San Joaquin Bank keeps mum through deadline
| Thursday, Oct 15 2009 11:06 PM
Last Updated Friday, Oct 16 2009 11:30 AM
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Felix Adamo/ The Californian Both lanes of the drive thru tellers were busy at San Joaquin Bank on the corner of 17th and L Streets.
As an important deadline came and went, leaders of San Joaquin Bank kept quiet Thursday about their progress toward meeting regulators' demands that the Bakersfield institution raise money to satisfy liquidity concerns.
After a four-hour meeting of grim-faced board members, the chairman of the bank's holding company issued a brief statement that left key questions about the bank's future unanswered.
"We continue to work with our regulators to comply with our agreement with the goal of reaching a satisfactory outcome," Chairman Rogers Brandon wrote in an 8:27 p.m. e-mail. "We are pleased that our customers still enjoy the great service the bank has provided for almost 30 years."
The bank had been required to raise at least $27 million in new capital by Thursday, according to an agreement with federal and state regulators.
Several board members could not be reached for comment late Thursday. President and CEO Bart Hill, also a board member, said he could not speak to a reporter as he left the institution's 17th Street headquarters shortly after the conclusion of the board meeting that began at about 2:15 p.m. and extended past 6 p.m.
For about a year the Bakersfield-based bank has been under regulatory pressure to raise money and take other measures to stabilize the bank's finances. In April San Joaquin and regulators put into writing their informal agreement made in November.
Then, on Oct. 1, the company announced that it had worked out an agreement with regulators under which it would, by Thursday, come up with $27 million or raise its net worth-to-total assets ratio at least 7 percent, whichever sum is larger. Bank executives said the $27 million would almost certainly be the larger amount.
Under that agreement, the bank also faces a Dec. 31 deadline to increase the net worth-to-total assets ratio to at least 8 percent. On Oct. 1, bank executives said the figure stood at 4.7 percent.
The federal and state regulatory agencies that negotiated the deadline together with San Joaquin have repeatedly refused to comment, declining even to say what consequences the bank would face if it missed the deadline.
Hill has maintained that Thursday's deadline was not absolute, saying as recently as Tuesday that there is "always negotiating room based on what's going on."
In July the bank announced that it had secured an agreement with 11 Indian investors who had together pledged $38 million, which would give them a combined 62 percent stake in the company, though no individual would own more than 8 percent. Bank executives said regulatory approval in India and the United States had stalled delivery of the money.
Meanwhile, bank representatives have worked with a local investor group that would contribute enough capital to satisfy regulators. Brandon has said the proposal was "extremely well received" but he declined to provide details.
San Joaquin executives have said they were working on a number of options to raise capital, from a public stock offering to an institutional investment. Without a signed agreement, they said, Securities and Exchange Commission rules prohibit them from being more specific.
Some progress toward the $27 million was made recently when three bank officials forfeited their retirement packages, together valued at $6.5 million.
In addition to the search for new capital, changes were made earlier this month to company's board of directors with the stated purpose of reassuring investors that they have a voice on the board. Among the changes announced Oct. 5 was the retirement of founder and Chairman Bruce Maclin, and the formation of a corporate governance and nominating committee. The company said more changes to the board are ahead.
Sour loans have exerted downward pressure on the bank holding company's earnings. The company has reported losing more than $18 million in the first quarter of this year -- $10.7 million of that attributed to loans that had to be charged off -- and another $1.58 million in the second quarter.
The deadline itself has raised enough concern among customers and employees that Hill issued a statement Wednesday saying that the bank is making progress on its near- and long-term goals. He acknowledged that an undisclosed number of customers have closed their accounts recently, and emphasized that checking account holders' deposits are insured "regardless of the amount."
Hours before Thursday's announcement, the company's stock closed at $2.99, up 58 cents, or 24 percent. Its best closing in the last 52 weeks was $21 on Oct. 20 of last year, according to Bloomberg.com.
