Sunday, January 24, 2021

Banking boldly through Jewish ethics

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Banc of California, one of the fastest-growing banks in the United States, has a rock-solid name that makes it sound like it’s been around for a century or more.

In fact, the brainchild of Chad Brownstein and his business partner, Steven Sugarman, was only formed in 2010, in the midst of the Great Recession. 

“The name Banc of California presented itself as an opportunity. Steve came up with the concept, and it has worked out as being probably the best brand you could have in the region, because everyone says they know Banc of California, whether they knew it or didn’t …” said Brownstein, 42, the company’s co-founder and vice chairman, at the start of an interview with the Journal in his Beverly Hills offices. Sugarman, 39, serves as president and chief executive officer, and joined the interview via conference call.  

In 2008, as the economy spiraled downward, Brownstein was running the Special Situations Funds group at the investment management firm Trust Company of the West (TCW), and Sugarman had recently founded COR Capital, a private investment firm. Both are members of Wilshire Boulevard Temple, and had known each other for years but had not previously worked together. They began discussing the possibility of collaborating on a new venture. At the same time, community banks were beginning to fail across the country. Between 2008 and 2011, more than 400 banks went under, including many in Southern California: California National Bank in Los Angeles, Alliance Bank in Culver City, First Federal Bank of California in Santa Monica and many others. This created a dearth of lending for small businesses in the state.

“The world was imploding,” Brownstein said. “We said, ‘Well, how do we get our heads straight and try to create some value out of everyone being so scared of the market?’ ” 

They decided to try to consolidate some of Southern California’s thrifts and small banks. So in 2010, Sugarman and Brownstein led TCW and a few other investors in a $60 million recapitalization of First PacTrust Bancorp. Sugarman became the CEO in 2012, and in 2013 they re-launched their holdings, which by this time included a few other local community banks, under the banner Banc of California. 

Since 2010, Banc of California’s growth has been staggering. Sugarman has led the team through six acquisitions, pushing their assets from under $1 billion in 2010 to over $6 billion today. They now have 40 full-service branches in Southern California, and more than 100 banking and lending locations across the state. They have about 100,000 account holders, and estimate they will fund more than $7 billion in loans this year, about $5 billion of which will be to homeowners. Banc of California now has nearly 1,500 employees. 

Brownstein admits many analysts question whether Banc of California can sustain such a head-turning growth rate, but he has a clear answer: No. 

“No one can keep growing at the rate we have,” he said. “The bank will continue to be not only opportunistic but, more importantly, focused on operations.” 

From the start, Sugarman said, their goal has been “building California’s bank” — not just in terms of financial assets, but also by taking a leadership role in communities around the state. 

In 2011, Banco Popular, a Puerto Rico-based bank, changed its name in Southern California to Popular Community Bank, part of a larger effort to reach beyond its Latino base. But it continued to struggle, and in early 2014 Banc of California agreed to purchase its network of Southern California branches. However, the California Reinvestment Coalition (CRC) objected, and requested the Office of the Controller of the Currency, the government regulator in charge of this sort of transaction, deny the sale until Banc of California designed a plan to comply with the Community Reinvestment Act, which is intended to encourage banks to serve historically underserved low- and middle-income communities. In particular, the CRC worried Banc of California would not be a fair partner in the minority communities where Banco Popular had its base, and which typically have low levels of trust in financial institutions. 

With the assistance of former Los Angeles Mayor Antonio Villaraigosa, who in July 2013 had become an adviser to Sugarman and the bank’s board of directors, Banc of California worked with the CRC to develop a community benefit plan targeting California’s underserved populations. For example, Banc of California agreed to work toward becoming a Top 10 Small Business Administration (SBA) lender to underserved borrowers in its assessment area, and to increase lending and investments to low- and moderate-income communities, with the goal of making these dealings 20 percent or more of total deposits. As a result, the CRC reversed its position, offering an endorsement of the sale. 

“Banc of California’s Community Benefit Plan sets the standard for the industry and is a testament to Banc’s commitment to serve the needs of … diverse neighborhoods,” CRC Executive Director Paulina Gonzalez said in a September 2014 press release. 

The work they accomplished with the CRC is emblematic of a wider ethos of community respect Brownstein and Sugarman view as essential to their business practice. “We are taking extraordinary steps to be a part of the [Southern California] community,” Brownstein said. 

Brownstein credits Banc of California’s approach to community banking to their Jewish upbringings — Brownstein in Denver and Sugarman in Orange County. “Steven and I have brought the concept of tzedakah to Banc of California,” Brownstein said. “The organization is very active in all different charities, all denominations. … Steven and I — being of Jewish heritage — we understand how important community is.”  

Brownstein especially credits his father, Norman, for instilling in him a sense of societal obligation. Norman Brownstein is one of the founders of the law firm Brownstein Hyatt Farber Schreck. Throughout his career, he has donated time and money to many organizations, Jewish and non-Jewish. In addition to being a prominent Democratic fundraiser, he is currently vice president of the national board of the American Israel Public Affairs Committee. 

Banc of California has provided assistance in the form of money and employee volunteer hours to a long list of local nonprofits and community organizations, including Jewish Vocational Service of Los Angeles, Los Angeles Conservation Corps and Los Angeles Team Mentoring. It focuses efforts largely on Southern California’s at-risk youth, who are often of Latino, African-American or Asian descent.

In mid-2014, Banc of California announced a partnership with USC Athletics to teach financial literacy to kids. What began as a small event, with 100 at-risk children participating in financial literacy classes, reached new heights in November when 7,000 people from across the Southland, including 5,964 at-risk youth, gathered at  USC’s Galen Center for an educational event hosted by Sugarman and Villaraigosa. The event culminated in a speech by former President Bill Clinton. The bank later announced that the event had broken two Guinness World Records: Biggest Ever Financial Literacy Training and Biggest Ever Financial Literacy Training in One Venue.   

In terms of integrating Banc of California into the communities it serves, “We’ve talked it and walked it, and that differentiates us — but it also obligates us. It obligates us to continue to lead,” Brownstein said. “We, as Jews, are very focused on helping the entire community, and we believe that because of our Jewish heritage it is our obligation to do that.”

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