When George Haligowski first learned Imperial Thrift & Loan Association was in trouble in 1992, the bank was getting administrative guidance from the federal government and was on the verge of being seized.
A group of Japanese investors had bought the bank that was later to become ITLA Capital Corp. in 1983. But by 1992, the Japanese economy was in a recession and the stock market there had begun a rapid decline.
The California economy wasn’t much better off, recalled Haligowski, president and CEO of La Jolla-based ITLA Capital.
To complicate things, the thrift was trying to be a community bank, offering a wide range of consumer services in competition with bigger banks that could offer much more.
“I came from a securities industry background and knew very little about banking,” said Haligowski, 46. “But I had a mandate from the owners to reposition the bank in the marketplace so it could be sold.
“I looked at the bank’s operations and realized it was a traditional community bank. But the paradigm had changed and community banks had a lot of trouble competing with bigger banks.”
He decided to change the bank completely. About 90 percent of the bank officers and executives were let go. Nine of its 16 branch offices around California were closed.
Three years after Haligowski took charge, the Japanese investors sold out and received their initial investment when the bank became a publicly traded company.
Now, five years later, ITLA’s subsidiary, Imperial Capital Bank, as it is now called, is a leading commercial real estate lender in the state. It recently relocated from Glendale to La Jolla where ITLA Capital is headquartered along with another subsidiary, ICCMAC Multifamily and Commercial Trust.
The ICCMAC stands for Imperial Credit Commercial Mortgage Acceptance Corp. It’s an REIT that holds real estate loans for income.
The book value of ITLA and its subsidiaries was about $40 million in 1995 and it has since grown to $150 million, Haligowski said.
Haligowski, a 1972 Madison High School graduate, had been spending weekends in San Diego and living in an apartment in Los Angeles during the week for five years, so a full-time return to his hometown was behind the recent corporate relocation, he said.
At the end of the third quarter of 2000, ITLA had $1.3 billion in assets and liabilities of $1.2 billion. Its net income for the third quarter of 2000 was $4.62 million, or 65 cents per diluted share, compared with net income of $4.12 million or 55 cents per share for the same quarter in 1999, he said.
During 2000, the company’s common stock price climbed from about $12 a share to around $19.50 as of last week.
Haligowski said the average commercial real estate loan made by the financial institution is $2 million, but it will go as high as $12 million.
He attributes the company’s success to an efficient work force that helps keep expenses low. The bank generates $1 in profit for each 36 cents of expenses, he said.
The company has 130 employees, though Haligowski said it would be typical for a lender the size of ITLA Capital to have 400 workers.
ITLA Capital generates about $1 million annually for each employee, compared to most other banks that generate about $300,000 annually from each employee, he added.
“Employee productivity is the single most important thing ITLA Capital has going for it,” Haligowski said. “We’re constantly trying to improve it.”
There are now five loan production offices across California, as well as six branches where deposits are received. The only San Diego County deposit-taking branch is in Del Mar Heights.
Fast, efficient communication is important to Haligowski, and he has equipped the company’s La Jolla office with a teleconferencing center. There is also a mobile office in a converted recreational vehicle that allows executives to work and communicate with others while commuting back and forth between San Diego and bank offices in the Los Angeles area.
The corporate headquarters has an exercise room and the company also pays for employee gym memberships.
“This business is all about efficiency and showing your customers you are efficient,” Haligowski said.
There are no plans to add more retail bank branches in San Diego. That’s because the bank has focused on a particular niche , commercial real estate loans , and while it offers a variety of other banking products it won’t be expanding the marketing of those products.
Haligowski said, however, ITLA Capital Corp. is interested in acquiring other financial institutions in the state.
He believes small retail banks can’t compete with bigger banks, and the way for them to survive and grow is to focus on a particular niche, such as commercial real estate loans. The bank also offers business franchise loans.
The bank is the third-largest industrial bank in California, behind Fremont Investment & Loan of Anaheim Hills and Southern Pacific Bank of Torrance, Haligowski said.
The laws governing an industrial bank are slightly different than those affecting other banks, he added. There are limits on the kind of checking accounts that can be offered, he explained.
There’s also an exemption from the federal bank holding company act that allows them to own businesses in other industries and financial services firms such as insurance companies. ITLA Capital, because it is a holding company, has more flexibility in making investments as well, he said.
The shift away from traditional bank services doesn’t bother Haligowski.
“There’s a new wave in banking, a new paradigm, that says the only way a small bank can grow bigger is by specializing,” Haligowski said.
Jeffrey Bittner, a bank analyst with Keefe, Bruyette & Woods, a New York stock brokerage, has followed ITLA Capital Corp. since 1997. He’s rated the company as a “buy.”
“While this thrift maintains its West Coast focus, it’s quickly developing a national presence,” Bittner said. “ITLA has been able to reap the benefits of a steadily improving California economy and growing demand for commercial mortgage-backed securities as well.”
Bittner said the strong quality of the company’s assets were appealing to him.
Scott Valentin, an analyst with Friedman, Billings, Ramsey & Co. Inc. of North Arlington, Va., also follows ITLA Capital Corp. He’s also optimistic about its prospects for the future.
He said continued earnings per share growth, stable asset quality and strong loan growth are evidence that ITLA has been effective in focusing on its lending niche. He also said the shares of the company appear to be undervalued when compared with other comparably sized California-based financial institutions.
“This is a stock that’s trading at book value and seven times earnings,” Valentin said. “It’s very cheap and the argument for buying it is that the market has currently mispriced it.”
