Organizers of Core Commercial Bank have put the effort on the shelf in a move that comes about a year after they received government approval.
Darrell S. Daniel III and Jonathan Sigal withdrew their application for the bank on Nov. 17, according to the California Department of Business Oversight.
Neither could be immediately reached for comment.
The department, which oversees state-licensed financial institutions, approved the new bank to raise capital on Nov. 19 last year.
Daniel was slated as chief banking officer, and Sigal planned to take the chief credit officer role. They started their respective careers at Deutsche Bank in Anaheim in 1994. Both worked at several other banks in Southern California, then reconnected at Grandpoint Bank in Los Angeles in 2013.
They submitted an application to organize Core Commercial in July of last year.
State regulators did not cite a reason for the application withdrawal, but a source said Core Commercial didn’t raise the $25 million in initial equity required by the government.
Capital requirements have been about twice as high as the general standard prior to the recent recession and economic crisis, according to an S&P Global report.
Core Commercial’s prospects looked good in February, by which time it had raised about $7 million from founders and prospective employees, but only a few outside investors committed funds over the ensuing months.
Organizers held presentations to introduce the bank to potential investors, with a goal of selling 2.5 million to 2.75 million bank shares at $10 per share spread over about 300 people.
But the high capital requirement set by regulators might have caused potential investors to favor existing banks, according to the S&P Global report, along with concerns that the current environment of low interest rates would crimp potential profits for a new enterprise.
OC investors should have considered Core Commercial as a long-term play with expectations that the bank would lose money in the first year, said James Jones, an executive vice president of Irvine-based Carpenter and Co., an advisor and bank holding company that worked with the proposed bank, during a February investor presentation.
The outlook offered by Jones projected Core Commercial would likely stabilize in the second or third years, growing assets afterward.
Core Commercial’s growth plan targeted OC’s small and midsized businesses, said Mark Simmons, the bank’s projected chairman. “We are not going to provide mortgage loans or enter into derivatives,” he said at the February event, referring to the products that led to the recession.
Simmons was chief executive of Commerce National Bank in Newport Beach, which was sold to Sterling Financial in Tacoma, Wash., in 2013.
Core Commercial’s targeted clients were manufacturers, wholesalers, distributors and professional services providers with revenue of $1 million to $50 million, Daniel said.
He said Core Commercial could build about $250 million in assets or a client base of 300 within five years.
“About 62% of existing bank clients (in Southern California) want better service from their banker,” he said.
There are about 91,000 businesses in Orange County, he said, referencing the U.S. Census Bureau.
“So we’re talking about obtaining a small share of the market to become successful.”
OC’s Growth
OC is a natural target for new banks because of its large population, growing wealth and new companies, Simmons told the American Banker last year.
There are about $86 billion in deposits in OC including a “staggering” amount of wealth in Newport Beach, Simmons said.
That’s money that could be used to grow local businesses.
And there are about 45,000 people per bank branch in OC compared to the national average of about 40,000 per branch. n
