Capital Buys, Reopens Valley State Bank
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Valley State Bank’s five offices reopened Tuesday as part of Capital Bank of California after Encino-based Valley State was closed by the California state Banking Department on Monday because loan and operating losses had exhausted its capital.
Capital Bank of California, based in Century City, has purchased $46.7 million in assets of the failed bank from the Federal Deposit Insurance Corp. The FDIC provided Capital with about $29 million in financial assistance in the acquisition. The deal was quickly approved by the Los Angeles Superior Court.
As part of the transaction, Capital assumed responsibility for Valley State’s $76 million in 8,800 deposit accounts and secured loans.
Valley State was plagued by loan losses in recent years and was under orders from the FDIC to raise $3 million in capital by Sept. 30. But this year, through Aug. 31, the bank had lost another $1.4 million.
Some of Valley State’s problems were said to have stemmed from its foray into the precious metals business, in which the bank lent money to investors who bought rare coins or metals. In December, bank officials discovered that $600,000 had been embezzled by an employee from its precious metals operation.
Valley State, which opened in 1979, lost $2.6 million last year, $1.7 million in 1985, $284,534 in 1984 and $691,501 in 1983.
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