San Francisco Business Times
by Mark Calvey
Torrey Pines Bank plans to expand beyond its East Bay base, hiring bankers and adding branches in San Francisco and San Jose.
“We’re a business bank, and San Francisco and San Jose are business hubs. We’re looking to add both bankers and branches in those areas,” Torrey Pines CEO Gary Cady told the San Francisco Business Times Wednesday. “Our strategy is hire teams and then build the infrastruture around them.
“We’ll probably start with loan offices in those areas,” said Cady, who spoke at his bank’s economic forecast breakfast in Oakland. He didn’t provide a timeline for the expansion, which will be overseen by Sedrick Tydus, division president of the Bay Area. Torrey Pines Bank is part of Western Alliance Bancorp. (NYSE: WAL)
The bank’s breakfast program discussed at length why the Bay Area, and San Francisco and San Jose in particular, are high on the bank’s radar: jobs, jobs, jobs.
The economic recovery is well underway in San Jose and is accelerating in San Francisco, where business and tourism is doing well and will get another boost with the America’s Cup, the bank’s clients were told. But the East Bay is having its difficulties due the the housing crisis. That stands in sharp contrast to the recovery from the 2001 recession in which housing helped the East Bay lead Bay Area growth.
Prosperity in San Jose and San Francisco will eventually spell good news for the East Bay.
“The East Bay is like New Jersey to Manhattan,” said Edward Del Beccaro, a managing director with Grubb & Ellis. “As Silicon Valley and San Francisco create jobs, some companies will migrate to the East Bay.”
Careful listeners could also detect a sober tone to the economic discussion and audience questions as business leaders try to ascertain where the economy is headed.
“We have a demand side issue. Until we get over that, we won’t see sustained growth,” said Jon Haveman. chief economist for the Bay Area Council Economic Institute. He pointed to consumers still grappling with debt, slow business investment and government budget cutbacks contributing to weak demand.
With three of every 10 California mortgages larger than the underlying house is worth. Haveman said, “I continue to be amazed that there aren’t more strategic defaults.”
Some of the audience questions focused on the Great Depression and how the current economy and government policies compare.
“It’s not necessarily over, but I think it probably is,” Haveman said of the 2008 financial crisis and its aftermath. He said risks to the U.S. economy include the Fed pulling back from accommodative monetary policy or the federal government embracing austerity to immediately stop deficit spending.
Both moves are considered highly unlikely. The Fed said Wednesday that it will keep interest rates near zero until “at least through late 2014,” which is longer than the central bank had previously indicated.
That expectation fits with some forecasters’ outlook on housing, a key driver of the economy. Del Beccarotold those attending the Torrey Pines breakfast that housing will take a minimum of three to five more years to recover. That starts moving into the same ballpark as a call made this month by Wells Fargo Securities (NYSE: WFC) Senior Economist Mark Vitner, who says a “true” housing recovery could be a decade away.
Del Beccaro also didn’t have good news for those holding commercial mortgage-backed securities coming due in 2013 to 2016. Many of those securities are backed by loans on suburban commercial real estate made during the housing boom years of 2003 to 2006. He predicts “deferred foreclosures and workouts” for those loans, with suburban commercial real estate still under pressure.
On an optimistic note, Haveman says he’s confident California will remain a center of global innovation, with half the nation’s venture dollars invested in the state. Bay Area companies routinely capture 40 percent of that money.
“When things are good in the United States, they’re really good here,” Haveman said. “And when they’re bad in the country, they may be bad here.”
