Highly rated Pico Rivera bank aims to overcome longstanding obscurity.

Pacific Western National Bank, a small Pico Rivera-based institution, has quietly been accumulating a track record that may well make it the envy of the industry. It has been consistently profitable for more than 13 years, in spite of an unkind banking economy. It's rated consistently high by the pinstripe rating services. And, chances are, you've never heard of it.

But if Pacific Western's soccer-loving CEO, 42-year-old Dana Godfrey, has his way, the bank's obscurity will soon be overcome.

"He's not the traditional gray-haired banker in a three-piece suit," said Howard Levenson, chairman and CEO of Western Financial Corp., a San Diego-based securities firm that makes a market for Pacific Western's stock. The broker-dealer added, "(Godfrey) is young, energetic and very capable."

So why is NASDAQ-ticker PACW trading at only about 70 percent of its book value? Because of the company's relative obscurity, Levenson insisted. "(Other) banks that have their kind of record are selling for two times book value," he commented. "Their story just hasn't been told yet."

"Pacific Western is a small but proven independent bank that has operated for 13 years-plus. They've never had a losing year -- which is unusual for California banks, large or small," added Levenson, whose firm provides investment banking and market making services to numerous independent banks throughout the state.

Godfrey is focused on the long term. "We want to balance growth and profit, not exchange one for the other," he said.

To achieve that, Pacific Western acquired its third branch, located in West Covina, from the Bank of California in 1992. Pacific Western's other two branches are in Downey and at its headquarters in Pico Rivera.

Last month, Pacific Western also acquired the depository assets of Mechanics National Bank's Downey branch office after the Office of the Comptroller of the Currency shut that failed institution down. Pacific Western's existing Downey branch will handle the new clients who were formerly with Mechanics, Godfrey noted.

"We're not trying to build a bank on every corner," he stressed. The assets of Mechanics other seven branches were purchased by various other banks.

Pacific Western does want to draw customers from the giant regional banks, and focus on the "high touch" service that Godfrey asserts the larger banks don't offer. While offering traditional banking services to both businesses and individuals, Pacific Western has its largest area of business in consumer installment loans, particularly auto loans, Godfrey explained. "We deal with car dealers and car brokers and buy the loans," he said.

Since moving into that business five to six years ago, the bank now has consumer loans that account for 40.5 percent of its total loan income, far surpassing the amount of income generated by commercial and industrial real estate, the second-largest sector, at 27.6 percent of total loan income.

It was a real estate loan that handed Pacific Western one of its largest losses. In 1992, the bank took a $1 million write-off on a second trust deed on a Beverly Hills residence, causing its annual net income to fall to $565,518, a 51-percent drop from the year before. The loan was made before Godfrey joined the bank in August 1990, and the local real estate market collapsed not long after he came on board.

"There was a lesson learned," the CEO noted wryly. "We don't belong over there (in Beverly Hills). We didn't belong in a secondary position on a loan like that, either. That won't happen again."

Pacific Western was able to cover the loss from its reserves, and continue to top the ratings for fiscal soundness with a 16-percent risk-based capital ratio, 60 percent greater than the minimum required for a "well capitalized" regulatory rating. Pacific Western's net income for 1993 rebounded 30 percent to $732,597, and earnings per share rose from $.91 in 1992 to $1.17 in 1993.

"Pacific Western is well capitalized," concurred Brienne Jorgensen, a spokeswoman for Bauer Financial Reports Inc., a financial institutions rating service based in Coral Gables, Fla. "They're now 'five-star' rated for three consecutive quarters," she pointed out.

Bauer awards its five-star rating, the firm's highest, to financial institutions with risk-based capital exceeding twice the federal minimum regulatory requirement. To get the five-star rating, institutions must also have their loan delinquencies and repossessed assets at "manageable levels," and they must be "soundly invested," Jorgensen explained.

Pacific Western had enjoyed a four-star rating for 18 consecutive quarters prior to rising to its five-star rating three quarters ago.

Pacific Western has also apparently impressed other major financial institutions rating services: Sheshunoff Information Services Inc. of Austin, Texas has labeled Pacific Western with an "A" grade, its second highest, and the Findley Reports Inc. of Anaheim, Calif. has placed Pacific Western in its "premier performance class," its second-highest rating category.

"We're the best-kept secret in town," Godfrey joked.

Market-maker Western Financial's first "buy" recommendation on the bank, currently being prepared, should change that, Godfrey said. A newsletter being sent out to current shareholders, Pacific Western customers and investor clients of Western Financial is also expected to raise the bank's profile and increase trading activity in the stock.

There are about 600,000 shares of Pacific Western stock outstanding, following a three-for-two stock split in 1991. That relatively small amount of stock relegates the company to NASDAQ's largely inactive pink sheets and zero visibility among banking security analysts.

Pacific Western's senior management and directors hold 30 percent of the outstanding stock; many of the other shareholders have held their stock since the bank first opened as a public company in 1980, Godfrey noted.

To thank them, the board announced a 5 percent stock dividend, payable May 17 to shareholders of record as of May 2. It is the bank's first dividend ever. "I think it's the right message to send," Godfrey noted.

Investors, who avoided the Southern California bank market recently, are starting to look this way again, the CEO noted. "There are some good values here (among Southern California banks)," he pointed out. "Ours is an example."

"We like them," said Paul Bauer, president of Bauer Financial Reports. "They're small. That's the only shortcoming -- a lack of diversification. If there's an earthquake in Pico Rivera, the whole company's affected," the rating firm president commented. Compared to other banks of its size, Bauer said he considered Pacific Western "better than average."

"The biggest difference, comparing us to others," Godfrey said, "is a looking at the longer term, a worry about the future rather than the next month. A lot of other institutions feel the economy will cure their problems when it turns around. Being financially strong now puts us a leg up."

Godfrey took over the consistently profitable bank in 1990 and has coached it through a long, difficult recession. "I stepped in just as things were getting tough," he recalled. One of the young CEO's first, somewhat-unpopular steps was the outsourcing of numerous data processing functions, saving about $10,000 a month, he estimated, and costing three jobs. "I streamlined a lot of operations to be more efficient," he said.

Godfrey also introduced computer modeling to the community bank. A lot of the decisions were made randomly before, he confided. Among the new policies he implemented was to move the firm more toward core depositors, away from unreliable certificate-of-deposit-based business.

"The economy, the branch locations, they're the same for the bank across the street. Why does Pacific Western succeed?" posited Levenson. "You have to give the credit to exemplary management. (Godfrey is) fiscally conservative, very deliberate in his expansion plans, dedicated and knowledgeable."

Levenson -- whose brokerage firm not only is the primary market-maker for Pacific Western stock, but also profits from having its brokers on site at Pacific Western branches (the two companies split commissions) -- pointed to a more objective performance indicator. "We look at results, and (Pacific Western's) results are consistently good," he concluded.