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Monday, Oct 3, 2022

Bank Sees Acquisition as Making for the ‘Perfect’ Footprint

Regents Bank, now a part of Los Angeles-based Grandpoint Capital, grew bigger last year, having assimilated Escondido-based California Community Bank in November.

The addition enhanced Regents by some $200 million in assets, bringing it to $620 million as of the end of last year.

Recently appointed Chief Executive Steve Sefton says Regents probably won’t do another acquisition this year.

“That’s a possibility but it’s not even in the discussion stages,” he said. “We’re not actively looking. We think our footprint is perfect the way it is.”

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While Regents got bigger, its profits didn’t. Last year Regents reported net income of $1.23 million, down from $1.7 million in net income for 2011. The results include CCB’s numbers for one month. The key reason for the drop-off is an accounting rule that was triggered from Regents’ sale to Grandpoint in February, Sefton said.

“From an accounting perspective, you’re reporting only 11 months of earnings,” he said.

The bank also put aside about $3.5 million into its loan loss reserves to deal with problem loans, which shrunk the bottom line.

At year-end, Regents was holding $9.68 million in nonperforming assets, or 1.56 percent of its total assets. That compared with holding only 0.39 percent in nonperforming assets at the end of 2011.

Sterling purchase of Borrego Springs closes: Borrego Springs Bank will officially become part of Sterling Savings Bank Feb. 28 when that bank’s parent company, Spokane, Wash.-based Sterling Financial Corp., will complete its purchase, which was first announced in October.

Sterling said the deal got a shortened approval from federal regulators, allowing it to begin merging into Sterling Financial, which has about $6.5 billion in assets.

Sterling acquired BSB for $6.5 million in cash, or about half of BSB’s shareholders’ equity as of Dec. 31. That depressed price was a clear result of the surfeit of problem loans propagating BSB’s loan portfolio. At the end of the third quarter, BSB counted $18 million in nonaccrual loans and foreclosed real estate or 13 percent of its total assets.

The bank’s owner, the Viejas Band of the Kumeyaay Indians, have declined to comment about the transaction, but may have been persuaded to unload the bank due to a regulatory cease and desist order BSB got in 2011. That order required Viejas to inject $2 million in new capital into the bank among other provisions.

Pat Rusnak, Sterling Financial’s chief financial officer, said BSB, with $142 million in assets, will continue to operate under its BSB name but will be part of Sterling Savings Bank.

He said Sterling will retain substantially all of BSB’s 72 full-time employees, except for CEO Bill Ruhlman, who is on a consulting contract “for a period of time.”

However, Sterling is closing down two offices, the Alpine branch, effective March 31, and a loan production office in Panama City, Fla., effective Feb. 28, Rusnak said.

That leaves two branches and six loan production offices still under BSB. Sterling acquired BSB mainly for its activity in loans guaranteed by the U.S. Small Business Administration.

REO drops at most banks: According to a recent report from SNL Financial, a Charlottesville, Va. research firm, the amount of foreclosed real estate on the books of banks fell 9.7 percent last year from the total held in 2011, which is good. Not so good are the numbers relating to mortgages that are in some stage of default and moving to foreclosure.

For openers, the real estate owned by banks at the end of 2012 stood at $38.5 billion, down from $42.6 billion at the end of 2011.

But those bad loan figures pale in comparison to the value of the mortgages of one-to-four family houses in default as of the end of last year. It’s $91.5 billion, which was down from $97 billion at the end of the third quarter, but only down slightly from the $92 billion at the end of 2011.

Not surprisingly, the large megabanks are holding most of the troubled mortgages. In order of the ownership of the mortgages they are JP Morgan Chase, Bank of America, Wells Fargo Bank, Citibank, and U.S. Bank.

To be fair, those big holders acquired some of the most prolific providers of subprime mortgages several years ago. Chase purchased Washington Mutual Bank, BofA purchased Countrywide Financial, and Wells got Wachovia Bank.

Small Change: CUSO Financial Services LP, the local broker dealer serving the credit union industry, said it partnered with CD Funding Group to expand its CD platforms. CUSO also launched a new website to better support clients … First Republic Bank, based in San Francisco and with five local offices, was named best private bank for client service in North America by Private Asset Management Magazine.

Send any news about locally based banks to Mike Allen via email at mallen@sdbj.com. He can be reached at 858 277 6359.


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