Regulators late Friday closed a pair of distressed Los Angeles County banks. They were sold to two local institutions.
Western Commercial Bank, a small lender in Woodland Hills that had been struggling with heavy loan losses and dwindling capital, was shuttered by the California Department of Financial Institutions and sold to First California Bank in Westlake Village. Later in the evening, Westminster’s First Vietnamese American Bank was closed and its assets acquired by Grandpoint Bank, a new but fast-growing L.A. institution.
First California agreed to pay the Federal Deposit Insurance Corp. a 0.5 percent premium to assume all $101.1 million of Western Commercial’s deposits. Additionally, First California purchased essentially all of the failed bank’s $98.6 million in assets – including the lone Western Commercial office, which will reopen Monday under the new ownership – and entered into a loss-share transaction with the FDIC for $83.9 million of the assets.
Western Commercial, founded just before the financial crisis, was struggling with significant losses in its commercial real estate and business loan portfolios. As of June 30, the bank had a risk-based capital ratio of 5.7 percent, the lowest of any bank headquartered in Los Angeles County, and a problem-asset level of 264 percent of equity, the highest in the county, as the Business Journal reported last week.
The bank had received several enforcement orders recently from regulators alleging “unsafe or unsound banking practices” and ordering management to raise $10 million.
In June, the board ousted Carl Raggio III as chief executive, a move sources said was prompted by regulator demands.
First California had acquired another failed institution, 1st Centennial Bank of Redlands, after it was shuttered in January 2009. In an earlier interview with the Business Journal, First California Chief Executive C.G. Kum said the bank, which accepted $25 million in government bailout funds, had been encouraged by regulators to use the money on failed bank acquisitions.
First Vietnamese had $48 million in assets and $47 million in deposits. Grandpoint agreed to assume all of the deposits and purchased essentially all of the assets, including one branch location.
Grandpoint was launched in late June by longtime banker Don Griffith. The bank’s holding company has acquired several open banks, including First Commerce Bank in Encino.
Western Commercial’s closure is expected to cost the FDIC’s deposit insurance fund $25.2 million, while First Vietnamese could cost about $9.6 million.
The FDIC has closed 143 banks this year.
