[Editor’s note: This story has been corrected. Scroll down to the bottom for the update.]
Westlake Village-based First California Financial Group acquired the assets of Western Commercial Bank on Nov. 5 after federal regulators shut down the Woodland Hills-based institution.
First California will pay the Federal Deposit Insurance Corp. a half percent premium to assume all of Western Commercial’s $101.1 million in deposits. First California also agreed to a loss-share arrangement with the FDIC on $83.9 million of Western Commercial Bank’s assets. That protects First California from the full sting of losses on those loans.
Western Commercial’s sole branch in Woodland Hills will reopen Nov. 8 as part of the $1.5 billion First California Bank franchise. Former Western Commercial depositors automatically become First California customers, the bank and the FDIC said Nov. 5.
The Woodland Hills bank had been on the rocks for more than a year. Primarily a business bank, Western Commercial’s markets were in the San Fernando Valley and Ventura County, where about 20 percent of its shareholders were.
In October 2009, it entered into a consent order with federal regulators to boost its dwindling capital levels. Western Commercial CEO Carl Raggio told the Business Times then that the bank had already raised $900,000 of the $1 million it was ordered to raise and that he was confident it would secure the rest in time. “We will be in full compliance with the cease and desist order. We take it seriously,” Raggio said in an interview at the time. “We have no intention of trying to fight the regulators.”
Federal regulators also cracked down on Western Commercial’s reliance on so-called brokered deposits. Those are deposits that come in from brokers who put client money into whatever bank promises the highest return at the moment. Regulators are weary of them because they are not as stable as other deposits.
Western Commercial was founded in 2006. Raggio told the Business last year that federal regulators had approved his initial business plan, including the reliance on brokered deposits for growth.
While he acknowledged that the deposits may remind some observers of past banking crises, Raggio told the Business Times in 2009 that he felt regulators had pulled the rug from under him after giving him a green light three years before.
Meanwhile, First California raised $39 million earlier this year with an eye toward acquiring troubled bank assets.
“We welcome Western Commercial Bank’s customers and employees to the First California family,” First California President and CEO C. G. Kum said in a Nov. 5 news release. “First California is financially strong, so customers can be confident that their deposits are safe and readily available. This transaction is in keeping with our growth strategy and increases our market share in Southern California.”
The FDIC’s deposit insurance fund took a $25.2 million hit as a result of the bank failure, the 141st in the nation and the 11th in California so far this year. The last FDIC-insured bank failure in the state was Solvang-based Los Padres Bank, which failed on Aug. 20 and was acquired by Pacific Western Bank.
[Editor’s note: The third paragraph and the headline originally incorrectly stated that the First California had acquired a branch in Oxnard. Western Commercial Bank had one branch in Woodland Hills, which is now part of First California Bank. Western Commercial also had a loan production office in Oxnard.]