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First PacTrust Bancorp is introducing
new products and services in January 2003 and enhancing their commitment to customer
First PacTrust Bancorp, Inc.
610 Bay Blvd.
Chula Vista, CA 91910
Hans R. Ganz
Chief Executive Officer
Interview conducted by:
Bio of CEO,
Hans R. Ganz
President and Chief Executive Officer
Pacific Trust Bank
Born and raised in Switzerland, Hans Ganz has
over seventeen years experience in lending and financial institution management. He joined
Pacific Trust in 1992 and served as its Vice President - Lending, then as Vice President -
Operations/Chief Lending Officer, prior to being appointed as President and Chief
Executive Officer in 1995. In those capacities, he was directly responsible for all loan
origination, processing and loan servicing functions, as well as the daily operations of
all branch offices.
As President of Pacific Trust, he oversees
all facets of financial institution operations, and exercises his management expertise in
coordinating with the Board of Directors and regulatory agencies, and in recruiting,
leading, developing and motivating staff toward optimal performance and accomplishment of
corporate objectives. He has taught classes in sales motivation, underwriting, financial
statement and tax return analysis, and organized workshops for interpersonal skills and
joining Pacific Trust, he served as President of Alpha Mortgage, a residential lending
firm. Prior to that, he was with Great American Bank where he worked as an underwriting
administrator and was later promoted to Vice President - Tract Lending. While there, he
supervised the origination, processing, and funding activities for Single Family Lending,
managed teams analyzing loan portfolios for purchase, drafted and implemented corporate
guidelines, and coordinated with Fannie Mae and Freddie Mac to resolve issues arising from
servicing loans sold to the Agencies.
First PacTrust Bancorp, Inc. (the Bancorp), incorporated in 2002, is a bank holding
company for Pacific Trust Bank (the Bank). The Bank is a federally chartered mutual
savings bank, operating eight office locations in the greater metropolitan area of San
Diego, California. Pacific Trust is a former credit union with over 60 years of experience
in providing financial service. Due to their credit union heritage, they are the only bank
that's part of the CO-OP Network® of ATMs, providing their customers with access to over
15,000 surcharge-free ATMs nationwide. In addition, they are the only bank that belongs to
the CU Service Centers® shared branch network - with over 850 offices in cities across
the nation where customers can do their banking in person.
Pacific Trust operates as a community-oriented financial institution, with its primary
focus on meeting the mortgage and retail deposit needs of the local community in San Diego
and Riverside counties. The Bank offers a broad array of banking services, including a
wide variety of retail deposit products and related services (automated teller machines
and debit cards, safe deposit boxes, wire transfers, online banking and telephone banking)
and a variety of lending programs, including fixed and adjustable residential and
commercial mortgage lending and consumer lending.
Pacific Trusts major investment in a new computer system is allowing them to offer
new deposit products, like our High-Yield Checking and Money Market Checking accounts.
Their lean operation allows them to offer among the best rates available on their savings
products, and more free services or low fees and ways that most fees can be easily avoided
- like free overdraft from savings or a personal line of credit to keep from bouncing a
check. All loan decisions are made quickly and fairly by their management team, not by a
faceless computer program with your credit score. Customers opening a new Savings,
Checking or Money Market Deposit Account at Pacific Trust Bank, receive a Service Quality
Guarantee Certificate with this $50.00 Service Quality Guarantee.
The Bank's lending strategy focuses on two population groups, the low- to moderate-income
population, primarily through multi-family lending whereby affordable rental rates are
offered, and the upper-income population, particularly through jumbo and super jumbo
residential mortgage lending. Such lending is largely focused on sales of existing units.
Additionally, construction and consumer lending has been an important albeit smaller
component of the Bank's historical lending operations.
Pacific Trust's one- to four-family lending is conducted through direct solicitation
techniques utilizing targeted marketing, the Internet and through certain real estate and
mortgage broker industry relationships maintained by its executive and lending staff. The
majority of the Bank's loan volume is derived from brokers and other third-party lenders,
which take applications consistent with its lending programs. In addition, the Bank
originates and purchases non-conforming loans for portfolio, and these loans represent a
majority of the one- to four-family portfolio.
