over 120 full time employees. Most remarkable has been its asset growth, starting with initial capital of $20 million — the Bank has grown its assets to $755 million at the end of its fifth year (Q2 2008).
Q3 2008 results show continued growth and positive trends with assets up to $791 million - $633 million in loans and $583 million in deposits. Non-performing assets of $248,951 were a mere .03% of total assets. These results have prompted some to tout the bank as "the most successful new San Diego start-up bank in the last thirty years."
Can this claim be justified? An analysis of asset growth of the 63 banks that have opened in San Diego County since 1970 (through year end 2007), provided by SNL Financial, indicates that this assertion has merit. If you look just at those banks that have opened since 1990, none other than Torrey Pines has ever attained over $700 million in assets.
San Diego’s most fondly remembered community banks that are no more never achieved Torrey Pines’ asset growth. Scripps Bank reached $631 million and Bank of Commerce grew to $638 before both were acquired by US Bank. Southwest Community bank grew to $655 million in nine years before being acquired by Placer Sierra, and Peninsula Bank grew steadily over 24 years to reach $490 million prior to merging with US Bank. The former Torrey Pines Bank grew to about $650 million in assets before being acquired by Wells Fargo. Today’s Torrey Pines Bank strives to follow these highly-regarded banks’ tradition of personalized service to San Diego County while achieving even greater financial success and longevity.
A few older, established San Diego community banks are now considerably larger than Torrey Pines, but examining their early years shows that their growth was no match for Torrey Pines impressive first five years. California Bank & Trust was founded in 1972 and currently has over $10 billion in assets, but it did not exceed $700 million until 1997, its twenty-fifth year of operation. In 1998 its assets leaped to over $6 billion with the merger with Sumitomo Bank. The second largest San Diego-based bank, Pacific Western Bank, was founded in 1982 and has assets of over $5 billion, but it didn't pass the $700 million mark until 2002 when it merged with First Community Bancorp. Founded in 1973, Imperial Capital Bank has assets of over $3.5 billion, but didn't exceed $700 million until 1996 after 23 years of operation. San Diego National Bank, founded in 1981, has assets of over $2.5 billion, but didn't grow larger than $201 million in its first fifteen years. It reached $906 million in assets in 1997 with the acquisition of FBOP Corp. The fact that Torrey Pines’ asset growth has been organic, without benefit of mergers and acquisitions, makes their success all the more impressive. It took three to five times longer for the four largest San Diego community banks to achieve the asset growth Torrey Pines achieved in its first five years.
Of course, rapid growth alone is not a guarantee of long-term success. IndyMac grew very quickly, building its business largely on alt-A mortgages and other sub-prime loans. As the real estate market fell, their loan losses soared, leading to the need to close offices and layoff employees. Finally, a massive run on deposits prompted federal regulators to seize control of the bank.
In sharp contrast to IndyMac, Torrey Pines Bank has always adhered to conservative lending practices. They have not participated in such risky lending activities as sub-prime mortgages, condo conversions, high-rise condos or leveraged buyouts. They anticipated the current lending crisis years ago by lowering their loan to value ratio requirements and reducing their exposure to real estate loans, especially in land and construction lending. Addressing loan problems early has paid off – their non-performing loans are less than 1/4 of their peer group average.
To accomplish such phenomenal growth, Torrey Pines Bank must be doing a lot of things right. Taking a look at some of the keys to their success offers valuable lessons for businesses of all kinds.
Torrey Pines Bank was founded to serve a specific, clearly-defined segment of the market: small and middle-market San Diego businesses and the professional community. They paid close attention to the banking needs of this customer group and spoke directly to them about those needs in their marketing materials. Because business owners are busy people, Torrey Pines provided the option of meeting with a banker at the customer’s location. Efforts to reach this market have delivered success – for the third consecutive year Torrey Pines is the #1 community bank lender for SBA 504 loans in San Diego and Imperial Counties.
Because their target market has high expectations for service quality, Torrey Pines built its staff from seasoned professionals, many of whom are veterans of such highly regarded San Diego community banks as Grossmont, Peninsula, Scripps and the former Torrey Pines Bank. They made a conscious effort to hire people who had meaningful experience working for successful banks, not failed ones. Torrey Pines hires only the best, and they preserve their investment in quality people by maintaining a positive work environment that keeps employee turnover low, receiving the "Best Place to Work" award from the Society of Human Resources Management. They are the only bank in their size category to ever win the award in San Diego.
As they have grown, Torrey Pines has expanded its offerings to gain a larger share-of-wallet from their customers and to reduce the potential volatility of their business. They offer business and personal deposit accounts, an affinity credit card, a trust company, equipment leasing, and investment advice through sister companies, Miller/Russell & Associates as well as Shine Investments. Unlike banks that are overly invested in a particular line of business, such as mortgages, Torrey Pines is much less likely to experience catastrophic losses if any one business area declines.
