A Colorado financier and real estate developer has paid more than $1.6 million to purchase nearly 81% of Orange City Bank and has pumped in an additional $1 million in capital to bolster an institution that last month turned a small profit after losing money for much of the last two years.
Martin List, a former Newport Beach physician, said Monday that he also will make a 90-day tender offer for the remaining stock held by some 95 shareholders. The total purchase price is expected to exceed $2 million.
The 9-year-old bank, with assets of $58 million, is operating under an order by the Federal Deposit Insurance Corp. to raise additional capital to offset recent losses. It has branches in Orange, Huntington Beach and Newport Beach. List, who has taken over as chairman of the bank’s board, said he plans to maintain the three offices.
Although a Colorado Springs resident, List has several business ventures in Orange County and other parts of California.
“I feel that Orange County is still one of most vital, energetic areas in the world today,” List said. “The Pacific Rim is one of largest economies in the world, and Orange County is in the middle of it all. One could not be in a better position for banking than in Orange County.”
List, who left a medical practice several years ago to begin developing land in Colorado, paid $10.61 a share for the Orange City Bank stock held by the three major owners, Dr. Robert Graham; his son, Robin B. Graham; and his business manager, Robert M. Dahlbo. The three sellers and a fourth person no longer affiliated with the bank purchased 93% of its shares in 1979. The bank opened in April, 1977.
The price List is paying is well below the $18.96 a share that investors paid in a 1984 private placement of 26,315 shares, according to Brea financial institutions consultant Gerry Findley.
Findley said the sale and infusion of capital should turn “one of our serious problem banks” into “one of our good banking institutions.”
Orange City Bank earned $390,000 in 1983 but was caught with bad real estate loans and overappraisals that contributed to a $721,000 loss last year, said William Diethrich, a decade-long friend of List who has taken over as the bank’s president and chief executive officer.
There will be a “significant loss” for this year, he said. Diethrich said, however, that the bank has turned a corner and that it earned a profit of $11,050 on operations for last month.
He said the November profit would have been “a great deal higher” had it not been for some extraordinary expenses, such as legal expenses and the cost of resolving real estate foreclosures, which the bank decided to take now so it could “start fresh in 1986.”
During the last year, Diethrich said, the bank has raised its ratio of capital to assets to 6.6% from nearly 4.8% at the end of last year. And with the extra $1 million infusion by List last Friday, the ratio will likely “settle down” at 7.5%, he said. Federal regulators, who use the ratio as a measure of a bank’s soundness, require community banks to maintain a capital-to-assets ratio of at least 6% and often require a 7.5% ratio of banks they have identified as troubled institutions.
The order to raise capital, which an FDIC official confirmed but would not discuss, probably will be re-evaluated by the federal insurance agency after an examination to determine if the bank is on sound footing. The examination “would be in the relatively near future . . . in a matter of months,” the official said.
List, who barely acknowledged Orange City Bank’s past problems, said the institution is now healthy.
Diethrich replaced David T. Blankenhorn, who remains as one of the new directors of the bank. Diethrich said Blankenhorn, a longtime friend, decided “to get out and get into consulting and other financial services.”
Other New Directors
Blankenhorn, who joined the bank nearly two years ago to help resolve problems that had just begun to surface, was on vacation and could not be reached for comment.
Besides List, Diethrich and Blankenhorn, the new directors include bank executive vice president Mark E. Simmons; Jack Harris, vice president of Continental Land Title Co. in Santa Ana; and David G. Lasker, president and chief executive officer of US Financial Inc., a Newport Beach mortgage company which List chairs. Lasker will serve as vice chairman of the bank’s board of directors.
The bank is the second major investment that List has made in Orange County this year. In October, he announced plans for a $20-million, 224-room Holiday Inn hotel in Huntington Beach. List said Monday that he has sold nearly all of a $5-million syndication in the hotel and expects to break ground within two months.
In Colorado Springs, where his ML Properties Inc. has offices in the List Building, located on List Drive, the doctor-turned-developer is building a $3-billion aerospace park and has plans to construct a $140-million center for research into space exploration.