Mostly at work Robert Sarver is focused, and at age 37, in control of $6 billion of assets in California Bank & Trust, the state's fifth largest commercial bank and now by far the largest financial institution based in San Diego, an achievement enjoyed in the 1970s and '80s only by Kim Fletcher and Gordon Luce. Not even Fred Stalder reached these heights. And none achieved so much in banking at such an early age.     The former San Francisco-based Sumitomo Bank of California, which merged in October with the local Grossmont Bank, which merged months earlier with First Pacific of Escondido, this month will complete a statewide roll-out of its new name and organization, California Bank & Trust, and a new mission as a "super community bank," although its size stretches the definition of community bank. Its headquarters have been moved to former Grossmont president Allan W. Severson's office, across from UTC, and its new location is properly filed with the FDIC.     But for all the noise made over the demise of San Diego’s largest financial institutions in the early 1990s, including the House Banking Committee hearings at the San Diego Convention Center, and despite all the pleas made to federal officials by private and public executives, including Mayor Golding, not to de-capitalize San Diego by dismantling the local decision-making of big lenders in the wake of S&L re-regulation, hardly anyone has noticed the rise of Robert Sarver. He's received no receptions from the Economic Development Corp., no vanity awards program featuring him, unlike the welcome accorded Ted Waitt of Gateway for a mere part-time headquarters.

Robert Sarver

Prior to arranging the acquisition of Sumitomo, about the closest Sarver had gotten to the public limelight was allowing his top real estate executives — Mark Schlossberg and Brad Perry — to serve on Downtown San Diego Partnership committees. Yet, with a legal lending limit now of some $40 million to any single borrower without going to his big-sister institution in Utah, he is capable of financing nearly any business in California, except maybe the largest 5 percent.
    His low profile is somewhat by design. Sarver claims he's not shy; he's just not a publicity seeker and believes other people are deserving of recognition for the success of an entire team. He also understands that success is not necessarily in the acquisition, nor in asset growth — it’s easy to make loans, not so easy to collect in hard times. Success is built over years of unglamorous operation; Al Severson's quiet, plodding success is a good example.
    Sarver does know how to have fun. So far, some modicum of privacy has been fun, and he may learn to enjoy this idea of becoming a little bit famous. Work is fun. Ambition is fun. Home at the Del Mar Country Club is fun; he and his wife enjoy a year-old boy and a second child is on the way. Fly-fishing on his 2,000-acre Seven-Mile River Ranch in Wyoming is really fun.
    He makes his office in Downtown San Diego, 12th floor of the Emerald Plaza, which his Southwest Value Partners acquired in 1995, the year he moved to San Diego. SVP then acquired control of the Comerica Bank Building, Golden Eagle Plaza and First National Bank Center, making him the largest office landlord in the Central Business District, probably in all of San Diego, with about 1.8 million square feet of space. In the 1990s, he's spent more money than anyone in San Diego on remodeling Class B office towers into space that competes handsomely with Class A.

Allan Severson

Serving as Sarver's right-hand banker man is Al Severson, 52, who adeptly earned the presidency of Grossmont Bank from Don Clague, steered it out of Bancomer ownership and into the hands of Sarver and Utah-based Zions Bancorporation. With nearly three decades of East County and San Diego banking under his belt, Severson has become managing director of CB&T and head of its Southern California division comprising 48 offices and two-thirds of the bank's assets.     For Severson, it’s been a thrill.     "I can’t imagine better people to work with than Robert and the people at Zions," says Severson. "I’m very fortunate to have hooked up with Robert in 1994. I’ve never seen a more driven, talented and intuitive business guy who at the same time looks for humor and has fun in everything he does. He's also financially conservative and very open and honest with his feelings. He works quickly and rarely makes mistakes. The combination of these characteristics is rare and has led to the extraordinary success he's had early in his career."     Sarver learned the business through his father, an Arizona S&L executive for whom he worked throughout high school and who died when Sarver was 18. The young Sarver, at age 22, founded National Bank of Arizona in 1984 with $4.5 million in assets and grew it 100 times by 1994 when he sold to Zions Bancorporation of Utah. Since then, Zions has helped grow National Bank of Arizona to $1.3 billion.     "I had a little success in Arizona and as the Arizona economy was recovering in the early '90s, San Diego was having trouble," Sarver recalls.