Another key to their success is the way Torrey Pines has built awareness and goodwill through community service. In 2007, the bank gave over $175,000 in grants to charitable causes and its employees contributed over a thousand hours of volunteer activities – including bank-wide support of Becky’s House II, a transitional housing community for at risk women and children. For the last three years, the Bank has sponsored the Base Hit Bonus promotion that makes a charitable contribution each time their spokesman, San Diego Padres first baseman Adrian Gonzalez, makes a base hit. This season the program provided over $10,000 to local charities. These and many other efforts are building the Bank’s reputation as one of San Diego’s leading corporate philanthropists as recognized by the San Diego Business Journal in 2007.
In addition to an active Board of Directors, Torrey Pines also utilizes an Advisory Board consisting of executives from local non-profits to help guide their efforts in community development. A primary objective of this Advisory Board is to hold the Bank accountable for meeting the credit needs of the community. For example, while Torrey Pines has not been part of the problem in the current mortgage crisis, they have found a way to be part of the solution. The Bank teamed up with Community Housing Works (CHW), a local non-profit agency that provides affordable housing, to create the Foreclosure Prevention Fund. The Bank established a revolving loan fund with CHW that can help qualified home owners refinance out of sub-prime mortgage loans. This effort helps keep homes out of the foreclosure process, stabilize neighborhoods and strengthen the local real estate market.
In its 2008 CRA examination of Torrey Pines, the FDIC noted that more banks should have this type of close advisory relationship with community leaders.
Another way Torrey Pines builds ties to its customer is by finding non-banking-related ways to serve them. They have entered into an exclusive partnership with the University of San Diego to launch their new Management Academy for Small Business Success. The goal of the Academy is to create a bridge between academia and business professionals that result in training programs that give business owners a competitive edge. Torrey Pines has also launched its Aventine Network, a series of breakfast educational seminars where bank customers have an opportunity to hear from industry leaders and bank experts about strategies they can use to better compete in today’s business environment. Response to these seminars is double the Bank’s expectations.
Much of Torrey Pines’ strength comes from its parent company, Western Alliance Bancorporation. Western Alliance is a holding company that consists of eight financial services companies in Arizona, California, Colorado, and Nevada, including five community banks. Western Alliance is one of the nation’s largest regional bank holding companies with over $5 billion in assets.
Its affiliation with Western Alliance allows Torrey Pines to maintain the spirit of a small community bank with the capabilities and financial strength of a large multi-state bank. The Bank is not subject to liquidity issues other community banks encounter. While many large banks are suffering record losses, Western Alliance’s regulatory capital increased by over $100 million over the last 18 months and it is considered "Well Capitalized" by federal regulators. The banks of Western Alliance show strong deposit growth and core deposit base, without relying on brokered CDs. One of the ways Torrey Pines’ customers benefit from the Western Alliance connection is through its WALTree Deposit Program where the bank works with its four sister banks to provide five times a single bank’s FDIC insurance coverage with the convenience of a single bank contact.
In these troubled times for financial institutions, Torrey Pines Bank offer San Diegans a bank they can count on. Their membership in the highly successful Western Alliance ensures that they are not for sale or vulnerable to acquisition. This stability gives Torrey Pines customers the confidence to build long-term relationships with their bankers.
The success of Torrey Pines bank is noteworthy well beyond the borders of San Diego County. Of all 109 new banks opened nationwide in 2003, Torrey Pines Bank is ranked #6 in deposits (Sister bank Alliance Bank is rated #4). If you discount the first three ranked banks (UBS Bank USA, Charles Schwab and Capmark GMAC Bank) that leverage large non-bank firms, then it can be argued that two Western Alliance banks hold the first and third rankings of deposits among all U.S. community banks founded in 2003.
About Torrey Pines Bank
Torrey Pines Bank is a California-chartered commercial bank, providing commercial and financial services to small and middle market businesses, and personal banking services to proprietors, employees, executives and consumers desiring a personal banking relationship. Information about products and services offered by Torrey Pines Bank is available at: www.torreypinesbank.com.
About Western Alliance Bancorporation
Western Alliance Bancorporation is the parent company of Bank of Nevada, First Independent Bank of Nevada, Alliance Bank of Arizona, Torrey Pines Bank, Alta Alliance Bank, Miller/Russell & Associates, Shine Investments, Premier Trust, Western Alliance Leasing and Partners First. These dynamic companies provide a broad array of banking, leasing, trust, investment, and mortgage services to clients in Nevada, Arizona and California. Staffed with experienced financial professionals, these organizations deliver a broader product array and larger credit capacity than community banks, yet are empowered to be more responsive to customers’ needs than larger institutions. Additional investor information can be accessed on the Investor Relations page of the company’s website, www.westernalliancebancorp.com.
On June 30, 2005 Western Alliance Bancorporation became a publicly held corporation traded on the New York Stock Exchange (NYSE: WAL). Member FDIC
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