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Wednesday, Aug 17, 2022

Gordon Ditches Branches at Latest Upstart Bank

Stephen H. Gordon has a model for his newest bank: no expansion via branches, which he calls “antiquated.”

“No one walks into branches anymore,” Gordon said at Genesis Bank’s inaugural party in early October.

“I love the fact that we don’t have all of that legacy. We should have a lower expense structure so we should be able to offer more competitive products.”

Newport Beach-based Genesis, which officially opened in August, is the third bank started by Gordon.

His latest bank will focus on loans for small to medium-size businesses, commercial industry, multifamily, office, industrial and retail. It intends to partner with other entities for consumer banking. He expects about $100 million in loan production during its first year, with the capacity to loan up to $7 million per loan. Gordon intends to bring in additional capital to support further growth.

“Everything is relationship driven,” Gordon said. “From previous banks that we’ve built, we have a pretty big following in Southern California.”

$57M Funding

Gordon has a long history in Orange County banking circles. After the dot-com bust in 2000, he co-founded Commercial Capital Bancorp, which was sold for almost $1 billion in 2006.

Following the 2008 financial crisis, Gordon in 2010 led the $460 million recapitalization of Bay Cities National Bank and renamed it Opus Bank, which was sold for $743.9 million a year ago to crosstown rival Pacific Premier Bancorp of Irvine (Nasdaq: PPBI).

Pacific Premier—run by a different Steve G, Steven Gardner—ranks No. 1 on this week’s list of Orange County-based Commercial Banks (see list, page 28).

Five days after that deal closed, Gordon filed paperwork to start Genesis Bank even though it was in the middle of the coronavirus-induced recession.

Gordon raised $57 million in an oversubscribed initial capitalization that included as investors himself and Arkview Capital of Stamford, Conn.

Minority Focus

Arkview, a minority-certified private equity fund focused on investing in diversity-oriented businesses, was founded last year by Joon Chang, Pavel Chernyshov and Vijay Mehta, a trio who worked together for a decade at the Ziff family office in New York. The Ziff family, heirs to the Ziff-Davis publisher of hobbyist magazines, is worth $15 billion, ranking it No. 20, among Forbes’ annual list of the wealthiest American families. Genesis’ private offering represents the largest capitalization ever for an entirely new bank based in Orange County, Riverside County, or San Bernardino County. It is the second ever largest de novo capitalization in all of Southern California, trailing one bank in Los Angeles County.

Out of 5,000 banks in the U.S., only 143 are labeled minority deposit institutions (MDI), according to Gordon.

With about 60% to 75% of Southern California considered “multi-diverse,” “we felt very strongly that we must be reflective of our community,” Gordon said.

“Our mission is very clear to us.”

It’s working closely with Hispanic, Asian and Black chambers of commerce, he said.

On Oct. 18, Genesis announced a partnership with the Orange County Hispanic Chamber of Commerce that includes helping the estimated 30,000 Hispanic-owned businesses in Orange County.

“We believe the bank’s diverse, multiracial focus as an MDI distinguishes their commitment to the community from other banking institutions and is a much-needed banking resource to the Orange County Hispanic business community,” Chamber CEO Reuben Franco said in a statement.

New Software

At Opus, Gordon employed more than 800 at 50 different locations.

This time around, he’s planning to hire far fewer and might open only a couple of other offices in Los Angeles and another in Orange County.

At the beginning of Opus, its legacy technology had to be rebuilt, Gordon recalled.

“As much as we thought we had an advanced platform in 2010, that was an amalgamation of bank acquisitions. We inherited their technology. That was pretty antiquated compared to where we are right now.”

Genesis’ platform was built from scratch employing software from a variety of vendors.

“We brought together best of breed and bolted them together in a way that no one else had done so before,” he said.

Called GenTech, it’s “a groundbreaking combination of best-in-class technologies, which are tightly integrated to give clients a seamless, digital first, and transparent experience,” according to the bank. Most of its documents are paperless and can be signed online.

Genesis’ software can compete with the biggest banks, Gordon said.

“Here we are, a little startup bank that is able to go head-to-head with Wells Fargo in terms of treasury management,” he said. “Don’t think of Genesis as a small startup bank. Think of it as a new platform led by a team that has built multibillion-dollar asset institutions.”

New Hires

Opus was known for expanding through acquisitions along the West Coast. Even though he’s already been shown one possible acquisition in Northern California, Gordon this time plans to stay focused in Southern California.

As of early October, the bank employed 37. Genesis’ top floor office, with a view of planes taking off and landing at nearby John Wayne Airport, has space for 80 employees.

Genesis has generated more business than expected, Gordon said.

“We’re only two months into it, but a lot is happening very quickly.”

Genesis’ edge is that it has skilled bankers with dozens of years of experience, including at major rivals like City National and Wells Fargo, Gordon said.

His team includes executives who worked alongside him at Opus: Jennifer Simmons, president and chief operating officer; Brian Fitzmaurice, senior chief credit officer; William Han, chief financial officer; and Andres Gallardo, chief legal and risk officer.

“We’ve got an incredible seasoned team that can run circles around other banks around us,” Gordon said.

Also, clients have an affinity for those who believe in social impact, Gordon said.

“They believe in our mission and purpose for existence.”

Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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