Ruling Due Today on Deposits at Valencia
Insured deposits in the failed Valencia Bank of Santa Ana will be transferred to Barclays Bank of California if an Orange County judge agrees today, state and federal regulators said Saturday.
The State Banking Department and the Federal Deposit Insurance Corp., which insures deposits up to $100,000 per account, negotiated with San Francisco-based Barclays to act essentially as an agent for the FDIC in taking control of $91.9 million in 10,600 Valencia accounts.
Valencia was seized and declared insolvent by state and federal regulators at 6 p.m. Friday. “Significant loan and operating losses had exhausted the capital of the bank,” a state banking official said.
Under the pending agreement with Barclays, Valencia’s six offices will not reopen.
The FDIC said 46 account customers holding an additional $2.1 million in uninsured deposits--the amount over the $100,000-insured limit--will be given receivers certificates, which will entitle them to share in whatever money is left after the FDIC liquidation.
Bank’s Condition Probed
“I couldn’t say at this time if there will be anything left after liquidation and expenses,” said Scott Jones, the FDIC closing manager. He is supervising a team of 40 examiners encamped in Valencia’s six branches over the weekend to determine the condition of the bank.
“The bank has been in trouble for so long that anybody with money in there over the insured amount . . . was not paying attention to what’s been going on,” said Gerry Findley, a Brea financial institutions consultant. He said the only depositors caught with uninsured deposits were those with high-yield certificates of deposit or brokers who had raised the money for the bank.
Examiners working through the weekend have determined that Valencia had total assets of $96.7 million and total deposits of $94 million at the close of business Friday. In the past three years, Valencia lost more than $10.4 million.
Bank executives had been looking for a suitor that would take over what was Orange County’s oldest independent bank. But during the past two years, two deals to sell the bank or a controlling interest fell through. A separate agreement to sell Valencia’s troubled $30-million trust department also collapsed.
10th Bank Failure of ’86
Valencia was the first bank in California and the 10th bank nationwide to fail this year. A bank in Nebraska was taken over by the FDIC a few hours before Valencia was closed.
Under the agreement with the FDIC, Barclays would pay the FDIC $251,000 to handle the deposits with the expectation that Barclays would be able to keep most of the depositors as customers. In addition, Barclays would pay up to $66.3 million for certain other assets, primarily real estate, installment and commercial loans.
Jones and FDIC spokesman Bill Olcheski said the federal insurer would turn over money equal to the insured amount to Barclays for customers, who can demand pay-offs immediately. If no one claims the deposits within 18 months, the money will revert to the FDIC, they said.
Checks drawn on Valencia accounts also will be honored, Olcheski said.
The FDIC’s directors decided to arrange the transfer of insured deposits Saturday because no acceptable bids from other banks to assume the assets and liabilities of Valencia were received.
Orange County Superior Court Judge Robert C. Todd will be asked to approve the deal at a 1 p.m. hearing today, said Alida Buchanan, a lawyer for the State Banking Department.
No spokesman for Barclays could be reached Saturday. Jones and Buchanan said signs will likely be posted on the doors of Valencia’s six branches directing customers to the nearest of Barclays’ 10 Orange County branches.
“Probably, under the circumstances, this is as good a deal as anyone could expect,” Findley said. “Barclays is a solid bank . . . and they’re getting more aggressive in California.”
Barclays Bank of California is a subsidiary of Barclays Bank PLC of London, a worldwide banking organization that boasts 5,000 offices in 80 nations.
The Barclays organization also operates a state-chartered bank in New York and Barclays American Business Credit Inc., a commercial finance company based in Hartford, Conn.
Barclays’ California operation has grown steadily during its 20-year history through a series of mergers and branch purchases. In 1968, it acquired the Independent Bank of Anaheim and later purchased banks in San Jose and Santa Barbara. In December, Barclays acquired 11 branches of California Canadian Bank, including four in Orange County.
During the first six months of last year, the bank grew by nearly $100 million to $965 million.
Barclays is not connected to the Barclays Mortgage Corp. in Irvine.
