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North Bay Business Journal

Monday, February 28, 2011, 4:35 am

Banking & Finance: Circle Bank exits ‘tenant in common’ lending

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    Also: Bank of Marin acquires Charter Oak; Cal State merged into RCU

    Circle Bank, one of the leaders in the Tenants in Common market, has left that sector due to risk concentration in that market.

    “A significant portion of the bank’s loan portfolio is composed of Tenant in Common, or TIC, loans,” reads the most recent amendment to a filing with the Securities & Exchange Commission regarding the bank’s intention to go public.

    There have been five amendments since the initial October 2011 filing.

    The filing goes on to say:

    “There are risks associated with FTIC loans.  For example, a general economic downturn resulting in increased unemployment may make it more difficult for the holders of FTIC loans to repay their loans.

    “In addition, there are political risks that tenant rights groups will object to conversion of rental properties to tenant in common units or there could be legal challenges to the agreements creating the property rights securing FTIC loans or to the structure of the FTIC loans themselves. In order to mitigate some of these risks, Circle Bank obtains a title policy in order to insure the Bank’s right to a specific unit securing each FTIC loan.”

    The bank is continuing to service existing FTIC loans.

    Earlier this month, Circle filed another amendment discussing concern by some shareholders about the public offering and the potential risks.

    Headquartered in Novato, Circle Bank has 56 employees with branches in Marin, San Francisco and Sonoma counties. The bank was established in 1990 under the name New West Thrift and Loan Co. It changed its name in 1998 to Novato Community Bank and in 2003 to Circle Bank.

    ***

    Redwood Trust Inc. reported an estimated taxable loss of $6 million, or $0.07 per share, during the fourth quarter of 2010.  This compares to an estimated taxable loss of $9 million, or $0.11 per share, for the third quarter of 2010, and a taxable loss of $35 million, or $0.44 per share, for the fourth quarter of 2009.

    Redwood also reported net income for the fourth quarter of 2010 of $15 million, or $0.18 per fully diluted share. This compares to net income of $20 million, or $0.25 per fully diluted share, for the third quarter of 2010, and net income of $40 million, or $0.51 per fully diluted share, for the fourth quarter of 2009.

    At Dec. 31, 2010, GAAP book value was $13.63 per share, an increase of $0.61 per share from Sept. 30, 2010, and management’s estimate of non-GAAP economic value was $14.31 per share, an increase of $0.58 per share.

    During the fourth quarter of 2010, Redwood acquired $195 million of residential mortgage loans, originated $30 million of commercial loans, and acquired $26 million of residential securities.  At Dec. 31, 2010, cash and cash equivalents totaled $47 million.

    ***

    Bank of Marin has in a Federal Deposit and Insurance Corp. assisted transaction acquired certain assets and assumed certain liabilities of Napa-based Charter Oak Bank.

    This transaction was completed under a modified whole-bank purchase and assumption agreement with the FDIC without loss share.  The acquisition follows a decision by the California Department of Financial Institutions to close Charter Oak Bank and appoint the FDIC as receiver.

    An earlier announced deal in which Bay Commercial was to purchase Charter Oak was not completed.

    “We are deeply committed to the communities in which we operate,” said Bank of Marin President and Chief Executive Officer Russell Colombo.  “We share many of the same values as Charter Oak, focusing on personalized customer service and community involvement. In the 21 years we’ve been in business, we’ve established one of the healthiest banks in California. We are excited for the opportunity to leverage our financial strength to expand into Napa.”

    At Dec. 31, 2010, Charter Oak Bank reported gross loans totaling $107.0 million and deposits totaling $105.3 million. The purchase price reflects an asset discount of $19.8 million and no deposit premium.

    Fifty-six loans with book values totaling approximately $28.5 million as of the bid valuation date (Oct. 18, 2010), which represents approximately 25 percent of Charter Oak’s loans, were retained by the FDIC. The excluded loans mainly represent loans delinquent more than 60 days or more as of the bid valuation date and certain types of land and construction loans. Balances are subject to change based on activities between the bid valuation date and the purchase date. The assets acquired and liabilities assumed are subject to internal adjustment under generally accepted accounting principles.

    ***

    Redwood Credit Union and Cal State Central Credit Union have announced plans to merge as of April 1 and will operate under the name Redwood Credit Union.

    The merger is pending approval from regulators, the National Credit Union Administration and the Department of Financial Institutions having already been approved by the boards of directors of both institutions.

    The merger will result in an institution with assets in excess of $1.8 billion and nearly 200,000 members.

    “CSCCU has served the financial needs of state employees and our community for nearly 75 years. In this environment, it’s been challenging to achieve the financial position and growth needed to provide the products, services and locations our members want and need. Our partnership with RCU will allow us to fulfill our mission and provide the added benefits our Members deserve,” said Jim Larson, Cal State Central Credit Union chief executive officer.

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    Submit items for this column to Jenna V. Loceff at jloceff@busjrnl.com, 707-521-4259 or fax 707-521-5292.

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