Struggling O.C. Bank Delays Stock Offering : Finance: Postponement leaves CommerceBancorp, concerned about its link to First Pension Corp., open to regulatory action.
Concerned about potential liability from its past business connection with First Pension Corp., CommerceBancorp in Newport Beach said Monday that it has postponed a stock offering that would have brought in desperately needed capital.
Another struggling Orange County bank, Pioneer, said that it is negotiating with two investor groups about a possible sale of the company.
For CommerceBancorp, parent company of CommerceBank, the delayed stock offering increases the risk of action, even seizure, by regulators. The bank, which is considered “significantly undercapitalized” by the Federal Deposit Insurance Corp., had planned to raise $14 million through a stock offering.
Dale Walter, CommerceBancorp’s president and chief executive officer, said in an interview Monday that from 1990 to the end of 1993, CommerceBank was a custodian for some individual retirement accounts administered by First Pension, the Irvine-based investment company that filed for bankruptcy liquidation two months ago.
The Securities and Exchange Commission has alleged that First Pension’s owners ran a pyramid scheme that may have resulted in the loss of as much as $124 million invested by 8,000 clients.
Walter said he is not sure what liability, if any, CommerceBank might have. But any doubts could have hurt the stock offering, he said, especially the possibility that lawsuits might be filed against the bank by First Pension investors.
As a result, he said, the bank decided to postpone the stock offering pending a review of those individual retirement accounts, though “the longer the delay, the greater chance of (regulatory) actions taking place.”
CommerceBancorp, with assets of about $158 million, has a capital-to-assets ratio as of March 31 of 2.14%--well below the 6.5% federal requirement and barely above the crucial 2% level that could trigger a takeover by regulators. The capital ratio is an indicator of an institution’s reserve against losses.
Pioneer, too, faces the possibility of a federal takeover. The bank, owned by Pioneer Bancorp in Fullerton, signed a Federal Reserve order last month requiring it to boost its capital by the end of June--Thursday.
The bank said Monday that it is in negotiations with two potential buyers but would not identify them or comment further on the talks.
Thomas Timmons, president and chief executive officer of Pioneer Bancorp, said that he is not sure whether the bank can meet the deadline. He expressed confidence that the bank will not be taken over this week but conceded that seizure by the government is possible if no sale agreement is negotiated.
“We’re doing everything we can,” he said Monday, “but I can’t make any promises.”
As of March 31, Pioneer Bancorp had assets of about $133 million and a capital ratio of 3.1%.
