NATIONAL CITY — Balboa National Bank shareholders on Monday approved a recapitalization plan that bank officials hope will draw $2 million of much-needed capital into the financially troubled institution.
Balboa, with $33 million in assets, lost $4 million in 1986. Balboa expects to report a $3-million loss for 1987 and a $500,000 loss in 1988.
However, the National City-based bank is "forecasting a turnaround in 1989, which is when we'll have gotten rid of the assets that were so troublesome for us," said Balboa President Dick Long.
The bank has been operating under a regulatory order to boost its net worth-to-assets ratio to more than 7%. The ratio, now at about 3%, would rise to 8% if the $2-million capital infusion occurs, Long said. He stopped short, however, of describing the capital infusion as a guaranteed solution.
"I think the best way to say it is that several directors have indicated they will each put up a piece of the $2 million," Long said. "And (the plan) has to be approved by regulators."
About $1.2 million of that capital is expected to come from board member Harry Fraser, owner of Fraser Boiler, a San Diego-based boiler repair company, Long said.
Shareholders on Monday authorized the issuance of 100 million shares of a newly created class of preferred stock.
About 40 million shares will be sold to directors who take part in the recapitalization plan. Balboa expects to sell the new class of stock at 5 cents per share, according to Long. The remainder will be offered for sale should future recapitalization be required, Long said.
In May, Balboa's board of directors agreed to infuse $3 million into the bank, a move that saved the institution from being shut down by federal regulators. Each of Balboa's seven directors contributed to that infusion, according to then-president Richard K. Castetter, who was replaced by Long in August.