"It was close to Phoenix, and some of the people working with me were familiar with San Diego. It was just a natural; nothing too complicated."
    Besides, Sarver had a child-like attachment to San Diego. Since he was born, his family spent summer vacations in Coronado.
    "By the time we signed a contract to buy Grossmont Bank I knew Al (Severson) for three months," says Sarver. "But we had a mutual friend who knew him well, Bob McKee, who runs the Torrey Pines Golf Course, so we had some comfort there. I had more comfort when he and his team put more money in the bank. That's usually the best way to judge people’s confidence in their own businesses, by their own investments. We bought the bank for $40 million and I'd say they put in about 10 percent. It was kind of an easy acquisition because nothing was broken. That was not a tough deal to put together or to see though."
    Grossmont's acquisition of First Pacific National Bank in Escondido, too, was relatively easy since Severson had known the FP crew for so long. Grossmont's assets grew from about $650 million before FP to $927 million by March 31, 1998, and swelled to about $1.5 billion by the time Grossmont was ready to close the deal with Sumitomo last October.
    But acquiring a $5 billion institution? Severson's head must have been spinning.
    Actually, "I’ve worked with Al about three years now, and I don’t think anything would floor him," says Sarver.
    At least it wasn’t their idea, so one can’t accuse them of excessive ambition.
    Sumitomo Bank Ltd. of Osaka, Japan's second largest bank with assets of $480 billion, was being hammered in the Asian financial crisis, had let it be known that its California unit was available. Goldman Sachs shopped it around.
    "Zions had taken a look at the bank and was conducting due diligence to see if it was interested in making an offer," says Sarver. "And they asked me to help with the due diligence, to help them underwrite the real estate portfolio. The bank had about a $1.5 billion real estate portfolio. They also brought in members of the management team at Grossmont Bank to help, due to their familiarity with the California market. The CEO of Zions, Harris Simmons, said they would be interested in making an offer and buying the bank and wanted to know if I'd be interested in running it. At the time, that really wasn’t my intention. But the more I got involved in the due diligence, the more opportunity I saw. So I told him if he gave me 5 percent of the profits, I'd be interested in the job. And he said, 'If you buy 5 percent (of the equity), you can have 5 percent of the profits.' So actually, the structure of this deal is very, very unique. I don’t think there's been another merger like it. Basically, Zions owns 95 percent of the company. With my 5 percent, I took 2.5 percent, and the other 2.5 percent is owned by about 50 management members of California Bank & Trust. Most of the people involved in management have ownership. They've contributed a significant amount of money. It really helps closely align the interests of the bank with the interests of the other shareholders. It really makes us somewhat of a locally owned bank, too.
    "In that vein," Sarver continues, "we’ve attempted to decentralize the company. We’ve got this concept of a super community bank. So we broke the company into different regions with regional headquarters. So we have a regional headquarters in San Francisco, Los Angeles, Irvine and San Diego, and those are the four areas where most of the administrative staff is housed. By far the majority is in San Diego and San Francisco. San Diego is listed as headquarters in the FDIC filing. From a legal standpoint, it’s San Diego."
    Zions paid about $546 million for Sumitomo Bank of California, so Sarver's 2.5 percent came to more than $13 million, and Severson and his management team put up likewise.
    "The decision to buy Sumitomo occurred over a few weeks and was not an easy decision for any of us to make," says Severson. "Key management of Zions was, of course, involved from the beginning. In the end it was Robert who really got enthusiastic about it and gave the board and Harris Simmons the confidence they needed to pull the trigger. It was a very gutsy move for everyone involved.
    "Getting our arms around a larger organization was a little overwhelming at first. However, we were already managing 23 (Grossmont) offices that were well run with a very strong and talented staff. Sumitomo consisted of another 48 offices. It was to some extent the equivalent of absorbing two more Grossmont Banks, one in the San Francisco area and one in L.A. and Orange counties. I think all of us have gained confidence in our staff's ability to understand the organization and develop it into a better performing bank. But there's still an enormous amount of work to be done to get things to where we want them to be.
    "Our expectations are high. When this was announced I think our people viewed it with a degree of skepticism and concern. Our bank was operated much differently than Sumitomo and everyone was wondering how it all would mesh and whether we could knit the two together into one bank with common goals and values.
    "Now that we’re down the road several months, I think we have enough in common with our approach to customers that we can integrate the two organizations very effectively.
    "We are fortunate that Mr. Tom Kato, former president of Sumitomo, agreed to stay with the bank and serve as managing director of the Northern California offices. He is a very energetic guy who spends a great deal of his time with our customers. He wanted to stay with the bank to take part and watch it succeed."
    One of the biggest challenges was technical, converting Sumitomo's larger database and items processing into Grossmont's systems. It’s done.
    Another challenge was sociological, becoming familiar with Sumitomo's large Asian base of customers who accounted for about two-thirds of its business. That's why so many bigger banks were "a little intimidated" by such an acquisition, says Sarver, and why Kato's agreement to stay was essential.
    "What we’ve come to learn is Sumitomo's Asian clientele tends to be extremely loyal, more to the people they deal with than the name of the bank," says Sarver. "Plus that market segment is growing faster than any other market segment in the state of California."
    Sarver says he's also discovered that some Asian business people would rather do business with a healthy, Asian-savvy California bank with a healthy Utah affiliate than a savvy California bank with a much larger, unhealthy Japanese parent.
    "Zions, the way it’s structured, is really not the-one-size-fits-all regional bank," he says. "They approach the business on a more personal side, and regional managers are free to run their banks differently and according to the markets they have. There are six banks: California Bank & Trust, National Bank of Arizona, where I started, Nevada State Bank, Vectra Bank of Colorado, Commerce Bank of Washington and Zions First National Bank of Utah. The strength of the company has been in its local identity. I think it’s been reflected in the growth rate of the company in various markets. Zions Bancorporation now has $16.6 billion in assets, of which $6.016 billion is California Bank & Trust. Right now basically Zions Bancorporation is roughly a third California Bank & Trust, a third in Utah and a third in the other markets."
    In addition to Tom Kato running Northern California and Al Severson running Southern California, Sarver retains David Blackford as managing director of real estate lending, Dennis Uyemura as managing director and chief financial officer, Chris Skillern as a director and executive vice president responsible for San Diego and Riverside counties, and senior vice presidents Jim Horton in San Diego County and Mike Perdue in North County and Riverside County. Joel Ewan and Walt Strangman are responsible for commercial and real estate lending, respectively.
    "Banking is a pretty basic business," says Sarver. "I don’t know size has a lot to do with it. In fact, it may be easier to run a large bank than a smaller one because you can hire more resources."

