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ITLA Goes Hollywood With Movie-Making Venture

ITLA Goes Hollywood With Movie-Making Venture

Official Notes Regents Bank Operating ‘Considerably Ahead’ Of Its Projected Schedule

Finance

by Mike Allen, Senior Staff Writer

ITLA Capital Corp., the San Diego-based parent firm of Imperial Capital Bank, is getting into the movie-making business, having purchased a company that makes loans to independent filmmakers.

The publicly traded ITLA, which also has a REIT as a subsidiary, said the acquisition of the Lewis Horwitz Organization in Century City for about $100 million , 1.01 times the company’s book value , will be immediately beneficial to the bank’s bottom line.

“It’s a niche business where there isn’t a lot of competition, and there’s fairly decent loan fees,” said Tim Doyle, ITLA’s CFO on the deal that was announced last week. “It’s part of our strategy to convert to a commercial bank and will help in getting new demand accounts and cross-selling our services.”

Lewis Horwitz has been in business for 22 years, and helped finance some 500 films with total loans made of more than $1 billion. Among the recent productions it has funded are “Ali,” “Cookie’s Fortune” and “My Big Fat Greek Wedding.”

The loans made by Lewis Horwitz are similar to construction loans with terms of no more than 14 months and secured by the film’s pre-sold distribution rights.

As soon as the film begins distribution the loans are usually paid off, Doyle said.

The average loan will be between $2 million and $3 million, and the total portfolio likely won’t exceed $150 million, he said.

ITLA will operate Lewis Horwitz as a wholly owned subsidiary of Imperial Capital Bank and retain Horwitz as the company’s president. It has 15 employees. Imperial Capital has been seeking to convert its current industrial bank charter to a commercial bank.

ITLA promotes itself as the area’s largest financial services company, although both California Bank and Trust and San Diego National Bank have larger assets. The two lenders are subsidiary companies of parent firms based in Utah and Illinois, respectively.

ITLA had $1.4 billion in assets as of June 30, and reported net income of $4.8 million for the second quarter, compared to a net profit of $4.7 million in the same period last year. Traded on Nasdaq, ITLA closed at $29.12 Oct. 29, while it has ranged between $17.85 and $31.85 for the past 52 weeks.

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Regents Nearing Break-Even: Regents Bank, the San Diego bank that opened its doors three days after the tragedies of Sept. 11, said it’s about one year ahead of its projected timetable for breaking even, said President Dan Yates.

“We’re operating considerably ahead of our projected schedule and think we’ll be breaking even by the end of the first quarter of 2003,” Yates said.

After a little more than a year in business, Regents is still losing money, but its losses have declined from $851,000 in the quarter ended Dec. 31, 2001, to $342,000 for the recently completed third quarter.

According to Ed Carpenter, an Irvine-based banking consultant, the average time for a brand new, one-office bank to achieve profitability is 18 months. For a two-office bank, it’s 24 months. Regents has two offices, in La Jolla and Downtown.

Yates said the bank’s original business plan estimated break even would likely come when its loan portfolio hit about $40 million, but the Federal Reserve Bank’s continued reduction of interest rates affected the timeline.

As of Sept. 30, Regents had $43.3 million in loans and $77.9 million in total assets. Yates now figures Regents will turn a profit when the loans hit about $65 million. It will exceed $49 million by the end of October, he said.

Most of the new loans are to small- and mid-sized businesses, with sales between $2 million and $50 million. The loans are going for such things as business real estate purchases, receivables, lines of credit and equipment purchases, he said.

With the portfolio still in its infancy, it hasn’t had a single non-performer. It allocated $578,000 in loan loss reserves since its opening.

Yates said one reason for the bank’s rapid growth is that its founders are well-seasoned bankers, many of whom come from several community banks that were acquired by larger, out-of-state banks in recent years. Its board includes former Scripps Bank chairman Bill Nelson.

The spate of new community banks forming in the county doesn’t worry Yates, who said the smaller lenders don’t need a big market share to become successful.

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CalFed Purchase Approved: Citigroup Inc.’s acquisition of Golden State Bancorp, the San Francisco parent firm of CalFed Bank, was given the go-ahead from the Federal Reserve Bank board last week despite extensive opposition from community fair lending advocates.

The $5.8 billion merger announced in May entails Citigroup’s purchase of Golden State Bancorp’s 352 branches and $54 billion in total assets. This gives the nation’s largest financial institution, with more than $1 trillion in assets, a big foothold in California and Nevada. Citibank currently has 80 branches in the state, but only a few loan production offices in San Diego.

CalFed, the nation’s second-largest savings and loan, has 26 branches in San Diego County and 238 employees.

The upcoming consolidation, which is expected to be consummated in the fourth quarter, shouldn’t result in much job loss in the state because Citigroup has a limited presence in California.

The San Diego City-County Reinvestment Task Force opposed the merger, objecting to Citigroup’s subprime lending operation, which charge mostly lower-income customers much higher interest rates.

The Task Force did approve a negotiated agreement that fell short of its initial demand to commit $1 billion in financing and grants to the area. Among the key points in the agreement with Citigroup is a commitment of $20 million to $30 million of investments to local community development organizations; first-time homebuyer and financial literacy programs; more market rate loan products; and building a new branch office in a low-income neighborhood.

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Top SBA Lender: Carlsbad-based Southwest Community Bank is claiming to be the area’s top SBA lender this fiscal year, both in terms of number of loans and dollar volume, although that could be debated.

That title will always go to San Diego’s CDC Small Business Finance Corp., which does nothing but SBA 504 loans for buying property. CDC made 156 loans this fiscal year with a gross amount of $78 million.

Bank of America, a subsidiary of Charlotte-based Nations Bank, did 101 loans for $6.4 million, and California Bank & Trust did 93 loans for $10.3 million.

Southwest’s SBA Manager Dennis Stytz notes BofA and CB & T; are both subsidiary banks of larger, out-of-state financial companies, but their dollar amounts still fall below Southwest’s total of $26.4 million for 71 separate loans for the year ended Sept. 30.

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Small Change: At ceremonies held this month, Wells Fargo’s Community Partners program donated $110,000 to a range of nonprofit programs in the county. Comerica Bank awarded a $25,000 grant to CDC Small Business Finance Corp. to expand a technical assistance program. California Bank & Trust is offering an Economic Stimulus Package that includes no interest until 2003 and no first-year annual fees on a credit line of up to $100,000. Community Bancorp Inc., parent of Community National Bank in Escondido, declared a 5 percent stock dividend payable Nov. 29 to shareholders of record Nov. 15. Community Bancorp reported net income of $2.1 million for first nine months, up 169 percent from the like period last year.

Send any finance news to

mallen@sdbj.com.

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