Mr. Ganz, where was First PacTrust Bancorp when you became its CEO and what changes did
I got involved about ten years ago when we were a credit union and I have been CEO
for about seven years. The credit union was started in 1941 and we converted on January 1
2000, to a mutual savings bank. We raised stock and therefore sold the ownership to the
depositors at the end of August of 2002.
Why the change from a credit union and why did you go public?
The change to a credit union had mainly to do with the fact that, at that time,
there were some issues of membership that needed to be addressed. In credit union
language, a sponsor is the company that you really are serving and we had a sponsor, which
was declining rapidly. At that time, our sponsor was ROHR
Industries. Aerospace was retreating slowly in the first part of the 90s,
and then it hit the skids. We had to absorb a lot of charge-offs due to the fact that ROHR
went from fourteen thousand five hundred employees, down to about four-and-a-half thousand
in a short period-of-time; most of these people left without severance agreement and were
unable to make their payments on their car loans and credit cards.
We had to find a way to stop the bleeding first and then to start creating
some solid income to make up for some of the lost revenue of the last few years and to
bring our capital ratio back into line. Therefore, we decided real estate lending was the
right way to go, be that on the personal home loan side or the commercial real estate or
multi-family side. However, having a business plan that the board management agreed to
would bring the company back to excellent health did not clearly fit into the credit union
charter. Therefore, we decided that the best charter to reach our strategic goals would be
a mutual thrift charter. Going to the membership, we let them vote and decided with their
support to convert to a mutual savings bank. One of the advantages of a mutual savings
bank is the possibility of going to the market to raise capital in order to grow the
company. We thought that we wanted to grow the company and the easiest way to finance the
growth instead of taking it from the net income of customers is to go to the investment
community and see if the market was willing to support us with equity capital for our
growth, which we did. We went public at twelve dollars ($12) a share and today we were
trading at $16.30 a share.
Not bad for a three months!
No, not in this environment.
What is the economic scenario like in the area you are serving today?
We had an unbelievable Bull Market in real-estate, the manufacturing side has been
alright and the commercial office side has been a little weak. The personal residences and
multi-family has been quite a boom, and have out-performed inflation by vast amounts. I
think we are now at a point where it will probably go back to a more normal kind of
appreciation because it cant continue at 20% a year; as you know from the
Tech-bubble. If we want to avoid a real-estate bubble, supply and demand and the ability
of people to pay, have to be a little bit in line. If you look at what happened over the
last few years, borrowers were able to go and borrow, and pull money out of their houses
to further their consumer activity without increasing the payments. They were liquidating
equity without an increase in payments and that would have been no problem, if they all
would have paid off high-interest credit cards and other debt, but a lot of them must not
have done that because consumer debt has increased at a pretty-scary rate.
I think we are now in an economic environment where growth is going to come at a steep
price and service is the only thing that will let you grow. I think there is going to be
some uneasiness in the real-estate market; I am not saying a bursting of the bubble, I am
saying uneasiness in certain areas. As long as the politicians down here in San Diego
County, where we have the bulk of our operations, try to solve the problem of low income
housing by assessing fees for new development, that will be used to support or subsidize
low-income housing, supply will not increase dramatically. In addition, as long as they
put more restrictions on future developments, the supply of housing will be such that it
will not be able to keep up with the demand. Therefore, I dont think that we are
going to see a big bubble because the political climate. Overall, I dont see big red
flags but I see little red flags on the horizon.
People who look for trouble before it happens are usually ahead of the game!
I think I am seeing some; I am being told by friends and colleagues that I am maybe
seeing a little too red but I have been wrong about the market this year. I didnt
think we would have the appreciation that we had this year and I was very wrong. However,
there is going to be the year that I am right. We are better suited than just about any
other bank for a downturn with a capital ratio of 20%.