    Of the $16.6 billion in assets overseen by Harris Simmons and the board of Zions Bancorporation of Utah, $6.016 billion is under the management of Robert Sarver, the Downtown San Diego-based chairman, president and chief executive officer of the new California Bank & Trust.
    But the management of the former $5 billion Sumitomo Bank of California never would have flowed in recent months from San Francisco to San Diego if not for Allan W. Severson, the former president of Grossmont Bank. Severson remains as managing director in charge of Southern California of the new CB&T.
    "If it wasn’t for the platform and the formula for success Al created at Grossmont Bank, Zions would have never made an additional $546 million investment," says Sarver.
    That's about what it cost Zions, Sarver, Severson and their management team to acquire the California arm of Osaka-based Sumitomo Bank Ltd., a $480 billion global financier. Zions acquired Grossmont about three years ago, allowing Severson pretty much to do his thing.
    As he finally closes the books on Grossmont Bank, founded in 1972 in La Mesa with $1 million of initial capitalization, Severson and the final Grossmont team can share credit for most of the bank's growth, from $328 million when Severson took over the presidency from Don Clague at the end of 1992, to $1.55 billion at year-end 1998, including the assets of the former First Pacific National Bank, but not including Sumitomo's considerable portfolio.
    The merger with Sumitomo became effective Oct. 1, 1998, but the pro forma loan portfolio of Grossmont (with FP) stood at $998 million at Dec. 31, up from $725 million (with FP) a year earlier. Total assets of $1.55 billion at year-end '98 compared with $1.21 billion a year earlier. Deposits stood at $1.33 billion, up from $725 million at year-end '97. Unaudited cash net income for the San Diego operation, before extraordinary Sumitomo merger charges, was $19.5 million for about a 1.5 percent return on average assets and more than 20 percent return on equity.
    Sumitomo Bank of California alone earned $41 million with assets of $5.07 billion at year-end '97, for an ROA of 0.8 percent, making it ripe for improvement. Year-end '98 numbers for Sumitomo alone were not available.
    With Grossmont folded in, California Bank & Trust now has 70 offices, including 22 in Northern California, 24 in Los Angeles and Orange counties, and 24 in San Diego and southern Riverside counties. Two new San Diego offices are in formation. (Grossmont had 16 offices and First Pacific eight before they merged.)
    The one former Sumitomo Bank office in Downtown San Diego — the first in town to be converted to California Bank & Trust — is run by Agnes Benson.
    The new company has about 1,800 employees.

