Plans to Use New Powers to Invest in Real Estate : Metrobank Will Switch to State Charter

Metrobank, a medium-sized Los Angeles financial institution, said Wednesday that it will switch from federal to state regulation and will use its new powers as a state-chartered bank to invest in real estate.

The bank’s shareholders authorized the move Tuesday and it was announced Wednesday.

Metrobank, with assets of $750 million, specializes in loans to medium-sized businesses. Its headquarters are in Westwood, and it has five other offices.

The bank will now be regulated by the State Banking Department, rather than the Office of the Comptroller of the Currency, a federal agency.

Metrobank will, however, retain its deposit insurance under the Federal Deposit Insurance Corp.

Metrobank becomes one of a handful of banks recently switching to state regulation to take advantage of the broader powers authorized by the California Legislature. Two other banks, Upland National Bank in Upland and Bank of San Ramon in San Ramon, are in the process of switching.

Of California’s 444 banking firms, 273 are chartered and regulated by the state.

State-chartered banks can invest directly in real estate projects or set up subsidiaries to make the investments. They can also buy stocks for their own accounts. Nationally chartered banks cannot engage in those activities.

John R. Paulus, deputy superintendent of the State Banking Department, said 70 state-chartered banks invest in real estate and 51 banks are using the stock investment powers.

Many of the troubles of the nation’s savings and loan industry have been blamed on misuses of similar powers granted to thrifts by federal authorities in 1982.

But Paulus said there have been no serious problems in the state’s banking industry as a result of the broader powers, which took effect in 1984.

“We think the banks have been conservative in using these powers,” Paulus said.

State law restricts the amount banks can invest in real estate or stocks, and bank examiners are instructed to pay particular attention to those areas, he added.

David L. Buell, chairman and chief executive of 9-year-old Metrobank, said the switch was undertaken to take advantage of the real estate investment powers.

He said he expects the new powers to improve profits at the bank, which earned $2.1 million in the first half of 1988.

Sharon L. Canup, vice president and corporate secretary of Metrobank, said bank executives are looking at several potential real estate investments and expect to create a separate unit to invest in the projects.

Canup added that the state charter will also allow Metrobank to increase its lending to several real estate developers who are major customers. State regulations are more generous than federal rules on how much a bank can lend to a single customer.

The switch was recommended to shareholders by the bank’s directors.

The directors and the bank’s executives, many of whom are former officers at Union Bank, control 51% of the stock.

The stock, which is traded on the American Stock Exchange, closed at $8.875 a share, down 12.5 cents.