Santa Lucia Bancorp facing regulatory action
September 14, 2010
Santa Lucia Bancorp announced it expects federal regulators to file an enforcement order against the bank because of issues discovered during a recent examination by the Federal Reserve Bank of San Francisco (FRB).
“In light of the current challenging operating environment, along with our elevated level of non-performing assets, delinquencies, and adversely classified assets, we are subject to increased regulatory scrutiny, and expect to become subject to potential enforcement actions,” bank officials said in their Aug. 30 filing with the U.S. Securities and Exchange Commission.
The Atascadero-based bank, which operates four branches in San Luis Obispo and Santa Barbara counties, reported a loss of $8.9 million during the first half of 2010.
Bank officials originally reported a loss of $1.9 million for the first quarter of 2010.
Last month, the bank said its original calculations were incorrect. Their adjusted financial statement gives a net loss of approximately $9.1 million during the first quarter, and cited an additional $7.3 million in loan losses discovered during the federal regulatory audit.
A number of local banks, including Santa Lucia Bank, provided hard money lenders unsecured commercial loans, according to documents taken from Hurst Financial Inc.’s dumpster. Approximately 98 percent of the Santa Lucia Bancorp’s loans are concentrated in the real estate and commercial markets.
Federal bank regulators have increased their staff by as much as 60 percent because of concerns about commercial and construction loan concentrations at smaller locally-owned banks.
As of June 30, Santa Lucia Bancorp had $39.9 million in loans categorized as doubtful or substandard. However, the bank has only $7.7 million set aside to cover loan losses.
“If these loans do not perform according to their terms and the collateral is insufficient to pay any remaining loan balance, we may experience loan losses, which could have a material effect on our operating results,” the bank’s August filing says. “Any such additional provisions for loan losses or charge-offs, as required by these regulatory agencies, could have a material adverse effect on our financial condition and results of operations.”