Last year, a number of troubled savings and loan companies such as UnionFed Financial Corp. in Brea kept regulators at bay by raising much-needed cash through stock sales. Now a number of Orange County's small community banks want to tap that pool.
CommerceBancorp in Newport Beach and Pioneer Bancorp in Fullerton are seeking federal approval for rights offerings, which give current shareholders the right to purchase new stock before the companies offer shares to the public.
Both are troubled banks desperately in need of cash, and at least six other county banks are waiting to see how successful CommerceBancorp and Pioneer are before going forward with their own plans to raise money, said Edward E. Schmidt, a co-director of the Findley Group, banking consultants in Anaheim.
Dale E. Walter, president of CommerceBancorp, said he hopes to get a $15-million rights offering to shareholders and the public in March. In one of three measures for adequate capital, the final reserve against losses, the company's CommerceBank unit is "significantly undercapitalized," he said.
"There's going to have to be a considerable amount of recapitalization in the industry down here," said Jeff Gottfredson, an industry analyst at Cruttenden & Co. in Newport Beach. "They're all under the gun to raise money--or consider getting out of the banking business."
For shareholders of severely troubled banks, that means they almost have to accept huge reductions in the percentages of stock they own, or face being wiped out by a federal takeover.