Paul Harris.

Guardian Bancorp Chief Executive Paul Harris is a banker who is riding high on the risk curve -- and still coming out ahead.

Pigeonholed as stodgy guardians of tradition, bankers aren't usually compared to race car drivers. But to some banking analysts, that is what Harris' strategy of rapid growth, specialization in construction loans and dependence on volatile deposits represents -- a chance to reach the checkered flag ahead of most or, if not careful, to crash and burn.

"He's what we call the new breed of innovative banker," says Gerry Findley, chief executive of Brea-based bank consulting firm Gerry Findley Inc. "He's a fellow that's thinking out front, thinking ahead. The only problem that may happen from focusing out front is that he needs to protect his rear end and make sure the details are taken care of. He's a race car driver and you've got to have a pit crew and maintenance."

The combination, however, has worked since the bank was founded in 1983, making it one of the fastest growing banks in L.A. County and, according to analysts, one of the most solid.

Unlike many banks suffering recessionary downturns in profits, Guardian Bancorp zoomed into high gear, reporting increased 1990 fiscal year and first quarter 1991 earnings and assets.

The bank's net earnings increased to $7.1 million last year from $5.4 million in 1989, a 31.5 percent gain from a year which itself showed record profits. First quarter 1991 net income was $1.5 million, a 3.6 percent increase over the preceding year.

That comes with an astounding 45 percent of the bank's loans in construction lending, making Guardian percentage-wise one of the largest lenders in the state in a loan category traditionally thought to be among the riskiest.

Yet, while non-performing loans at other banks soar with the worsening economy, Guardian Bancorp's level has actually decreased, with non-performing assets as a percentage of loans falling from 1.1 percent in 1989 to 0.8 percent in 1990.

Maintaining loan quality, Harris says, is made easier by the fact that he rose through the ranks as a loan officer.

"In my 28 years of lending, I have never lost money on a real estate or construction loan," Harris says. "It is an area where a bank that is not careful can suffer devastating losses in a recession. Our philosophy on construction lending has been the principle reason that the bank has yet to even have a foreclosure completed, let alone a loss."

He says the bank loans only on entry-level housing, small to medium apartment projects and smaller commercial projects, rather than high-rise office buildings and hotels. It also finances properties only in the real estate market it knows best: Southern California.

Borrowers are expected to have significant equity tied up in their projects.

Also risky are the deposits from escrow and title deposit companies which form 50 percent of the bank's deposits -- far more than most banks. Little besides offering good service can be done to retain such deposits, which fluctuate dramatically with the building industry's fortunes, concedes Harris.

Harris agrees with Findley that the bank's pit crew and maintenance team is the key to the bank's success. Employee service and expertise make the difference, says Harris, and high quality doesn't come by working bankers hours.

"Employees here put in 10-hour days and work at a level of energy and output higher than at other institutions," he says of the company's 150 employees. "Our philosophy is to buy the best employees money can buy and work with fewer of them."

Harris relies on the golden motive of self-interest to motivate employees at the bank.

Employees are paid on average 20 percent more than the industry average, which helps in luring top talent from other banks. And no employee at the bank, including Harris himself, gets a bonus unless the bank achieves a 30 percent pretax return on beginning equity, which it has repeatedly achieved.

With that kind of growth, Harris sees the bank growing from its current $636 million in assets to $1 billion in only three years. Over the same period, he expects the number of branches to increase from three to 10, with one branch to take root in San Francisco.

Such growth would likely transform the bank from a local independent to a regional presence. That would force him to delegate more authority and add more levels of management as the bank expands, Harris says. Hiring the right senior management will be the key, he says.

"Some bad bank (branches) take two years to break even because they put a bunch of zombies out there," Harris says. By contrast, he points to the bank's Ontario branch, opened in September 1990 and turning a profit three months later.

Harris characterizes himself as a hands-on detail man, a 60-hour-a-week workaholic -- with certain incongruencies: "I haven't balanced my checkbook in five years," he admits.

Raised in a strait-laced family in Toronto, Canada, Harris headed to Los Angeles to experience the Golden State and continue his accounting studies. A roommate who worked at Crocker National Bank landed Harris a part-time job in the bank's credit department.

While not sure at first that he would stay in the profession, Harris says, "I knew I liked it better than accounting."

He spent five years in Crocker's credit department and then seven years in the loan office at the Los Angeles main office.

Several things bothered Harris though. For one, unlike banks today, Crocker did not offer an executive training program which would help him learn the variety of skills necessary to become a top executive there.

In addition, he noticed top management at the San Francisco headquarters tended to be senior executives brought in from New York.

Harris decided he prefered the L.A. climate to advancement in San Francisco. Also his wife was also a Crocker employee based in Southern California.

"She had a good job" as a vice president and regional loan supervisor, Harris says. "She was making more than I was!"

So he joined small independent bank, Tokai Bank of California, and "received a 70 percent pay increase overnight."

In the seven years Harris was at Tokai, it grew more than 10-fold in assets. He ended up as the third highest official at the bank.

"I was very happy there, I enjoyed working with the Japanese," Harris says. But he wanted something more. "I wanted to build something together with a team, something I put together and had significant ownership in."

So in 1980, he and Arthur Tate, then a senior vice president at Imperial Bank of Los Angeles, gathered a group of business associates they had known for years and started Guardian, with Harris as CEO and Tate as president. It had an oversubscribed initial public offering from individuals who hoped to do business with the bank.

Many also hoped the bank would be sold in four to five years and they would earn a premium on their shares, Harris says. Despite the bank's continuing high performance, no significant offers have been made for it, he says.

Would he sell if there were?

"I suppose everything has a price," Harris says with a smile.

Still, he wonders what he would do with all the free time. Most of Harris is tied into his work. Asked what he does with his free time, Harris exclaims: "Good lord, I have four kids under the age of five and I work."