The Treasury Department’s plan to invest in banks includes taking a stake in a small Little Saigon bank but so far excludes the largest troubled lender based here, Newport Beach-based Downey Financial Corp.
Westminster-based Saigon National Bank said this week Treasury plans to buy shares in the bank worth $1.2 million.
Saigon National plans to use the proceeds to make more loans, according to the bank.
Started in 2005, Saigon National lends to business in the Vietnamese-American enclave of Little Saigon, which covers parts of Westminster, Garden Grove, Santa Ana and Huntington Beach.
The bank is far from struggling. As of June 30, Saigon National had a 23% core capital ratio,a measure of financial health for banks. Regulators require a core capital ratio of at least 5%.
Downey, which operates a savings and loan, could end up not getting a federal investment, Karen Dorway, president of Coral Gables, Fla.-based bank research firm BauerFinancial, told Bloomberg.
“Those struggling the most probably aren’t going to participate,” Bloomberg quoted Dorway as saying.
Downey is under a regulatory enforcement order to shore up its operations.
The government may be waiting to see how Downey progresses on its own. It was slated to submit a long-term plan to the Office of Thrift Supervision on Oct. 20.
Government investment “amounts to a sort of ‘seal of approval’ from the Treasury,” CreditSights Inc. analysts led by David Hendler wrote, according to Bloomberg.
Downey’s core capital ratio was 7.48% at the end of the third quarter, down from 7.5% at the end of June.
Meanwhile, real estate sources say a sale of Downey’s Newport Beach headquarters is near.
The buildings overlooking Newport Beach’s back bay are likely to sell for less than comparable buildings in recent months. Downey is expected to lease back space in the buildings, prompting the lower price amid questions about its future.
A local real estate investor could end up with the building, according to sources.
