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First Bank of Beverly Hills rescued by Chicago firm

The Calabasas bank was facing a government takeover because of losses on Southland real estate lending. Orchard First plans to convert it into a conventional small-business operation.

March 04, 2009|E. Scott Reckard

First Bank of Beverly Hills, a Calabasas institution under federal orders to raise more funds, was rescued Tuesday by a Chicago financial firm that pledged to provide new capital and convert the bank into a conventional small-business operation.

Orchard First Source Asset Management, a privately held specialist in leveraged buyouts and corporate restructurings, would use a subsidiary to merge with First Bank and become its 80% owner, according to a statement from Orchard and the bank's owner, Beverly Hills Bancorp Inc.

First Bank, which moved from Beverly Hills to Calabasas in 2000, was facing a government takeover because of losses on Southern California real estate lending.

It had $1.5 billion in assets at the end of 2008, including about $100 million in land development and construction loans and $1 billion in mortgages on completed apartments, offices, warehouses and retail stores. It recorded more than $93 million in losses during the second half of last year and was forced to write off more than 20% of its loans as uncollectable in the fourth quarter.

The news release explaining the transaction didn't say how much new capital -- a bank's cushion against losses -- Orchard would provide.

But in a recent Securities and Exchange Commission filing, Beverly Hills Bancorp said the California Department of Financial Institutions and the Federal Deposit Insurance Corp. had ordered it to raise an additional $70 million in capital.

Beverly Hills Bancorp Chief Executive Larry B. Faigin said the amount of the capital infusion would depend on a pending valuation of the bank's assets but that $70 million was a ballpark figure.


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