Doug Bowers is hopeful Banc of California can return to playing offense.
The $10.3 billion-asset company spent much of 2017 retooling after the
Banc of California is set to unveil a strategic plan to guide its direction over the next three years. While unlikely to signal a radical departure from the existing game plan, it should be a strong indication that management is finally ready to move forward.
That includes a bigger commitment in areas such as title and escrow, small-business lending and multifamily projects, said Bowers,
“We really like the hand we have,” he said. “When you ask if there's going to be a meaningful new business addition to what we do, the short answer is not really.”
Banc of California, to be sure, continues to deal with a few lingering issues from its highflying days under Sugarman, including wrongful termination lawsuits from Jeffrey Seabold, who had been its
It will be up to Bowers to keep the rank-and-file employees focused on the future as the Santa Ana company’s past continues to make headlines. For that reason, he is among American Banker’s Community Bankers to Watch in 2018.
"Banc of California remains a story of transition,” Andrew Liesch, an analyst at Sandler O’Neill, wrote in a Dec. 1 note to clients after meeting with top executives. “Management is diligently focused on developing its core banking activities further, while reducing nontraditional banking products.”
Meanwhile, legal activity has been a drag on earnings. Professional fees, including payments to lawyers, totaled $35 million in the first nine months of 2017, or nearly double what they were a year earlier.
Still, Bowers said Banc of California's shareholders have been patient as new management sorts through old issues. The company’s stock appreciated by nearly 20% last year.
One-time items “will settle down,” Bowers said. “I think the investor community understands it.”
Banc of California has quietly put the rest of its expenses in order, hitting its target of keeping nonrecurring costs at or below $60 million in the second and third quarters. Such discipline, along with stellar credit quality, have bolstered earnings since Bowers took the helm.
Bowers said he is “pretty upbeat” about near-term credit quality.
“I don’t want to jinx things,” he said. “I must say that when you have a 0.16% ratio [of nonperforming assets to total loans] it doesn’t take more than an additional loan or two or three to tip it over … but I don’t see anything that is truly meaningful to disrupt that performance.”
There is always the question of Banc of California's long-term independence. Several analysts have speculated that a bigger bank could eventually make an overture given the company's size and scale across California. As part of last year's corporate governance overhaul, the company added several activist investors to its board.
While Bowers did not address such speculation, he said he's optimistic that the wind is finally at his back, expressing a belief that a steady growth plan — backed by the company’s brand, size and talented staff — can produce strong returns.
“It’s awfully hard to … think about doing something that would detract from being the in-market, in-California bank we are,” Bowers said. “I just feel like, if we get this right, it’s a really great opportunity for our employees, for our shareholders and for the marketplace. It’s quite special.”
