Banc of California (BANC) in Irvine may be suffering from indigestion tied to its appetite for acquisitions.

Costs associated with recent acquisitions put a crimp in the $3.8 billion-asset company's third-quarter results and placed management in the hot seat about expansion plans.

"Wouldn't it make more sense with regards to future acquisitions to get your earnings up and you stock price up?" an investor asked during a conference call Friday to discuss the company's quarterly results. "Wouldn't you be in a better position to do acquisitions at that time?"

"Possibly," Steven Sugarman, the company's chief executive, responded following a pronounced pause. "We are looking at building a really strong franchise here. I think there is an incredible opportunity in the markets we serve to be a real strong and valuable franchise."

The conference participant persisted, clarifying that he meant that delaying further deals might better serve Banc of California, which has made it clear that it wants to reach $5 billion in assets.

"It's hard for me to understand what the market will look like in two years and delay what is otherwise a very attractive opportunity on the wish that in two years prices haven't gone up," Sugarman said. "If you did that two years ago you would have seen acquisition prices increase dramatically and we probably would have lost the opportunity to be where we are today."

During the third quarter, the company lost $9.5 million, or 53 cents per share, compared with $9.2 million in profit a year earlier. In the same quarterly release, Banc of California announced that Sugarman had become its president, succeeding Robert Franko. The management change was unexpected, though the company had undergone other management changes during its transformation from a legacy thrift, says Jacquelynne Chimera, a KBW analyst.

Banc of California had roughly $1 billion of assets 18 months ago, Chimera notes. But it has grown aggressively through a series of deals, including recently acquiring Private Bank of California, investment advisory firm Palisades Group, and mortgage lender CS Financial.

These deals, along with a charter consolidation and platform investments, led to higher quarterly expenses. Noninterest expenses more than doubled those of a year earlier, to $52.3 million. Similar one-time expenses are expected this quarter.

"It is one of the fastest-growing banks," Chimera says. "That just creates a lot of noise and drama."

More deals could be in the works. Banc of California is in constantly evaluating acquisition opportunities, Sugarman said. Given the company's track record, it could buy anything from a whole bank to a specific business line, Chimera says.

It recently sold eight branches in San Diego, Riverside and Los Angeles counties to AmericanWest Bank.

"I think that speaks highly to where they are headed," Chimera says. "They aren't interested in growth for growth's sake but they want to create a brand."

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