Assets at Orange County-based commercial banks climbed 3% as growth slowed following a wave of consolidation and payoffs of government-backed loans.
The Business Journal’s annual list of locally-based commercial banks showed assets increased to $38.8 billion as of June 30. Fifteen banks made the list, down from 16 on last year’s list. A decade ago, 26 banks made the list, with far fewer assets of $10.6 billion.
A year ago, the assets soared 31% as local banks benefited from new clients brought on by the government’s Paycheck Protection Program (PPP) to help small businesses survive during the shutdown caused by the coronavirus.
The biggest decline on the list was Mission Viejo-based Partners Bank of California, where assets fell 10% to $406 million.
Chief Executive Chris Walsh attributed the drop to companies paying off the first round of their PPP loans.
“We were No. 28 in the nation of banks between $100 million and $1 billion in PPP loan production and those loans are being paid off higher than our normal loan production,” he told the Business Journal.
The list of banks headquartered in Orange County has notably changed in the past couple of years.
Opus Bank, ranked No. 3 two years ago, is now gone after it was bought by Pacific Premier Bank in June 2020.
Opus Bank founder Stephen H. Gordon in August started Genesis Bank (see separate article, page 22).
On last year’s list, the Opus purchase helped Pacific Premier Bank increased assets 74%. Assets this year were flat at $20.5 billion.
Pacific Premier CEO Steve Gardner pointed out that assets grew $500 million in the third quarter to $21 billion.
“With the successful integration completed in 2020, we are able to increase our focus on new business development throughout the remainder of 2021,” Gardner said in an email. “As a result, we enter the fourth quarter with a strong loan pipeline as our teams are attracting larger, more sophisticated clients.”
Also gone is First Foundation Inc., No. 4 last year, because its headquarters has shifted to the Dallas area. Many of its banking executives continue to work out of its Irvine office.
No. 5 Pacific Mercantile Bank will be off next year’s list since it was acquired last month by No. 2 Banc of California Inc. (see story, page 1).
The local banks remaining on the list shrank their headcount 1.4% to 1,586. A year ago, the local banks boosted their OC headcount by 14%.
The biggest decliner in headcount was Irvine’s Sunwest Bank, where its OC headcount fell 27% to 97.
The bank moved some back-office functions to Utah and Idaho due to California’s challenging employment issues, President Carson Lappetito said.
While a year ago, Sunwest’s assets climbed 47%, this year they increased at a slower pace, 3.3%, to $2.1 billion, good enough for No. 3 in the ranking.
A better measure of growth is deposits, which have climbed at a much faster pace, Lappetito said.
“With PPP, we helped a lot of local businesses while others weren’t (doing so),” he said. “We created a lot of long-term customers out of that.”
Irvine’s Commercial Bank of California jumped into the No. 4 spot as its assets climbed 19% to $1.7 billion.
The PPP also gave the bank the opportunity to meet new customers as larger banks didn’t respond quickly to the government program, Chief Executive Ash Patel said.
“During the PPP era, we helped a lot of customers and non-customers—those non-customers became customers,” Patel told the Business Journal.
While about 25% to 30% of CBC’s loan portfolio is for firms in the hospitality sector, those companies were able to remain afloat due to government aid like the PPP, Patel said.
CBC’s assets have steadily climbed from $200 million in 2013 when Patel took the CEO position. CBC has been investing in digital assets, which provided to be helpful during the pandemic.
“The pandemic has proven locations aren’t as critical as they used to be,” said Patel, whose bank only has three branches. “Customers want to be served anywhere at any time. Banks are going to the customers rather than customers going to the banks.”
The number of branches on the list has steadily fallen from 56 in 2011 to 41 this year.
One bank that’s done well by shedding its branches is No. 7 CW Bancorp (OTC: CWBK), parent of CommerceWest Bank, which reported assets climbed 27% to $1.2 billion.
“It’s due to our focus for the last several years on a digital banking platform versus physical branches to serve clients throughout California,” Chief Executive Ivo Tjan told the Business Journal. “This environment of digital and remote working bodes well for our business model.”
Since then, its assets have climbed even higher, to $1.32 billion as of Sept. 30, Tjan added.
Another bank reporting high growth was Garden Grove-based US Metro Bank, which climbed 31% to $872 million in assets.
The bank, which caters to Korean-Americans, is thinly traded on pink sheets (OTC Pink: USMT). If it can get to $1 billion in assets, it might join Nasdaq, CEO Dong Il Kim has previously said.