How do you as an organization weather the ups-and-downs, particularly with all the rate
cuts which nobody could anticipate, and what can you do to plan for those situations?
There isnt much planning you can do. It is almost an oxymoron, but to plan the
unforeseen is impossible. You react to it as the situation changes over the years; you
readjust your budget expectation and your planning about certain things and you institute
projects that before didnt make sense and you cancel some that did make sense. I
think what you have to do is keep your eye on the ball and you are constantly
moving. I think to be agile, watch what is happening and to react to it in an appropriate
way is all you can do when the unexpected happens.
What we do is look at our risk exposure. We are a real-estate lender and our risk
increases but interest rates increase and decrease, so our risk got diminished over the
last few years with those interest rates coming down. We are now very cautious and making
sure that when this train goes the other way or the pendulum swings over
again, which it has a tendency to do, that we are not going to take a haircut.
We are now planning to protect from a reverse in interest rates. If the reverse is worse
than we planned, then we will have to increase or decrease the measures in certain areas
to make sure that we are protected from it. That is all we can do at this point.
Nobody knows what is going to happen during the year and everybody says that interest
rates will go up over the next twelve to eighteen months, but that has not been true in
Japan or in Europe over a long period-of-time where interest rates stay low. They
dont have the same production gains that we had in the US, so I dont know if
this comparison is appropriate but there is also a case to be made that we could have
another two to three years of low rates. To be prepared for all three scenarios is what we
try to do. The rates going down; we are not too worried about, rates staying the same; we
would love it and rates going up, we want to make sure we are protected.
Tell us about the philosophy behind your focus on basic services.
The philosophy behind that is very simple; I talk to a lot of customers and on our
website is my direct telephone number; you do not have to go through a secretary, and I
think that is important. Many banks say they provide wonderful service and I dont
know of a bank that doesnt have a free checking account anymore, although when we
started it a few years ago, we were the only ones. I dont think there are a lot of
banks that are competitive that dont have Internet services anymore, especially in
my neighborhood every bank has a website that has some kind of functionality attached to
it in regard to transactions. Real-estate loans on the conforming side have become a
commodity; on the non-conforming side is where we really operate. That is where we can add
some value to the product. On the deposit side, some people are rate sensitive/ but more
than rate sensitive, most people are service sensitive.
I believe people today, just as they were before this big internet boom, are
sensitive to when something isnt right they want to talk to a real person, whom they
can reach easily.
What differentiates us more than any other bank rather than rate or product is what
happens to you when you walk into our branches or call our call-center or when you call
me. I also go out to branches and talk to customers offering seminars on investing in CDs.
I want to stay connected to the customer because no matter what we do, if we are not going
to serve the customer to the customers expectations, we will not reach our strategic
Service is the best differentiator for a bank; this is why we are pushing this hard. If
you go to our website you can see who we are, what we do and why were better. Other
banks say and dont do, but we do what we say! That is where the customers
loyalty and trust come in, because banking is about trust. When they have something to
resolve, we will resolve it! I believe it, my board of directors believes it, management
believes it, all staff believes it and we are going to push hard because we want to stand
out. I believe service is what is going to get us in the direction we want to go. Not only
is our website now talking about it, everywhere you are exposed to us you will see it.
Every teller will have a laminated sheet on their workstations, where all these points are
listed for them to look at every single day.
We are going to make people live it and not just say it.
How do you develop that in your staff?
Some of it is by standing right up front where the wind blows the hardest and say,
Im doing it and I expect everyone else in the organization to do it.
Thats why my name and direct phone line is there, because if I am not stepping up
front, how can I expect all of these people to follow. Leadership is being personally
willing to make the difference by implementing something that is very hard to do in any
business. We have to be totally dedicated in believing employees can provide a service to
the customer, so that the customer becomes a fan of the bank. If I am not there leading
that charge, then I dont think it is going to work.
Give me a concrete example of what you might do customer service wise that somebody might
not find elsewhere.
