California Oaks State Bank is offering to sell a many as 8 million
shares of its common stock, through a private placement with a target price of
$12.50 a share.
The bank, which got $3.3 million in government aid through the Troubled
Asset Relief Program last January, said it would use some of the proceeds from
the offering to redeem the preferred stock it issued the Treasury Department
and exit the program.
California Oaks, however, plans to do much more with the money than
simply escape TARP. It announced that it also will use the proceeds of the private
placement to buy back common stock from current stockholders,
purchase vested stock options from bank directors and employees, increase its
asset portfolio and acquire assets from failed institutions through negotiated
deals with the Federal Deposit Insurance Corp.
California Oaks did not identify the directors or employees who would be
benefiting from stock or options purchases, or specify the amount of money that they would
receive.
The bank, which is based in Thousand Oaks, said it was offering the new shares only to accredited investors and institutional purchasers on a
best-efforts basis, through placement agents.
Although the $3.3 million in government aid that California Oaks received
is a small amount in terms of overall TARP participation, the bank appears to
be an unlikely choice to cash out of the program, given that one of its
intended goals is to help stabilize and strengthen financial institutions.
On the same day it announced plans to exit TARP, California Oaks reported that it lost $563,000 in 2009, one top of a $1.09 million loss the previous
year.
California Oaks said a comprehensive management review of its credit
quality found that the company had $611,217 in past due loans and more than
$1.3 million in nonperforming loans at the end of the fourth quarter.
"This was especially disappointing," the company said, "after having no
past due loans and only $993,000 in nonperforming loans in the third quarter."
In other words, the bank is looking to exit TARP at the same time that
its loan portfolio is showing signs of greater stress. California Oaks, a business bank with $125 million in assets, said it has attempted to
steer its loan portfolio away from what it deems riskier construction lending
and toward more typical commercial lending.
California Oaks also has taken steps to reduce its operating expenses by
renegotiating key contracts and downsizing its workforce.
"These two initiatives were not enough to counteract the dropping rates
and the deterioration of credit quality caused by the down turn in the economy,"
Chief Executive Officer John Nerland said in a press release.
The bank's offering is subject to regulatory approval, as is its plan to
exit TARP.
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