The federal government has ordered the operators of Bakersfield's San Joaquin Bank to get more money to back its deposits or to sell the bank to someone who can.
A 'prompt corrective action directive' to the bank was posted on the Federal Reserve website Monday.
Bank managers have failed to submit an adequate plan to restore the bank's fiscal stability, the Federal Reserve said in its notice to San Joaquin.
The bank falls into the category of ''significantly undercapitalized institutions,'' the Fed said.
''Banks accept deposts and then they make loans,'' explained John Emery, dean of the School of Business and Public Administration at Cal State Bakersfield.
''They're supposed to have enough money so that if the loans go bad, they can still pay back the deposits if they have to,'' he said.
Bart Hill, president of the bank's parent company, could not be immediately reached.
He said a month ago that a $38 million stock sale to a group of businessmen from India will satisfy all federal requirements and revitalize the bank.
The Federal Reserve regulates the nation's banks. It gave San Joaquin officers until Oct. 15 to sell stock or otherwise get contributions to increase the bank's funds or sell the bank to a properly funded institution.
Despite the tough language on the government website, Emery said the order was not a huge development. ''This is fairly routine,'' he said. ''The system is set up to do this. No one is in danger of losing their deposits.''
It's been a tough year for San Joaquin Bank. A year ago, its stock was selling for $20 a share. In 2006, it traded at $39. On Monday afternoon, it was at $2.10.
In May, the bank reported first-quarter losses of $3.6 million, but federal regulators said that figure was inaccurate. In July, the bank said its first quarter loss really was more than $18 million.