    My philosophy from a real estate standpoint is to be more on the contrarian side," says Robert Sarver, who serves as chairman of the new California Bank & Trust and also the principal executive of Southwest Value Partners, San Diego’s largest office landlord.
    "We tend to look at markets that most people think are the worst markets, and the San Diego Central Business District three or four years ago was the market with the least interest from an investor standpoint; the buildings were able to be bought at the lowest percentage of replacement cost.
    "The downtowns my partner in the real estate business likes are what he calls 24-hour cities. You have to have, in addition to office, restaurants, the arts and residential and San Diego’s is one of the few CBDs three years ago that had all of that. So we really felt confident the San Diego CBD would turn around."
    His suspicions were correct, he says, and that’s a good thing, since he and his partners invested about $152 million from 1995 to 1997 to acquire Emerald Plaza, Comerica Bank Building, Golden Eagle Plaza and the First National Bank Center. They total about 1.7 million net leasable square feet of Class A and B space, although you'd be hard-pressed to identify which properties are Class B since he spent millions more to refurbish them.
    He sold the hotel portion of Emerald Plaza one year ago this month for $67 million, a bit more than he'd paid for the hotel and adjacent office portion.
    Economies tend to cycle faster than most people expect, and the peaks and valleys aren’t as good or bad as people usually think, he asserts.
    He doesn’t believe the Downtown San Diego office market has peaked yet "because there's no new construction. (Lease rates) will turn in Downtown when we have under construction more space than people will lease. I think this market can handle 200,000 or 300,000 of square feet of office per year. Above that, you'll see the market begin to peak a little bit."
    As for John Moores' pledge to build 600,000 square feet of office space as part of the Padres ballpark project, the Padres "are going to build it regardless of the market," says Sarver. "I don’t think Downtown will handle 1 million square feet coming on line at the same time, unless sizable tenants can be attracted that aren’t in Downtown now."
    Asked what he thought of the City Hall's efforts to lure office tenants to Downtown — as opposed to the millions of dollars spent marketing suburban alternatives with looser parking and sign restrictions and fewer streets, not to mention cheaper land — Sarver says, "I don’t know of any direct incentives to entice users to move Downtown. The people who sell Downtown are the people who own the buildings Downtown. Over and above that, Downtown has to sell itself."
    In the middle of 1998, Southwest Value Partners was in escrow to sell all its San Diego office properties to Crescent Real Estate Equities for about $250 million. "The sale fell through because a REIT was buying it, the REIT market fell apart and the REIT didn’t have the funds," he says.
    Except for the First National Bank Center, the properties are off the market and he has no intentions of selling them anytime soon. He says he’ll entertain $80 million to $90 million for the First National Bank Center.
    Sarver says he’ll remain in San Diego indefinitely, although he can’t see much of anything beyond five years. "Nothing" would cause him to leave. He loves the climate and he and his wife have made some friends.
    "I try to look at things on a case-by-case basis and have an open mind to where value is. I have to be doing something I like doing. I don’t drift too far from real estate and banking, and I try to keep my eggs in a small basket."