American Interstate Bank Gets Clean Bill of Health

John Engberg didn’t think it would take too long to straighten out American Interstate Bank’s problems, but it took nearly five years for the president of the Newport Beach-based bank to get a clean bill of health from federal regulators.

Engberg said he was notified earlier this month by the Federal Deposit Insurance Corp. that an April, 1981, order for the bank, then known as American State Bank, to halt certain “unsafe and unsound practices” officially was lifted.

“I’m terribly relieved and very, very pleased,” Engberg said. “We cooperated with them (regulators) completely through this. But I didn’t realize at the time how long it takes to straighten out such problems.”

The bank, in a consolidated report with its subsidiary, American Interstate Properties Inc., posted a net income of $164,000 for 1985, four times its $41,000 profit the previous year.

To satisfy federal regulators, American Interstate Bank had to raise its ratio of capital to assets to at least 7%, which it did by raising new capital and reducing its assets to $55.7 million on Dec. 31 from more than $70 million at the time the FDIC order was imposed. The capital-to-assets ratio was 7.7% on Dec. 31, Engberg said, compared to 7% the previous year.

One of the major problems the bank had was a $6-million loan package to a Prescott, Ariz., real estate developer. The loan went sour, and Engberg, who was named president of the bank in early 1981, foreclosed on the property and spent several years trying to market it. Some of the Arizona land was sold, and the bank decided to develop the rest.

Now through its American Interstate Properties subsidiary, the bank has built a country club and is starting construction on a major residential and commercial neighborhood around the club.