Sprouting like an oak.

Chairman David Buell leads Metrobank to success with a careful growth strategy

Metrobank Chairman David Buell appears a bit uncomfortable when asked to talk about the reasons for his own success and the success of the bank he founded 15 years ago.

While other Westside banks have been riddled with bad loans, dwindling capital ratios and financial losses, Metrobank has remained strong and profitable.

Metrobank "is probably one of the strongest independent banks on the Westside," says Barry Rubens, chief executive officer of California Research Corp., a Santa Monica-based bank consulting firm.

The bank has kept its percentage of non-performing assets -- non-accrual loans and foreclosed real estate -- at 1.6 percent, when similar-size banks' non-performers have soared above 7 percent, Rubens notes.

Buell, a soft-spoken man with warm brown eyes, says there are two reasons Metrobank has done well. First: "We've had a fairly conservative (loan) underwriting policy in the mid-1980s and early 1990s."

And, secondly, the bank has been the recipient of "a little bit of luck," Buell contends. It has been "fortunate" because it has been able to quickly sell off real estate it has foreclosed on, according to Buell.

"Oh, he's being modest," says Stanley Kafka, new head of real estate at City National Bank, when he hears that Buell attributes much of his success to luck.

Kafka has known Buell for 25 years, having worked with him when they both were at Union Bank in the 1970s. And Kafka currently teams with Buell on "transactions neither of us can handle individually," Kafka says.

The reason Metrobank has remained successful is "they're more interested in growing like an oak tree than like a weed," Kafka says. "They're very selective about how they do business, who they do business with."

The $900 million-in-assets Metrobank earned $5.76 million, or $1.21 a share, in 1992, compared with $5.51 million, or $1.16 a share, in 1991.

In the first quarter of 1993, the bank earned $1.49 million, or 31 cents a share, compared with $1.4 million, or 30 cents a share, a year earlier.

For the past two years it earned a 0.7 percent return on assets and a 10 percent return on equity.

"They're doing better than the rest of the state," says Gary Zimmerman, an economist at the Federal Reserve Bank in San Francisco who specializes in studying the real estate loan problems of California banks.

While Metrobank achieved an average return on assets of 0.7 percent in 1992, Zimmerman notes, California banks in the $300 million to $1 billion asset ballpark, by comparison, had an average return on assets of 0.11 percent last year.

At Southern California banks with less than $300 million in assets, the average bank posted a loss in 1992, Zimmerman says.

Many small banks, particularly Southern California ones dependent on the region's real estate market, have seen earnings dragged down by bad real estate loans, he says.

California banks with between $300 million and $1 billion in assets -- those in the same size range as Metrobank -- had an average of 7 percent of their total loans posted as non-performing in 1992, Zimmerman says. He did not have a figure available for total non-performing assets, which includes foreclosed real estate plus non-performing loans.

Metrobank's non-performing asset percentage of 1.6 percent, which includes both foreclosed real estate and non-performing loans, is "pretty low," Zimmerman says.

Kafka said that the reason the non-performers are low at Metrobank is because Buell is not only conservative, but smart. "When he realizes he's made a mistake, he cuts his losses very quickly -- whether it's a credit issue or a personnel issue," Kakfa asserts.

Hiring the wrong person can be disastrous for a bank, and "I know of several cases where they (at Metrobank) have been quick to smell the coffee" on a bad hire, Kafka says.

In addition, Buell is a master networker and has "numerous" business contacts in the L.A. area whom he calls on when trying to decide whether or not to make a loan, Kafka says. As a result, Buell has not "stumbled onto borrowers who have caused a lot of damage at other banks," Kafka says.

Rubens said of Metrobank's management: "I'm just very impressed with these guys."

"I know they've had only one president; he's one of these ex-Union bankers. And it looks like he put into practice every good thing he learned over at Union bank," Rubens says.

Buell was one of a number of young executives at the Union Bank of the 1960s and 1970s who went on to head their own banks, notes Kafka.

Harry Volk, Union Bank chairman at that time, produced a special kind of bank in which regional vice presidents were treated like presidents of small banks. "It was a culture that existed, an entrepreneurial, decentralized type of culture," Kafka says.

Metrobank, like Union Bank, is made up of a number of regional offices -- in Orange County, San Diego County, the San Fernando Valley and the South Bay -- with its headquarters in Westwood, its operations center in downtown L.A. and an administrative office in Torrance.

Buell told the Business Journal in 1988 that he wanted to boost assets to more than $1 billion by 1991, but he says the recession prevented him from doing that. Otherwise, Metrobank would have hit the $1 billion mark and would have at least one more office that it currently has, Buell says.

The bank's profits are not where Buell projected they would be either, he concedes.

In Metrobank's 1991 annual report, Buell wrote that the bank was on its way "toward our goal of a 15 percent return on equity by year end 1994." In that letter, Buell noted that goal was based on the belief that Southern California would begin an economic recovery in late 1992 or early 1993.

But in Metrobank's 1992 annual report, Buell wrote, "It appears that Southern California may not see any meaningful economic improvement for several years."

In an interview at his office, which looks out on the intersection of Westwood and Wilshire boulevards, Buell says, "Since I've been a banker, I've been in five (recessions), and this is the most severe economic contraction I've ever experienced. It has surprised all of us."

The fact that as many as 80 percent of his competitors, the other Westside commercial banks, have been issued regulatory orders to reduce problem loans and raise capital seems to concern Buell deeply.

"It's like a riptide, this recession," he says. "No matter how good a bank they are, they are getting carried away."

He adds, "I'm not going to be so smug as to say 'It won't happen to us." Right now, no one knows what the future will be."

Buell has been married to the same person for more than 30 years and has two daughters and four grandchildren. He and his wife, Judi, give a portion of their money and time to the Venice Family Clinic, which provides health services to low-income and homeless people, and to the L.A.-based John Tracy Clinic, which provides an array of free services to hearing-impaired children.

James Garrity, director of the John Tracy Clinic, describes Buell as a "gentle, caring and self-effacing man" who "has been genuinely committed (to the clinic) for at least a decade."

And while most business people who give to the clinic immediately present their credentials and achievements when you meet them, Garrity says he did not know Buell was the head of a major L.A. bank for many years.

Buell also serves on the board of directors of the Entrepreneurial Studies Center at UCLA, part of the John E. Anderson Graduate School of Management. Buell has been a guest lecturer and has provided internships at Metrobank for the students, says Al Osborne, director of the center.

Enabling students "to meet the David Buells of the world is an important part of what we do," he says.

When asked what is most important to him, Buell answers, "Family always has to be your first concern." Without a pause, he says, "Second is Metrobank."

When he was at Union Bank, Buell worked through the summer weekends of 1976, writing the charter for Metrobank on his kitchen table. He formed the bank because he felt banks were under-serving mid-sized businesses.

"We started this institution with eight people and $4 million in capital," he says. "Today, we have 300 employees and $60 million in capital. Our payroll on an annual basis is $12 million."

Buell says, "We have come a long way and produced a lot of good in the community."

Snapshot

David Buell

Age: 57

Born in: Wichita, Kan.

Resident of: Marina del Rey 

Education: Bachelor's degree in marketing, California State University, San Diego; graduate work at Harvard University, Stanford University and UCLA