Greater Bay Consolidating for Efficiency, Compliance

Article excerpt

Greater Bay Bancorp announced Wednesday that it plans to put its 11 banking charters into one national charter to cut costs and ease regulatory compliance.

David L. Kalkbrenner, the $8.1 billion-asset company's chief executive officer, had said the decentralized structure helped Greater Bay attract and keep customers and staff. But in a telephone interview Wednesday he said the new structure "will not change the way we do business."

It will, however, change the Palo Alto, Calif., company's cost structure. The consolidation will cost it $3 million to $4 million over a period of 18 months after regulatory approval, which is expected by yearend.

Mr. Kalkbrenner said that the benefits far outweigh the expense. He did not put a number on the cost savings but said most of them will result from the elimination of expenses that "more efficient" growth will bring.

Greater Bay's efficiency ratio was 62.2% on Sept. 30, 54.9% without its insurance agency business.

"Could the efficiency ratio benefit from this? Yes," Mr. Kalkbrenner said. He said he would be comfortable with "a number in the low 50s, high 40s."

Greater Bay reached an agreement in January with the Federal Reserve Bank of San Francisco to beef up its compliance with laws aimed at money launderers and terrorists, as well as its risk management and its analysis of its sensitivity to interest rates.

Mr. Kalkbrenner said that his company had run afoul of regulators in part because it had focused more on the holding company than on each bank, and that it had been planning the charter consolidation before signing the January agreement. He said the holding company was in full compliance but that some of the 11 banks apparently had problems.

Regulators did not have a direct impact on the decision to change the structure, though the process of working through the agreement underscored the need to change it, Mr. …