Financially troubled Santa Lucia Bancorp of Atascadero is being purchased by Mission Community Bancorp of San Luis Obispo with the help of a private equity firm.
Santa Lucia Bank, scrutinized by regulators for inadequate capital, and Mission Community Bank, which has been working with regulators to prepare itself for expansion across the Central Coast, have been in talks for about six months to join forces in what Mission Chairman Jim Lokey called a stronger, “super-community bank.”
Mission Community Bancorp, the holding company for Mission Community Bank, is backed by the Carpenter Fund, an Irvine-based private equity firm that owns an approximate 80 percent share of the bank. That ownership share is expected to decrease to about 60 percent as new investors join after the merger, said Lokey, who is also chairman and chief executive officer of the holding company.
Under terms of the agreement, Santa Lucia shareholders will receive 35 cents a share. With more than 2 million outstanding shares, that totals about $700,000. The bank’s stock closed Monday at 32 cents a share, down 19 cents from Friday. It was $6.70 a share a year ago.
The Carpenter Fund’s commitment to Mission includes about $4 million to repay Santa Lucia’s bailout loan from the U.S. Treasury, $5 million to pay off Santa Lucia’s trust preferred securities (bonds) and an unfinalized amount up to $25 million to capitalize Mission Community Bank.
Carpenter is working with five banks in separate California markets on such recapitalization ventures, according to Anita Robinson, president and CEO of Mission Bancorp.
As part of the merger, Santa Lucia Bancorp will become a separate non-bank company and manage the nonperforming assets of Santa Lucia Bank, which as of March 31 were reported as $22.8 million. The term nonperforming assets refers to debt obligations where a borrower has not paid any interest or principal to a lender for an extended time, such as a defaulted mortgage or credit card account.
The merger, still subject to shareholder and regulatory approval, is expected to be completed in the fourth quarter of this year, with integration occurring early next year. The total value of the deal was not disclosed.
Talks are scheduled to begin this week to determine how to consolidate the companies’ workforces and locations, which are near each other in Arroyo Grande, Paso Robles and Santa Maria.
Lokey said that though branches might close, he expects the workforce at each location would grow. Management hasn’t yet determined if top Santa Lucia executives will remain; Mission is reserving a spot on its board for a Santa Lucia representative, Lokey said.
Lokey came out of retirement to lead Mission with an eye for expansion, after working as president and chief executive officer of Mid-State Bank & Trust and president of Rabobank.
“It’s an interesting time in the landscape of banking,” Lokey said, referring to the economic downturn and increasing capital requirements and regulations. “A number of banks are looking for the best way to go forward. We have positioned ourselves to be a preferred partner when these positions come up.”
The merger would give Mission about $460 million in assets and $400 million in deposits, according to the companies’ statement. As of March 31, Mission had total assets of $217.6 million and total deposits of $174.7 million, while Santa Lucia had assets of $246.3 million and total deposits of $230.7 million.
Santa Lucia lost nearly $14.8 million in 2010, and Mission lost nearly $6.7 million in 2010.
Santa Lucia Bancorp was organized in 2006 as a holding company for Santa Lucia Bank, which opened in 1985. The bank has offices in Atascadero, Paso Robles, Arroyo Grande and Santa Maria.
A review by the California Department of Financial Institutions late last year resulted in a consent order requiring Santa Lucia Bank to increase its shareholder’s equity and possibly find a strategic partner.
Mission Community Bank opened in 1997. It operates two offices in San Luis Obispo; one each in Santa Maria, Paso Robles and Arroyo Grande; and an agribusiness loan office in Oxnard.
Mission Bancorp’s stock closed Monday at $3.50 a share, where it has remained since the close of trading June 8; a year ago, it was trading at $5 a share.