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Bank CEO sees problems just beginning

Sunwest president gives tips to consumers, says banking industry will face more closures

By ELYSSE JAMES - The Orange County Register

Sunday, May 31, 2009 

Glenn E. Gray is the president and CEO of Sunwest Bank in Tustin. The bank, which mainly handles small business accounts and some personal accounts, is profiting in a time when many others have gone under or been bought out. Sunwest handles entrepreneurial businesses and young business as well as companies that have banked with Sunwest for decades. About 10 percent of its business is personal accounts.

The company headquarters in Tustin has been around for 40 years, so a majority of its clients are Tustin residents, Gray said. Sunwest also has branches in Anaheim, Newport Beach and Laguna Hills; and offices in Oakland and Scottsdale. Sunwest has 85 employees.  

Q: What has Sunwest Bank done differently than larger banks?

A: We're doing very well. This will probably be our best year ever. It's a combination of what we did and what we didn't do. We hired a lot of good people. We focused, from a lending point of view, on healthy niches that aren't suffering through the recession, like health care, defense and security, professional firms like attorneys and property management.

We didn't do subprime lending and we exited the construction business. We kept old clients but didn't take any new ones. Banks were supporting small developers who were speculating – didn't have buyers – and subprime lending was driving that. It was temporarily kind of painful and a big part of what we were doing but we replaced it with other groups that seem to be recession resistant.  

Q: What else have you changed?

A: Now we are offering home mortgage loans but it is all old-fashioned mortgage lending – you need an income, down payment and good credit. We started doing that last May. 

Q: What is the biggest challenge to the banking industry?

A: It's a self-inflicted problem, the result of poor loan underwriting. You hear every day about banks suffering and declining, with problem loans, and they caused it by loosening their underwriting standards. Banking seems to have a cycle every eight to 10 years, finding a new way to self-destruct every eight to 10 years, each time they loosen their standards. 

Q: What is the biggest challenge Sunwest is facing?

A: Finding clients to lend to. We have a lot of liquidity and are eager to lend, but our standards are higher. It's standard for us, but not for everyone. We're viewed probably as being more conservative. Our underwriting process is very thorough. We want to know everything about a business so we can construct the loan appropriately. Some prospects like that, and some want an easier, quicker answer. We don't do riskier transactions. But we research a company's products and where they stand competitively.  

Q: Do you have any advice for new or changing businesses?

A: It's a tough time for a start-up. It sounds simple, but try to avoid excessive leveraging. When you have a lot of debt there's not much room for error. Try to keep your debt under control to give yourself margin for error.

Also, know what you're good at and what you're not good at. It's worth paying a few extra dollars to get a professional in to do your financials or human resources. A lot of people resist doing that but look at it as an investment in business and it allows you to do what you do best.

Third, have a plan for what to do if things don't go according to your original plan.  

Q: What should consumers know?

A: They should probably take more of an active role when choosing a bank. They should research the bank. Ask some of the same questions the bank asks them, such as about their financial condition. You can also ask for the bank's financial statements and ask to meet the people who run the bank.  

Q: How do you see the future of the industry?

A: Sadly, we're going to see a lot more bank closures. It's far from ending. We're in the first inning. So be careful about who you select.  

Contact the writer: 949-553-2918 or ejames@ocregister.com