Three years after suffering heavy losses and sacking its founder, Civic Bancorp and its CivicBank of Commerce subsidiary are free of regulatory scrutiny.

Oakland, Calif.-based Civic Bancorp had been subject to a memorandum of understanding and CivicBank of Commerce to a written agreement with the Federal Reserve Bank of San Francisco since Sept. 16, 1992.

The agreements, the result of spring 1992 examinations by the Federal Reserve Bank and the California State Banking Department, came two months after CivicBank founder, chairman, and chief executive officer Claude B. Hutchinson was asked to step down as CEO.

The Dec. 27 decision by the Federal Reserve Bank of San Francisco to lift the agreement comes more than a year after the California State Banking Department lifted its memorandum of understanding with both Civic Bancorp and CivicBank Commerce, according to Herbert C. Foster, president and CEO of Civic Bancorp.

"The economy is beginning to show signs of life again, and hopefully this brings to a close this chapter of the bank's history," said Mr. Foster. "We made about $1.8 million in 1994 and we'll do even better in 1995, so we're pleased with the turnaround."

Like many California institutions, CivicBank's problems were related to real estate loans. One of the East Bay's leading independent business banks, CivicBank was hit hard by plummeting land values and lost nearly $16 million in 1992 and 1993.

Examinations by federal and state regulators resulted in CivicBank taking drastic measures, including the decision to ask Mr. Hutchinson to step down as CEO, which he did.

"We effectively went through and made a complete assessment of the bank," said Mr. Foster, who came aboard in January 1993. "The emphasis was on problem assets and problem loans, and there were a number of assets that had to go. We were able to significantly reduce our nonperforming assets."

The bank, which had peak nonperforming assets of $44 million, or 10% of total assets, implemented a restructuring plan during the third and fourth quarters of 1993 and began selling off assets.

CivicBank, which has offices in Oakland, San Leandro, Fremont, Walnut Creek, and Rossmoor, shrank from $410 million in assets in 1992 to $250 million today.

Mr. Foster said he wants to start running a bank for his customers again.

"What happens is you spend so much time trying to solve the bank's problems that you tend to lose some of the good business also," Mr. Foster said.

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