Bank of San Francisco's chief executive, James Gilleran, is feeling some of the regulatory heat he used to mete out as California banking superintendent.
Mr. Gilleran, now seven months into the job, managed to start 1995 with a profitable quarter - the bank's first in the black since mid-1991. In March he also garnered more capital for the bank.
But California's State Banking Department and the Federal Deposit Insurance Corp. each issued new directives last month designed to increase the bank's capital. The bank had already been under regulatory scrutiny, but the new directives give the bank June 30 to raise $6.3 million more capital, even after its holding company, San Francisco Co., pumped $4.2 million into the bank last month.
Once the extra $6.3 million is in hand, the $140 million-asset bank would have a 4.2% leverage capital ratio, still below the 7% ordered by state and federal regulators.
In an interview Wednesday, Mr. Gilleran struck an optimistic note.
"We've taken very aggressive steps over the past six months to sell the problem assets and reduce costs," he said. "We believe the results demonstrate that the bank is positioned to achieve its goal of returning to ongoing profitability."
The bank barely broke even in the first quarter, earning $68,000, compared with a $3.2 million loss a year earlier. In 1994 the bank lost $33 million, bringing the total lost during the last two years to $43 million.
The bank is finally getting some relief from the heavy loan-loss provisions and asset-value writedowns that have plagued it for two years. In the first quarter it took no provision for loan losses.
Mr. Gilleran stressed also that the bank is extremely liquid, with liquid assets of more than 25% of total assets. That should stave off any serious regulatory problems in the immediate term, he said. Several banks in California in the last year, most recently Guardian Bancorp of Los Angeles, were closed by California regulators when their liquidity ratios fell to critical levels.
The bank is also benefiting from its well-heeled - and patient - principal shareholder, Putra Masagung, an Indonesian shopping center magnate. Masagung first started pumping money into the San Francisco Co. three years ago, and to date his total capital contributions to the company surpass $40 million.
Mr. Masagung's most recent contribution is his promise to buy $3.8 million of a new series of preferred stock. The holding company will give that $3.8 million, plus another $400,000 of its own money, to the bank.
Without Mr. Masagung's money, the bank reports a total risk-based capital ratio of only 2.9%, making it "critically undercapitalized."
One West Coast analyst said the jury is still out on whether Mr. Gilleran can turn the bank around, but said, "The first quarter profit is the first piece of good news out of this company in three years."
The company's stock, once traded on the American Stock Exchange, is so thinly traded and has lost so much of its value that no investment firm follows it.
Bank of San Francisco was founded in 1979 to serve the city's rich. It had pushed $500 million in assets in 1990, but its past reliance on real estate lending made it particularly vulnerable to the recession. It has gone through a series of management changes in the last four years, culminating in Mr. Gilleran's appointment last September.
