A unit of Banc of California (BANC) has agreed to pay $10 million for a mortgage business owned by one of its managing directors.
Pacific Trust Bank in Los Angeles has exercised its option to buy CS Financial in Beverly Hills, the bank said in a regulatory filing on July 30. Jeffrey Seabold, the managing director of Pacific Trust's residential lending division and a former board member of the bank, is a majority owner of CS. Seabold granted Pacific Trust the option to buy CS as part of a three-year employment contract he signed in May.
The $1.6 billion-asset Pacific Trust will pay at least 51% of the transaction in stock, and 60% of the purchase price will be subject to certain vesting terms, according to Seabold's employment agreement. It will also pay Seabold $25,000 a month between the exercise of the option and the completion of the purchase, which Pacific Trust expects to take place in the fourth quarter.
CS Financial is part-owned by relatives of Stephen Sugarman, the chief executive of the bank's holding company. Sugarman recused himself from the vote on buying CS Financial, the regulatory filing states.
Pacific Trust's financial arrangements with Seabold came under scrutiny after the company disclosed late last year that it would pay CS Financial a $100,000-a-month consulting fee to help build its residential mortgage business. Seabold was a Pacific Trust director at the time.
In May, Seabold resigned from the boards of both the bank and the holding company after Pacific Trust named him managing director of its residential lending business. Seabold's three-year employment contract with Pacific Trust pays him a base salary of $400,000 a year, an annual cash target bonus of $200,000, and an incentive bonus of 10% of the profit that the residential lending business earns on mortgage originations held for sale.
As part of his employment agreement, Seabold also granted the bank the option to buy CS within 120 days, which the bank exercised on July 29th.