In an attempt to loosen growth restrictions imposed by federal regulators, Irvine City Savings & Loan Assn. plans to bolster its capital base with a $1-million stock offering.
The year-old old savings and loan is issuing a secondary offering of 100,000 shares at $10 a share to increase its capital fund to more than $3 million.
With the increased capital base, Irvine City Savings officials said they hope the S & L will receive Federal Home Loan Bank Board approval to increase its total assets--loans and other investments--by as much as $10 million this year and by an additional $9 million in 1986.
Currently, regulators limit Irvine City Savings to taking in no more than $33.8 million in savings. On June 30, the S & L reported savings of $32.7 million. Irvine City's chief financial officer, James Giraldin, said that the institution's total assets also are limited to a maximum of $36.1 million. On June 30, the thrift reported assets of $35.2 million.
In recent years, the bank board, through its savings and loan deposit insurance arm, has required most new S & Ls to maintain a net worth, or so-called capital base, equal to 7% of assets if the thrift is operating with less than $3 million in capital. That is more than double the 3% required of older, established thrifts. The capital fund, made up essentially of shareholders' money, serves as a cushion against losses from bad loans or an unforeseen downturn in the economy.
"It's not unusual for a new institution which is growing according to a business plan to reach out for additional capital, because the regulators will not allow them to grow if they don't keep a high net worth ratio," said Robert M. Shafton, a financial institutions attorney in Los Angeles.
'Criterion for Survivorship'
"More and more today, people are being asked to look at the survivor ratio of institutions," Shafton said, referring to the growing number of S & L failures. "One of the major criteria for survivorship is net worth, particularly for new and smaller institutions."
Irvine City Savings had hoped to open with $3 million in capital, but fell short of that goal when its initial offering expired last November. "We had sold $2,468,000 worth of stock," said Paul Guiso, Irvine City's senior vice president. "Our goal has always been to reach a total capital of $3 million . . . so we had to go out and come up with another offering."
Guiso said that the new offering, which is valid until April, 1986, already has brought in almost $250,000.
Irvine City Savings has not yet reported its finances for fiscal 1985 but is expected to post a loss of about $200,000, most of it due to first-quarter opening expenses. Guiso said the S & L had net earnings of $91,000 in the second half of its fiscal 1985, which ended June 30, but lost $313,000 in the first half. Because of its first-year loss and costs of the stock offering, the book value of Irvine City's stock--originally issued at $10 a share--is $8.81.
By the end of last month, Irvine City Saving's officials reported net worth of 7.24% of assets. A $3 million capital base and the Federal Home Loan Bank Board's blessing to decrease its net worth ratio would enable Irvine to operate with a 6% net worth ratio this year and a 5% ratio in fiscal 1987.