Monarch Bank Plans Stock Offer : Finance: If approved by regulators, institution will issue $2.5 million to $7 million in new shares.

Monarch Bank, starting a five-year expansion plan, said Tuesday it hopes to issue $2.5 million to $7 million in new stock to its own shareholders and to the investing public next week, if state and federal regulators approve the offering by Friday.

The two-branch community bank had planned to raise money this year as it launched a growth plan, said Lynn Caswell, the bank’s president. A $1.1-million net loss last year has created more impetus for the offering.

The bank said it would use about $1.1 million of the proceeds to raise its level of capital, its final reserve against losses. It moved some existing capital into reserve last year to cover possible future loan losses, causing the bank to report a net loss.

Holders of the nearly 800,000 shares outstanding will have a right for 30 days to purchase part of the 2.33 million shares being offered. At the same time, the public will have 60 days to pick up the rest. Caswell said the offering would go public in 12 states across the nation, including New York.

The Laguna Hills institution also said that it erred in filing year-end financial figures with federal regulators, leading to a vastly overstated amount of problem loans.

Monarch said its delinquent loans--those 60 days or more past due--were actually 8.38% of its total loans at the end of December, not 17.5% as reported earlier. Regulators want problem loans to remain below 3%.