Banc of California to Buy Popular Community Bank in-state branches
Originally published in The Orange County Register, Marni Usheroff
April 24, 2014, 07:35 AM
Irvine-based Banc of California said Wednesday it will acquire Popular Community Bank’s branch network in California, creating the largest Orange County-based bank.
This latest in a string of acquisitions since a 2010 recapitalization accelerates Banc of California’s growth, deepening its presence in Los Angeles and Orange counties. When the deal closes in the fourth quarter, Banc of California expects to have more than $5 billion in assets, over 100 locations and 38 branches serving private businesses, entrepreneurs and homeowners throughout California.
“We’re one of the few community banks that can offer to finance someone’s business and their home,” Banc of California President and CEO Steven Sugarman said.
The deal with Popular Inc. – parent of Banco Popular in Puerto Rico – adds 20 retail branches (split between Los Angeles and Orange counties), $1.1 billion in deposits, $1.1 billion in performing loans and other assets, real estate and liabilities.
Banc of California will pay approximately $5.4 million for deposits and loans.
“We feel there’s a kind of sweet spot where you’re large enough to finance businesses and small enough to look at the value of each of those relationships,” said Sugarman, sitting in a conference room at Popular Community Bank branch in Fullerton.
Sugarman, 39, grew up in Fullerton and now lives with his wife and three children in Pacific Palisades.
Sugarman, who joined the bank board in 2010 before becoming CEO in 2013, has helped oversee acquisitions of six financial institutions over the past three years, including The Private Bank of California and Palisades Group, a financial advisory firm.
Since the recapitalization – including this latest deal – Banc of California will have grown from $700 million in assets and about $50 million in loans to $5 billion in both assets and loans. Total employees will have also grown, from about 80 to 1,500.
Sugarman isn’t expecting any “dramatic” changes to personnel and currently doesn’t have plans to close any branches, since he says the branches are run fairly efficiently. “Banco Popular put in place a pretty responsible retention and severance program,” he added.
Latinos are a big focus for Popular Community Bank, and will be a source of its growth going forward, according to former Los Angeles Mayor Antonio Villaraigosa, who is a senior adviser to Banc of California.
“Latinos represent 37 percent of deposits being acquired by Banc of California, and several branches are located in diverse communities that lack banking alternatives and access to financing for their businesses,” Villaraigosa said. “We believe that this customer base, including California’s fast-growing Latino market, which accounts for nearly 17 percent of California businesses, represents some of our State’s greatest entrepreneurs and business owners and we intend to help them further realize their dreams.”
There will be no changes to customer accounts or branches until after the transaction is completed.
Oaktree Capital Management and Patriot Financial Partners have entered into separate equity purchase agreements as part of the transaction. Oaktree’s aggregate commitment will be nearly 10 percent of the Banc of California’s outstanding shares as of the closing. Patriot will increase its position by $10 million. Oaktree and Patriot will be acquiring common stock priced at $11.50 each, subject to certain closing conditions.
Sugarman expects to open new branches in Fullerton and Rancho Santa Fe this spring and summer, and the bank’s first branch north of Los Angeles in Santa Barbara by late August. He also sees opportunities in the San Fernando and San Gabriel valleys, and is eyeing expansion into Northern California starting in 2015.
During a conference call Sugarman held with investors last year to discuss third-quarter financials, one investor questioned why the bank wasn’t focusing more on lifting its stock price rather than acquisitions. Net income was moderately positive for all of 2013, at $20 million.
“Our business is really focused on growth – building out our value proposition, aggressively investing in technology, lending, de novo (new) locations and our people,” Sugarman said Wednesday. He said these require investment and that much of the profits are being reinvested into the business.
“Payback on this investment is less than one year … which means we’ll have four calls like that before (investors are) happy,” Sugarman joked.
