Irvine-based CalWest Bancorp, the holding company for South County Bank N.A., has six new directors and $14 million in new capital as it looks to get back on a growth track.
“The new board members add significant business acumen that we will tap into for our customers and investors,” said Glenn Gray, president and chief executive of CalWest Bancorp and South County Bank. Gray retains one of eight seats on the board; Fadi Cheikha, president of Foothill Ranch-based service provider Electronic Cash Systems, is the other carryover.
Kenneth Karmin is the bank’s new chairman. He’s also the chairman and chief executive of Ortho Mattress Inc. in La Mirada, and a principal at private equity firm High Street Holdings Inc. in Los Angeles, which invests in distressed businesses in the retail, manufacturing and finance industries.
The other board members are William Black, managing partner at hedge fund Consector Capital LP in New York, N.Y.; Jonathan Glaser, founder and managing member of hedge fund JMG Capital Management LLC in New York; Richard Mandel, founder and president at real estate investor Ramsfield Hospitality Finance in New York; Clifford W. Lord Jr., managing partner at real estate investment firm PRG Investment and Management in Los Angeles; and Jeremy Zhu, managing director at Wedbush Opportunity Capital LLC, a private equity fund in Los Angeles.
Gray said the bank will use about $5 million from the $14 million raised to repay the Troubled Asset Relief Program funds it received in 2009. The repayment and several changes to bank policy should release the institution from government oversight that restricted its ability to pay dividends. The rest of the capital will be used to grow bank assets.
South County Bank ranks No. 16 among OC-based banks, with about $137 million in assets as of March 31, according to Business Journal research. It operates four branches under different names—South County Bank in Rancho Santa Margarita and Irvine, Surf City Bank in Huntington Beach, and Inland Valley Bank in Redlands.
“The names were chosen to reflect and identify with the different communities served,” Gray said.
TARP
He said South County had an overaggressive lending policy and less stringent credit standards prior to the Great Recession, which began in 2007.
“Borrowers were under strain when the recession hit” and had difficulty repaying their loans, he said.
The bank, under former Chief Executive Thomas Yott, received TARP funds in 2009. Yott semi-retired in 2010 due to health problems.
The Treasury Department ordered the bank in January 2011 to raise capital, overhaul strategy and management, and improve lending procedures.
Yott died later that year.
Gray joined CalWest and South County Bank in 2012, arriving from Sunwest Bank, now based in Irvine.
He said he tightened CalWest and South County Bank’s loan policies and hired additional managers while members of the previous board sorted through the problem loans.
“We adopted a philosophy of active management to improve the loan portfolio,” he said.
Some loans were restructured, and others were sold to other banks.
Many of the former board members retired from the bank after working through the portfolio.
“I think they were all exhausted,” Gray said.
Gray said he expects the infusion of capital to bring an end to recession-related difficulties.
The bank’s new growth plan aims for it to lend to businesses with annual revenue between $10 million to $15 million.
He said the bank likely has the potential to double its assets. It is considering opening a branch in the western part of Los Angeles County as it seeks to maintain a focus on servicing entrepreneurs, family-owned businesses and high-net-worth individuals in Southern California.
