1st Century Bank ready to move to next stage of growth.

When Alan Rothenberg and Richard Cupp formed 1st Century Bank two years ago, they generated buzz among local bankers for raising $34 million--the most capital ever raised by a bank start-up in California history.

The bank's high-powered board includes Oakland A's co-owner and real estate mogul Lew Wolff and Alan Levy, chairman of commercial real estate management firm Tishman International Co.

After turning its first profit in June, 1st Century now is embarking on its second phase of growth.

The bank has hired local search firm Hudson Highland Group Inc., in Torrance, to find a replacement for Cupp, who at 66 is planning to retire soon. He wants to spend more time on his favorite hobby--racing vintage sports cars at local speedways.

"It's always appropriate to have a bench and to look outside for someone to come in when the time is right," said Cupp, who for years led the commercial division of the former First Interstate Bank. Cupp, who has a history of cleaning up troubled banks, has led four other banks in a career spanning 40 years.

"The bank is profitable and well-capitalized and it needs to be taken to the next level," he said.

Board members say Cupp only intended on getting the bank up-and-running, and he expressed an interest in finding a replacement.

"The bank came out of the box hot, and it grew, and now we as a board are saying, what are we going to do for an encore here?" said Marshall Geller, an organizing director at 1st Century and senior managing director of St. Cloud Capital LLC. "Banking is all about vision--you either buy another bank or you get acquired or you do deals."

The move by 1st Century to replace its top banker comes at a time when the environment for small banks has become increasingly competitive.

In the past two years, at least 20 bank startups have opened in Southern California, many of them catering to professional businesses such as law firms. But there is a greater emphasis now on trying to attract high-growth companies that need financing.

1st Century's business model was predicated on having its 400 initial investors and board members--made up local doctors, lawyers, business managers and agents--to bring in business to the bank in the form of deposits and high-growth companies.

Other bank start-ups rely on a similar business model including California Business Bank, Century City-based Private Bank of California, and Premier Business Bank, which opened its doors this month. Encino-based California United Bank and 1st Enterprise Bank, based in downtown Los Angeles, both started with heavyweight management teams and seasoned bankers who already had deep contacts with middle-market companies.

Still, 1st Century finds itself in a good position financially.

In the second quarter ended June 30, the company's assets jumped 44 percent to $170 million from one year earlier, and total deposits jumped 40 percent to $116 million.

1st Century, headquartered in Century City, posted a 134 percent jump in net interest income of $2.1 million in the second quarter. It also reported its first quarterly net profit of $450,000, compared with a loss of $575,000 in the same period a year ago.

With financial success comes added pressure to farm out its capital in high-margin loans.

The problem is that many banks are finding a far more competitive environment for loans and deposits than they previously thought. At the same time, bank boards appear more willing than ever to lend aggressively, particularly in hot areas of construction and real estate, which have fueled profits at Southern California banks over the past five to six years.

Rothenberg, a retired partner at Latham & Watkins who started First Los Angeles Bank in the 1970s and later became a sports entrepreneur when he founded Major League Soccer, admits that the banking environment has changed since 1st Century first opened its doors in 2004.

"I think it is tough only because of the fact that it's getting harder and harder to find business," he said. "It's also harder today than it was two to three years ago to find an executive."

Rothenberg, who is chairman, often describes his role at 1st Century as the bank's "head cheerleader." He said the bank has never had a problem loan and recently got a clean report from bank regulators. Despite plenty of competition, he claims 1st Century's main competitors are large banks such as Bank of America, Wells Fargo & Co., City National Corp. and Union Bank of California.

"This is a perfect time to move to a second generation," he said.