I will take any phone call and meet with any customer without screening. I will go
and meet somebody at a branch; I have done all of these things. When somebody comes in and
reports a problem and they want to talk to the CEO, they will be given my business card
and they can dial me right then and there. I will stay in touch like no other CEO. I know
that this is not an easy thing to do, because I do get phone calls. Out of five phone
calls that I get, four will be positive calls. It is much better to have my phone number
in any branch or any newsletter as a quality control tool, than paying for some survey of
customer satisfaction. This is the ultimate survey of customer satisfaction. If the
employees know that access to me is unrestricted, their service will be provided at a
higher and better rate than if I were not leading the charge. I am convinced of
Do you advertise in the community?
We do some, which includes a local radio talk-show advertising. We send also out a
quarterly newsletter to everybody that has an account with us, where we communicate with
them about a lot of consumer issues and advice, not necessarily selling a product, but
financial advice on how to do certain things, what to be careful about, identity theft and
all the issues that come along. We use it more as an identification tool than a sales tool
and as a way to stay in touch with customers who dont come into the bank
Are you involved in the community and/or with charities.
We were replacing and upgrading our computer system, so instead of just discarding
them, two days ago, we donated fourteen computers to Operation Home Front.
They are a local organization that will donate these computers, which are perfect for
word-processing and e-mail, to the military families that cannot afford computers, but
will have to talk to their loved ones on the ships. We also sponsor a dignitary luncheon
at the Mother Goose Parade, which is the biggest parade out west after the Rose parade;
the children appreciate that. We are not a huge donor of things, but what we do give, we
want to make sure that the public at large or a certain group of people clearly and
Are there any new products and services that you would like to offer?
In January (2003), we are going to go through a core system conversion and then we
are going to introduce a High-Yield Checking and Money Market Checking accounts; two
products we currently dont have. We are also going to bring all of our loan
servicing inhouse so that a customer will be able to see all his and her
relationships with us, and to execute all transactions on the web.
Are you looking to open any new branches?
Yes, as we have publicly disclosed in our prospectus, we will open one new branch a
year. We have done so this year and expect to do so in the years to follow.
Are acquisitions a part of your strategy going forward and are you committed to remaining
Yes, we are at this point committed to remaining independent, however on any such
statement, I have learned never to say never because situations might change. I am not
currently looking to acquire another bank. If I had a chance to acquire one at a great
price that would be a credit to our income, I would do it.
I think we want to keep our options open and have available strategic
acquisitions or dispositions down the road. Whatever we feel is appropriate for the
shareholders; that might change because what is true this year may not be true next year.
This year we are not planning on selling and we havent decided to buy. We want to
keep our options open but we dont have definite plans one way or the other.
How do you do with non-performing loans compared to your peers?
We have been doing well, if you look at our 10-Q, we have been in good shape from an
asset quality point-of-view. As long as the real-estate market stays up, I think all
thrifts are going to do well in asset quality.
I see that you have a service guarantee; do people take you up on that?
We havent paid out much yet. The
reason we did it is because the bank managers and employees tell the customers about it
when they open their accounts, and if the customer leaves us, because of a service issue,
I think that it is worth at least fifty dollars for me to know. Many companies say open a checking account
with us and we will put fifty bucks in it. We are basically saying that you might go
out and buy a checking account, but to get a loyal customer is not guaranteed. I would much rather tell a loyal customer that
if you ever have a problem, Ill pay it.
What should shareholders and potential investors know about First PacTrust Bancorp?
We are a plain vanilla S&L, and if you want to invest in a plain vanilla S&L, we
are probably the way to go. We dont do many of the things that other banks do
because we are a niche player. We do home lending multi-family and commercial real-estate
loans and deposits, better than anyone else in our neighborhood.
deposits, I think we have the best transaction schedules in regard to fees and service, of
any local bank, We also have the best home loan process and we are faster at approving a
home loan than any other bank locally. I think we have two competitive advantages, one is
that we have better transaction services for less fees and we are faster in our loan
processing and approval than our local competitors.
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