NEWPORT BEACH — Bank of Newport, losing money and operating under strict orders from federal regulators, said Tuesday that Ronald L. Rodgers has resigned as president and chief executive and that four directors have agreed to pump $2.8 million into the bank.
Rodgers, who helped found the bank in 1972, will remain on the board of directors and assume the title of vice chairman. The board appointed Richard P. Ritter, the bank's chief financial officer, as interim chief executive while it searches for a new president.
Ritter said that the bank needs approval from both state and federal regulators for its plan to raise additional capital, its final cushion against losses, from its four outside directors. The proposal would bring the bank's capital to 6.5% of its assets, the level ordered by regulators. Capital is now less than 5.6%, he said.
Under the proposal, the bank's chairman, E.O. Rodeffer, would put up $2.5 million. Three other outside directors--Los Angeles lawyer Alan Rothenberg, real estate developer William Messenger and William Baker, Del Taco's former chief executive--would contribute the rest.
Rodeffer is the bank's single largest shareholder, with more than 15% of the stock. He would end up with 25% under the proposal, Ritter said. Rodgers is the second-largest shareholder, with about 10% of the stock.
The board said it accepted Rodgers' resignation with reluctance. But outside directors have been concerned about the bank's direction since August, when the Federal Deposit Insurance Corp. imposed a cease and desist order, its most severe directive.
That Rodgers would turn over the reins is understandable, said Gerry Findley of Anaheim, a banking consultant. "They've had a little difficulty recently," he deadpanned.
A change somewhere in management had been expected since the FDIC took action. The order criticized the bank for weak management and its directors for lack of attention to bank affairs. But neither Findley nor Ritter thinks that regulators were pointing at Rodgers.
Ritter said that Rodgers' resignation did not result from any one thing but from a combination of factors, including the FDIC's order, the bank's poor performance last year and the board's desire for a change.
Findley said he thinks regulators simply wanted the bank to hire people who had more experience dealing with troubled properties. Most banks under such federal mandates eventually improve, regulators say, and the orders are lifted.
Bank of Newport, which relied on real estate loans and real estate collateral, has been hurt during the recession by falling home and office building values. Its assets, once more than $300 million, have shrunk to about $250 million as it sells loans and other properties to help it meet its capital ratio.
It lost $699,909 for the first nine months of last year. That was mainly because it had to add $3.4 million to reserves for possible losses from weak real estate loans and also because it spent money on management fees, tenant improvements and other expenses for the real estate it had acquired through foreclosure.
What particularly troubled Rodgers, he said in an interview last fall, was that his institution is foreclosing on some of the same properties it took back and resold after the last economic downturn 10 years ago.
Bad loans accounted for 3.2% of its loan portfolio at the end of September, slightly above the 3% level that triggers regulatory action.
"This has not been as much fun as when you have a better economic climate," Rodgers said at the time.
Findley said Wednesday that Bank of Newport is also saddled with some high expenses, including a costly branch in Encino, far from its Orange County base.
"That market over there is really a tough market," he said. "It's the last place in world that a bank should be going when someone isn't sitting there to deal with issues daily."