State Banking Officials Close First City Bank

State banking officials on Friday closed First City Bank, a small Glendale-based institution, citing bad loans and continuing operating losses.

The bank, with offices in Glendale and Burbank, had 3,728 depositors with a total of $27.6 million in deposits.

First City has experienced serious problems over the past two years, including problems with real estate loans, a large loss from a check-kiting scheme and a shrinking capital base. At Sept. 30, the bank reported losses of $2.1 million on assets of $35.8 million. Net capital was reported as $201,000.

State Banking Superintendent Louis Carter said bank officers had violated an order to increase the institution’s capital, which had fallen below 1% of assets. Banks are generally required to keep capital equal to between 5% to 6% of assets as a cushion against unpaid loans and other losses.

“As a result,” Carter said in a statement, “the bank was operating in an unsafe manner, which necessitated the closure as protection for depositors and creditors.”

The Federal Deposit Insurance Corp. was named receiver and, as of Friday night, was seeking a larger bank to take over First City’s business. The FDIC insures deposits up to $100,000 and disposes of failed banks.

Most bank officials could not be reached for comment late Friday. Vice President Tony Alves said: “Any information would have to come from the state Banking Department.”

First City was founded in 1978 as Burbank Citizens Bank by a group that included former Burbank City Council members Leland Ayers and Daniel Remy. It was acquired last year by real estate developer John T. Hall, who had promised to inject sufficient capital to keep the bank operating.

Jerry Findlay, a consultant who follows small California banks, said: “It was in trouble a year ago, and Hall put some money in, but it was a desperate situation. It was a case of a little bank trying to be big.”

First City was the eighth California bank to fail this year. Nationally, 117 banks have closed their doors in 1985.