First Charter Bank raises $6 million with offering: capital injection raises enough capital to satisfy regulators.

First Charter Bank will receive about a $6 million capital injection this week which will enable the Beverly Hills-based bank to meet the terms of its order from the Office of the Comptroller of the Currency, Peter Bustetter, the bank's chief executive officer, told the Business Journal last week.

The bank sold 1 million shares of common stock at $7.125 a share on Dec. 27, said Brian Spahr, branch manager Long Beach office of Century City-based Baraban Securities Inc., which underwrote the deal.

The offering, which was fully subscribed, placed the bank's stock on the NASDAQ stock exchange, Spahr said. First Charter's stock previously had traded in the pink sheets, he said.

The offering increased First Charter's float, or number of shares publicly available, from 1.289 million to 2.289 million, Spahr said. Both individual investors and institutional investors subscribed to the offering, with individual investors buying "the majority" of the shares, he said.

Bustetter said the offering was a success story for the bank.

"The public truly stepped up and bought the stock," Bustetter said. He noted in other stock offerings for troubled banks, "usually it (the stock) is sold in the board room (to bank board members). We hadn't pre-sold or privately sold."

First Charter had been under orders by the OCC, the regulator of nationally chartered banks, to inject $6 million in capital by Dec. 31 or face regulatory action, including possible seizure.

Bustetter said the bank has been in constant contact with regulators and the OCC has allowed the bank some leeway on the Dec. 31 deadline, since it will take a few weeks for the bank to get the offering's proceeds and add it into its capital base.

OCC spokesman Frank Vance declined to discuss the specifics of First Charter's order or the stock offering.

"When we have a deadline in an order, we expect those banks to meet those deadlines," he said. However, Vance added, the OCC "will work with banks" which are striving to fulfill directives to inject more capital.

Another L.A. County-based bank, Paramount-based Mechanics National Bank, was also ordered to boost capital by Dec. 31. Officials from that bank declined to comment on if or how they had met that order.

Based on Mechanics' Sept. 30 financial statement, "It's in very serious condition," said Warren Heller, research director of Wakefield Mass.-based Veribanc Inc., a bank rating service.

The bank was "significantly undercapitalized" by federal standards and "just barely over" the standard for being rated critically undercapitalized, Heller said. Under federal law, banking regulators must seize institutions that are critically undercapitalized.

Mechanics, a bank with $192 million in assets, posted a net loss of $4.2 million for the fiscal fourth quarter ended Sept. 30 and a net loss of $11.7 million for the year.

At Sept. 30, the bank had $47.7 million, or 24 percent of its total assets, in bad loans or foreclosed real estate.

Mechanics' situation at Sept. 30 was "significantly" more serious than First Charter's, Heller said. First Charter was adequately capitalized under federal standards, an improvement over its position on June 30, when it was undercapitalized.

Charter CEO Bustetter said when the capital injection is completed, the bank will be well capitalized under federal standards.

First Charter, which has $186 million in assets, posted net earnings of $248,000 for the fiscal fourth quarter ended Sept. 30 and a net loss of $2.78 million for that year.

At Sept. 30, the bank had $29 million, or about 15 percent of its total assets, in foreclosed real estate or bad loans.