Although it once needed a $28-million capital infusion to stave off insolvency, Commercial Center Bank of Santa Ana appears to have turned a financial corner and, with a profit of nearly $1 million for the first half of 1985, should not be threatened by the failure of its Canadian parent, according to state banking regulators.
Commercial Center, once known as Westlands Bank, is a subsidiary of the failed Canadian Commercial Bank in Edmonton, Alberta, closed Saturday by Canadian authorities.
The Canadian bank's problems included a sizable portfolio of bad real estate loans, the same problem that almost dragged Westlands Bank under last year.
In March, 1984, Canadian Commercial--already owner of a 41% interest in Westlands--agreed to acquire all of the Santa Ana bank's stock and to add about $10 million to the $18 million it already had pumped into the bank in order to shore up its finances and keep state and federal regulators from closing it. As of January, Canadian Commercial had given Westlands a total of $50 million.
Westlands, which changed its name to Commercial Center Bank in January, lost a staggering $15.8 million in 1984, almost all of it attributed to soured real estate loans.
But California banking regulators and Commercial Center officials said Wednesday that Canadian Commercial's failure should have little, if any, impact on the 15-year-old California institution. "It is merely a change in ownership. . . . It (Commercial Center) is still a viable institution," said John Paulus, deputy superintendent of banks for the State Banking Department.
Canadian Commercial Bank, with about $2 billion in assets, was taken over by the Canadian government when regulators there determined that it was incapable of meeting its obligations because of bad real estate and energy loans. The government then appointed Price Waterhouse Ltd. to oversee and ultimately liquidate Canadian Commercial's assets.
Commercial Center Bank is owned by Westlands Diversified Bancorp Inc., which in turn is owned by Canadian Commercial Bank.
"What that means," explained Linwood Boynton, Commercial Center's chairman and chief executive, "is that the shares of Westlands Diversified are now under the control of Price Waterhouse. At some future time there is a strong likelihood that the shares of our parent (Westlands Diversified) will be acquired by someone else. In other words, the owner of our owner will probably change."
Boynton said that it would be only speculation to say who the new owner might be and that it could take years before a new owner is found.
Citing a $2-million profit for the first 10 months of this year and capital of about $70 million, Boynton said his bank is "in sound financial condition, extremely well capitalized, and will continue to carry out its business activities in a normal manner."
For the six months ended June 30, Commercial Center reported a profit of $975,000, a significant improvement from the 1984 loss of $15.8 million.
The bank also reported assets of $387 million and deposits of $315 million. Commercial Center's capital-to-assets ratio--an indicator of a bank's financial health--is a robust 17.8%, more than double the required minimum.
"Commercial Center Bank is on a stable and favorable course and well positioned to continue servicing its customers," Boynton said. "We are an independent California state-chartered bank and we operate that way, although there is an ownership above us that will change. That doesn't alter our business plan, our customers or the strategy of the bank," he said.
Commercial Center Bank has branches in Santa Ana, San Diego, Sacramento and Campbell.