A struggling Beverly Hills bank has a new lease on life and a new chief executive after barely averting seizure through an 11th-hour recapitalization.

First Charter Bank last week completed a private placement to a group of institutional and individual investors, raising about $5.5 million of fresh capital just before a Sept. 30 deadline.

The sale of new preferred stock, which yielded just over $5 million in net proceeds for the bank after expenses, brings First Charter into compliance with regulatory demands issued in late August by the Office of the Comptroller of the Currency, bank officials said.

"We are extremely pleased that the bank was able to successfully raise this amount of capital from a group of sophisticated investors," chief financial officer Robert Junet said in a statement. "We believe it reflects confidence in the improving Southern California economy as well as the prospects for First Charter Bank."

Simultaneously, the bank announced the retirement of president and chief executive Peter Bustetter. Mr. Bustetter, who will remain a director, will be replaced by James Brewer, an experienced Southern California community banker. No other details on Mr. Brewer's background were released and Mr. Brewer did not return telephone calls.

Mr. Brewer was also appointed to the bank's board, replacing Isaac "Buddy" Salzberg, who resigned.

"It's always good that an institution doesn't fail," said Jerry Jones, managing director of Duff & Phelps in Los Angeles. "However, with most other institutions well capitalized, First Charter faces some stiff competition in the Los Angeles community."

The successful venture closes a long and painful chapter for First Charter, a profitable high-end residential construction lender in the 1980s. When the California real estate market tanked, especially in the Los Angeles area, First Charter was hit hard and its losses mounted.

The bank raised just over $6 million in a January 1994 public stock offering designed to boost capital, but the losses continued, including another $2.8 million in the second quarter of this year. That brought its Tier 1 leverage capital ratio down from 3.31% in the first quarter to about 1.5% in the second, Mr. Jones said.

In its "prompt corrective action" order, the OCC had given the $112 million-asset bank until the end of last month to boost its ratio of Tier 1 capital to risk-weighted assets to 11% or face a takeover.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.