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Local banks weather financial storm

The rain was pouring down and the roads were slick, but that didn’t stop a customer from pulling up at the new drive-up teller station at California Bank & Trust’s newest location in Rancho Bernardo.

While watching a small television screen from the warm, dry interior of the bank, a teller makes some small talk with the customer before sending money through a pressurized tube where the customer can take the money from his car.

Though the bank had a branch near its new location since 1998, it moved into its current space on Bernardo Center Drive earlier this month to increase its visibility and provide better service to its customers.

Though the move was “significant” financially, Senior Vice President of Corporate Marketing Steven Borg said the move will be beneficial to the branch in the long run.

While growth and change might seem strange for a bank while newspaper headlines read some major U.S. banks are having difficulty staying afloat financially, it is often not the case for local- and state-level banks.

California Bank & Trust, a subsidiary of Zions Bancorporation (Nasdaq: ZION), has seen positive earnings through the third quarter and said it has actually benefited from some aspects of the economic downturn felt around the country.

For example, customers were given a boost to their confidence when FDIC limits were raised to $250,000 from $100,000, Borg said. Additionally, banks that did not make or purchase subprime, Alt-A or other adjustable-rate mortgages (ARM) have been somewhat shielded from the housing market bubble burst and credit crunch.

“We never did any of those specialized loans such as subprime and ARM, so we’ve haven’t been writing off a lot of bad debt. So that’s put us in a really good position,” Borg said. “… In these times especially, we appreciate the fact that we are conservative lenders and didn’t take part in those risky loans.”

Additionally, the bank received $1.4 billion from the U.S. Treasury department that has strengthened its capital reserves. Borg said the bank is well-capitalized, and therefore has not been affected by the credit crunch.

Zion Bancorporation had a capital ratio of 6.6 percent during the third quarter -- a standard figure for the top 50 banks by assets, according to data from RBC Capital Markets.

For a bank to be considered “well-capitalized” it must have a capital ratio of 6 percent or more.

Borg said California Bank & Trust “falls well beyond” regulatory standards.

Currently, many large, publicly-traded banks like Citigroup (NYSE: C) and Bank of America Corp. (NYSE: BAC) have equity ratios of 3 percent or less, which could be why their stocks are trading at historic lows.

Like California Bank & Trust, some California credit unions are weathering the financial storm with cash reserves.

Most California credit unions have a capital ratio between 9 percent and 10 percent, but it does not mean they are not immune to the poor economic climate.

According to the National Credit Union Administration, the number of money-losing credit unions was up 75 percent last year.

Borg, however, said he is optimistic about his bank’s future due to California and the other states Zions Bancorporation is in as “growth states.”

“When you look at the demographic shifts in the country, we expect to grow because these states continue to grow,” he said. “This year was a bad year and next year’s going to be tough too, but long-term the projections are good.”


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