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Monday, Mar 18, 2024
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Banc Shot!

Managing fast growth has been just as important to Banc of California Inc. as making it happen in the first place.

The Irvine-based bank holding company last month rebranded itself from First PacTrust Bancorp Inc. and merged all four of its distinct operating entities—and two different charters—into one.

“We see it as a creation of a new bank,” Chief Executive Steven Sugarman said. “You have to consolidate the growth as you go.”

The bank previously operated through its Pacific Trust Bank brand and three other subsidiaries that were results of recent acquisitions: Beach Business Bank, Mission Hills Mortgage Bankers and Private Bank of California.

“We had a thrift charter and a [Department of Financial Institutions] charter,” Sugarman said. “Now we’re a national bank. We’re ‘Banc of California’ for all our banking activities now.”

Banc of California is among the largest banks based in Orange County, with about $3.4 billion in assets. That’s more than triple the amount roughly three years ago, when institutional investors recapitalized the bank.

The company moved its headquarters from Chula Vista to Irvine in March 2012 and has grown to about 50 loan offices and 15 branches throughout Southern California. Its employee base has expanded about tenfold to 1,400 since its move to Orange County. It’s set to move its headquarters next year to Costa Mesa, where it purchased an 180,000-square-foot office by the South Coast Plaza mall for $40 million.

Banc of California ranks No. 1 on the Business Journal’s fastest-growing list for medium-size companies (see medium-companies list, page 48).

The medium category includes businesses with revenues between $100 million and $500 million. The rankings are based on percentage revenue growths across a two-year span, comparing the 12-month revenue through June 2013 with that of the same period through June 2011.

Banc of California had $148.2 million in revenue through June, up more than 240% from two years prior, when it had $43.4 million. The company was No. 15 on last year’s list, which was divided into categories based on the size of the companies.

Acquisitions played a significant part in Banc of California’s recent increase in size and financial resources, though growth within the organization accounted for the majority of the gains.

Purchases combined to net about $1.1 billion, or 40%, of the increase in the bank’s assets over the past two years: The latest buy, of Los Angeles-based Private Bank of California, brought in $657 million in assets; Manhattan Beach-based Beach Business Bank added $312 million; and Cerritos-based Gateway Bancorp provided another $182 million.

Strategic buys were necessary, Sugarman said, to boost the capability of the bank to grow “organically.”

“When you’re at $700 million, $800 million as an organization … the amount of growth you can have is really confined,” he said. “You can’t grow too quickly, or you stress the organization too much. These acquisitions helped us build our platform. We’re now enhancing all of our information-technology and risk systems.”

Recent efforts of combining “disparate cultures and different operating systems … meant a lot” to the bank, said Sugarman, who oversaw the company’s various stages of growth in recent years, initially as an investor, then as a director and more recently as chief executive.

He took the top post last fall, succeeding Gregory Mitchell. Sugarman at that time had spent about two years on the First PacTrust board, a role he took on after his Los Angeles-based investment firm, COR Capital LLC, led the $60 million recapitalization of the bank in late 2010. He continues to serve as a managing member at COR Capital and as chief executive of COR Securities Holdings Inc., the parent entity of a securities clearing firm.

Sugarman is a Fullerton native and has lived in Southern California all his life, other than going to school on the East Coast. He earned his bachelor’s degree at Dartmouth College and a law degree from Yale. He began his management consulting career at New York-based McKinsey & Co. and founded such businesses as Law Offices of Steven Sugarman Inc. He lives in Pacific Palisades and splits his time between the bank’s L.A. and OC offices.

Banc of California is now “transitioning to where the majority of our growth is coming organically,” Sugarman said, while noting acquisitions aren’t completely discounted. “I would be surprised if there wasn’t another acquisition in the next 12 months. Deals still continue to be an important part of our strategy. They’re just not the primary part. We’ve found that … we can meet our objectives without having to reach for big acquisitions.”

A short-term goal for Banc of California is to hit the $5 billion mark in assets.

“That’s an important goal, not because it’s a marquee number, but because in order for a business model to work for a full-service bank in multiple categories, that’s the size you need to be,” Sugarman said. “There’s not a specific timeline, but at the pace we’re going, it’s foreseeable.”

The bank remains focused on Orange County and neighboring markets—for now. There are plans to grow into Northern California in the long run, according to Sugarman.

The bank recently re-emphasized its focus on Los Angeles, including by tapping former Mayor Antonio Villaraigosa as an adviser.

“He has very good connections, but the thing we’ve been trying to work with him the most is reaching out to communities and understanding how banks and the communities they serve should interact with each other,” Sugarman said. “Financial institutions have had a hard time with that in the past. It’s less about finding a new loan and more about finding community partners.”

The bank also partnered with a couple of Los Angeles charitable organizations—Los Angeles Team Mentoring and LA Conservation Corps—in line with the launch of its Banc of California Foundation. The foundation is expected to help other organizations, including Fullerton Excellence in Education Foundation.

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