Troubled Bank Tries Fresh Start

Pacific Inland Bank, which squandered millions of dollars on big loans that went bad during an often troubled 12-year history, announced a major effort Wednesday to revitalize itself.

The one-branch Anaheim bank has changed its name to Security First Bank and will move into new quarters across from St. Jude Medical Center in Fullerton by the end of the year, said Jack C. Wauchope, its chairman and president.

The institution, which started bringing in new management more than two years ago, also is issuing new stock to raise up to $6 million in an effort to regain its financial footing.

“We’re transforming this into a true community bank, one that serves small businesses, professionals and consumers,” Wauchope said. “We’re changing the whole emphasis.”

Industry experts expected Pacific Inland to be the next in a long line of bank and thrift failures in Orange County. The bank earned more than $1 million a year only once, and lost a total of $7.7 million in the last two years.

But Wauchope and his team have other plans.

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The name change, for one, signifies a new beginning and, he said, an effort to put its notorious past to rest. Among the past incidents:

* The bank’s founding chairman, Richard J. Meyer, drew a five-year prison term for defrauding a Northern California savings and loan he owned.

* A former president, Ronald L. Askew, made headlines with an unusual fraud claim: His wife duped him into marriage by concealing her lack of sexual passion for him. Askew won $242,000 on his claim, but an appellate court overturned it.

* The bank has been involved in more than 60 lawsuits over a 10-year span, spending so much money on legal fees that regulators listed those expenses as one reason for restricting its activities. The bank has spent $4 million in legal fees just to defend seven suits filed by two separate borrowers, Wauchope said.

“When I came here [in June 1994], we had 16 different law firms handling cases,” Wauchope said. “We had major legal actions that the board didn’t even know about.”

* The bank paid $50,000 last year to settle Securities and Exchange Commission charges that it violated agency rules in the operation of its trust department, which it later sold. The bank didn’t admit any wrongdoing.

For the last eight years, Pacific Inland also has been operating under various state and federal regulatory restrictions that limit its business activities.

“We want to shed that baggage,” Wauchope said. “Why carry that name and that reputation?”

He admits that “a lot of mistakes were made,” but regulators have “scrubbed” the bank clean. “There’s no malfeasance, no fraud,” he said.

For years, the bank relied on fewer and larger commercial mortgage loans and on large deposits that could be moved quickly to other banks. Its trust department seemed to be more troublesome than it was worth, and a statewide mortgage banking business died during the recession.

When its mortgage banking operation was going full steam six years ago, Pacific Inland had $230 million in loans and other assets. But it also had more than $24 million in bad loans and real estate it had taken back through foreclosure.

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Today, Security First has just $28 million in assets but it expects to reduce its bad loans to $3 million by the end of the year.

Directors also have worked hard, he said, to straighten out the bank and redirect its efforts. Indeed, directors and officers have changed strategy so thoroughly that they like to talk about Security First Bank as a new institution.

“The key to the community banking concept is to get a broad base of local investors who will become the seeds for business,” said David E. Hooston, the bank’s chief financial officer.

Executives began looking for a new base partly because the bank soon will lose its headquarters to Caltrans as part of the widening of the Santa Ana Freeway.

They believe they found the support they need in Fullerton, which lost its only home-grown bank, Pioneer Bank, to regulators two years ago.

The bank has commitments from investors to buy $2.7 million in new stock--an amount that should put the bank in full compliance with regulations and allow restrictions to be lifted.

Altogether, the bank wants to raise $3 million in the Fullerton-Anaheim area by selling 7.5 million shares to local residents at 40 cents a share. It also is offering 7.5 million more shares to existing shareholders at the same price.

With the new money, Hooston said, the bank can go about building a franchise and expanding operations again. “We have to build a new franchise,” he said.

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Ups and Downs

Pacific Inland Bank is trying to right itself under new management. Among other things, it is changing its name to Security First Bank and moving from Anaheim to Fullerton. The bank has lost money in three of the past five years.

Troubled Past

Pacific Inland has been dogged for the last decade by lawsuits and other problems:

Numerous lawsuits: Involved in more than 60 lawsuits during a 10-year span, some of which are still pending. Accusations include fraud and breach of contract. The bank’s mounting legal fees were one reason regulators restricted its activities.

Founder convicted: Founding chairman and majority owner Richard J. Meyer was sentenced to five years in prison on fraud charges stemming from the collapse of a Northern California savings and loan Meyer owned. He pleaded guilty to several charges, including using federally insured deposits to make high-risk loans that aided real estate projects in which he had an interest.

Penalized: Last year, Pacific Inland and its parent company paid a $50,000 penalty to settle a Securities and Exchange Commission suit. SEC accused bank of helping four investors operate a four-year scheme to buy $260 million in securities without enough cash to pay for them. Bank extended millions of dollars of credit to investors for securities purchases cleared by the bank. Institution admitted no wrongdoing.

Unusual fraud claim: In 1993, Ronald Askew, Pacific Inland president, accused his wife of 13 years of fraud after she said during marriage counseling that she was never physically attracted to him. He asked to be reimbursed for her $240,000 interest in four parcels of land the couple owned. Askew won, but decision was overturned.

Net Income / Loss

In thousands:

1991: $1,056

1992: -$925

1993: $488

1994: -$4,921

1995: -$2,769

Sources: Times reports, Pacific Inland Bank; Researched by JANICE L. JONES / Los Angeles Times