Seacoast Commerce Bank, based in Rancho Bernardo and with about $350 million in assets, joined the Federal Reserve System, becoming one of 26 banks in California in the system.
The nation’s central bank provides membership to commercial banks, but they must meet certain criteria, including having strong capital reserves and a profitable track record.
Seacoast Commerce CEO Rick Sanborn said becoming a member made sense given the bank’s possible future plan to form a bank holding company. That structure would give the bank more flexibility in raising new capital to expand.
As it stands, if the bank decides to raise new capital, Seacoast Commerce has to conduct a stock offering that would dilute the current shareholders. With a holding company, the bank could borrow the money or issue debt, and downstream the funds to the bank, a wholly-owned subsidiary of the holding company.
The holding company also enables Seacoast to form or buy other nonbank entities such as an insurance or brokerage firm, Sanborn said.
As a member of the Fed, Seacoast is required to own stock in the San Francisco Federal Reserve Bank, which covers nine western states including California. It will receive a 6 percent annual dividend from that stock ownership, but the amount is negligible, no more than 3 percent of its capital or about $850,000.
Under the new arrangement, Seacoast Commerce maintains its state charter, but is also regulated by the Federal Reserve Bank. The Federal Deposit Insurance Corp. no longer regulates the bank.