Financial institutions proliferate in affluent Los Altos
By John Flood, Town Crier Staff Writer
 PHOTOS BY BRIAN CONNELLY /SPECIAL TO THE TOWN CRIER Above, Joanne Kavalaris, vice president and branch manager of Bank of the West in Los Altos, stands in front of the vault inside the bank. |
Those looking for banking options don’t have to travel far in Los Altos. More than a dozen operate within the city itself. And, there are at least another dozen banks located outside the city that compete here, too.
This beefed-up banking environment makes Los Altos somewhat unique. After all, a town the size of Los Altos, with two-dozen banks, all vying for a piece of the action, might seem like overkill. But, for the banks themselves, it’s called market opportunity.
Follow the money
If you’re a bank, you follow the money. And it’s the installed wealth of Los Altos that brings the banks here. That fact continues to attract new banks, including Borel Private Bank and Trust and First Republic Bank, which opened offices along San Antonio Road within the last year. Wells Fargo Bank opened a branch in Foothill Crossings shopping center in May.
“Los Altos is a very affluent area, and banks are attracted to money,” said Jim Wall, Los Altos resident and retired chairman and CEO of the Private Bank of the Peninsula. “People in this area are wealthier in income and in net worth. Los Altos residents have bigger loans and more deposits.”
For Bank of the West, a full service bank with offices in downtown Los Altos, the market opportunity is obvious.
“The majority of my customers are high-net-worth individuals,” said Joanne Kavalaris, vice president and branch manager of Bank of the West. “We target high-end, upmarket individuals. The median household income in Los Altos is $191,200 per year.”
That median income had a gravitational pull on Borel bank of San Mateo. It opened its Los Altos office in December 2005 with the mission to be a full-service bank offering personalized service.
“There’s a lot of wealth in this area, and Borel feels there is a place for us,” said Steve Fick, senior vice president and manager of the Borel bank in Los Altos. “There’s a need and an interest here, and there’s still a need for personal banking.”
The opportunity of installed wealth wasn’t lost on Heritage Bank when they acquired Bank of Los Altos in 2000. Originally formed by residents of Los Altos, the Bank of Los Altos served the community by emphasizing friendly, personal service.
“The demographics are favorable in Los Altos,” said Raymond Parker, executive vice president in charge of the banking division of Heritage Bank. “It’s a wealthy community and that wealth continues to build. Los Altos incomes are growing, which is important in private banking,” he said.
First Republic Bank also found the wealth-based gravitational pull of Los Altos an attractive opportunity. The bank opened its preferred banking office in Los Altos in 2006 and intends to provide full-service banking with an emphasis on private banking, business banking and investments, brokerage and trust services.
And, for Northern Trust, Los Altos was a natural location to open an office.
“We are focused on serving a narrow niche, 1 percent of America’s wealthiest families,” said Steve Shepherd, vice president of private banking at Northern Trust. “We focus on a few relationships, not a lot.”
According to its Web site, Northern serves more than 20 percent of the Forbes 400 richest Americans.
Sounding a similar refrain
Bank of the West is an object lesson of the typical Los Altos bank. It emphasizes a full range of services backed by high-touch customer service, and a deep connection to the community - common themes among the banks of Los Altos.
“The customers warrant and demand exemplary service,” Kavalaris said. “You need to go above and beyond and offer it. Los Altos customers want a relationship and a history with their banker.”
Other banks in Los Altos provide similar things.
Heritage Bank positions itself as a community-based commercial bank, emphasizing its commitment to Los Altos and its involvement in charities and non-profit organizations.
“We live and work in the communities we represent,” said Parker of Heritage Bank. “Our mission is aligned with the community, and we do well in tight, well-organized communities like Los Altos.”
Borel bank also puts an emphasis on the local connections and the commitment it has to the Los Altos community. The senior management live in Los Altos and Los Altos Hills.
“The three principals of the bank have long-term, highly developed relationships in the area,” Fick said. “We like being involved in the community. It’s a tight-knit community.”
Fick said Borel is a full-service bank and, when a customer walks into a Borel branch, he or she is greeted by name.
First Republic Bank emphasizes its full-service products and exceptional service.
“We invite you to visit our office and be welcomed into a warm, no-teller environment, with fresh-baked cookies and an equally fresh way of doing business,” said Cindy Luedtke, managing director of the Los Altos office.
While not all Los Altos banks are the same size, or even offer the same services in the same way, the commonality of similar marketing messages - offering personal service backed by a strong commitment to the community - tends to dilute the distinctions among the banks rather than differentiate them from each other. And it begs the question, what’s unique about them?
Local, but not really
There’s a whiff of irony in all this. Although the banks put great emphasis on their commitment to the local community, none is locally owned. All of them are branch offices and operate as a part of corporate banking entities with headquarters as far away as France in the case of Bank of the West. Northern Trust is based in Chicago. Borel bank’s home office is in San Mateo. Heritage Bank has headquarters in San Jose. First Republic has corporate offices in San Francisco. Washington Mutual is based in Seattle.
“None of the banks is locally owned,” Wall said. “The real question is, who can behave like a community bank without really being a community bank? It comes down to the orientation and the quality of the local people.”
A stand-alone, independent bank is uncommon these days. It’s the nature of the banking business. Until its acquisition by Heritage Bank, the Bank of Los Altos was an example of an independent bank.
“Unless you expand and open more branches, your end game is to be bought out,” said Bob Grimm, former Los Altos mayor and formerly on the board of the Bank of Los Altos.
Nonetheless, there is a focused, almost passionate, emphasis on providing high-quality service and a feeling that the banks not only speak the local language of wealth, but understand the nuances of the Los Altos and Los Altos Hills cultural ecosystem.
Too much of a good thing?
Are there too many banks competing for the same customer? That answer depends on whom you ask. Bankers welcome the competition. However, the city of Los Altos has taken steps to ensure that they don’t open offices downtown.
“Banks don’t provide interest to a downtown core,” said Community Development Director James Walgren. “We want to promote a contiguous and interesting pedestrian retail presence. Banks create a gap in that pedestrian experience.”
The city passed ordinances to prevent banks from locating in the downtown core, along Main and State streets. And today, they are only permitted on thoroughfares like San Antonio Road, outside the core of the downtown triangle. If they do come in, they aren’t allowed on the ground floor.
This hasn’t stopped new banks from establishing themselves.
“I guess there will be a continued influx of private banks,” Parker said. “Los Altos won’t suffer from competition.” The standard way to compete in a crowded market is “to start a rate war,” he said.
“Competition is healthy and there’s enough business here for everyone,” Kavalaris said.
Others are less optimistic about the increasing number of banks in Los Altos.
“It’s not entirely clear that the market is growing fast enough to support all the banks,” Wall said. “I’m sure the new ones will do fine. The question is how fast they will grow to the size they expect. It’s a matter of time until they get to the size and profitability they would like.”
“It’s hard to imagine that they’re all viable,” Grimm said. “It takes time to be a community bank and it proves how sincere you are. It has to be a part of your makeup. That’s the real test.”
