An Iowa bank holding company has come to the rescue of an ailing California bank in which it already owns a substantial stake.
ATBancorp in Dubuque has agreed to invest an initial $10 million in United American Bank in San Mateo and will receive warrants to the acquire the bank's 2.5 million shares, at 30 cents each, over the next five years. The $1.2 billion-asset ATBancorp has been an investor in United American since the bank was founded in 2003 and is now the bank's largest shareholder, according to news reports.
The deal, announced late Wednesday, still requires approval from the Federal Reserve Board, the Federal Deposit Insurance Corp. and the California Department of Financial Institutions. As a condition of the deal, the preferred shares the $285 million-asset United American issued to the Treasury Department under the Troubled Asset Relief Program would be converted to common stock.
United American has been battered by losses on real estate loans. The bank has lost nearly $30 million in the last three years, according to FDIC data, and at June 30 more than 13% of its loans were at least 90 days past due.
The bank received $9 million under TARP in the first quarter of 2009, but with its capital levels steadily shrinking it has missed its dividend payment to the Treasury in every quarter since.
In a news release Wednesday, United American President and Chief Executive Officer John Schrup said that the capital infusion from ATBancorp "is a critical component in stabilizing our bank and and starting us on a path to a successful future."
