San Joaquin Bank gets deadline to raise money
| Thursday, Oct 01 2009 11:09 PM
Last Updated Friday, Oct 02 2009 09:28 AM
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December 1980: The Bakersfield-headquartered bank is founded; it later becomes a subsidiary of San Joaquin Bancorp and trades over-the-counter under the symbol SJQU:US.
Oct. 19, 2006: Stock price reaches an all-time high of $38.86 a share.
Nov. 7, 2008: Bank officials enter into an informal memorandum of understanding, or MOU, with state and federal regulators saying they will maintain sufficient capital, improve credit risk and maintain an adequate rainy-day fund. The action results from weaknesses found by regulators in February.
December 2008: The bank stays in the black for the year despite a a spike in troubled loans during the fourth quarter. Profits of $2.5 million on average assets of $888.5 million represent a 74 percent drop from 2007 earnings.
April 2009: State and federal regulators put the November agreement in writing. They set urgent deadlines for cleaning up troubled loans, among other things.
June 2009: U.S. Banker, a monthly trade magazine, publishes a list of the nation's 200 top community banks with assets of $2 billion or less. San Joaquin is ranked No. 6 in its June 2009 issue.
July 17: Stock price drops to $1.36 a share.
July 20: Bank officials say first-quarter losses were five times greater than originally reported, reaching about $18.2 million. At the same time, they announce a deal with a group of 11 Indian investors who have promised to buy about $38 million in stock. When the deal is fulfilled, the investors will together own 62 percent of the institution.
Oct. 1: Bank officials file papers announcing state and federal regulators issued an order Sept. 25 requiring San Joaquin to increase certain equity by at least $27 million by Oct. 15. Stock prices close unchanged at $2.25 a share.
Sources: Federal financial filings, Californian archives
Images:
Felix Adamo / The Californian Bart Hill, president and CEO of San Joaquin Bank, in April 2009.
A new agreement between regulators and San Joaquin Bank's holding company spells out for the first time exactly how much money the Bakersfield institution must raise to satisfy liquidity concerns and sets a deadline for officials to complete the task.
The deal announced Thursday adds specifics to a months-old pact between San Joaquin and state and federal regulators. It does not say what consequences the bank would face if it failed to meet the new Oct. 15 deadline to finish raising at least $27 million in new capital.
Signed last month and disclosed Thursday in a public filing with the Securities and Exchange Commission, the agreement suggests that impatience with the bank has grown inside the state Department of Financial Institutions and the Federal Reserve Board, which together with the bank are parties to the deal. The regulators are anxious for San Joaquin to boost its net worth to protect it against the possibility of failure.
Bank officials would not say exactly how near they are to attaining the goal, but they emphasized they have been working on it for months, and expressed confidence that they will succeed.
"I've got seven (million dollars) of it already figured out," bank President and CEO Bart Hill said.
"We have a lot more than that (lined up), but my lawyers say I can't say anything without a definitive agreement signed," he said. "We're close to our goal."
Hill has said the bank is working on different ways to come up with the capital, including looking to institutional investors and a public stock offering. Such sources have become easier to tap, he said, because capital markets "have thawed out" in recent months.
One of the more hopeful avenues, he has said, is an offer by 11 private investors in India totaling $38 million, which would give them 62 percent ownership, though no single person would get more than 8 percent. Hill said $5.5 million of that money is now in Los Angeles but that the rest is awaiting the completion of background checks of the investors.
Hill emphasized that the agreement made public Thursday is the result of negotiations with regulators, and is a deal all sides could accept.
A spokeswoman at the Federal Reserve Bank of San Francisco declined to comment on bank orders, which she described as "fairly self-explanatory."
A spokeswoman at the California Department of Financial Institutions could not be reached for comment Thursday.
The bank will face a second deadline of Dec. 31 to bring its net worth up to at least 8 percent of its total assets, according to the agreement. Hill said that as of Thursday, that figure stands at 4.7 percent.
The bank is also required under the agreement to meet its new capital goals without diminishing its loan loss fund, which is set up to cover possible bad debt.
Thursday's announcement further states that Hill and Steve Annis, the bank's chief financial officer, have given up their retirement packages, together worth $3 million.
That sum is to be added to San Joaquin's progress toward the $27 million.
Hill said the bank may not necessarily need to hit the exact numbers and dates contained in the agreement, saying, "They're humans. These things are negotiated. It's not like you're dealing with a robot."
Annis likened the situation's urgency to a mother calling her child for dinner a second time.
"Be in the house in the next five minutes or else," he said.
The bank holding 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 then losing $1.58 million in the second quarter.
Shares of the company, San Joaquin Bancorp, closed unchanged Thursday at $2.25, according to Bloomberg.com, which reported the stock's 52-week high at $21.50 a year ago today.
Californian staff writer Courtenay Edelhart contributed to this report.
