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Santa Lucia Bancorp facing regulatory action

September 14, 2010

By KAREN VELIE

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.”


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There are as of today currently 854 “operating” zombie banks, victims of nothing except their own greed, stupidity, mismanagement, and negligence. These institutions lent money to those who had zero ability to repay – mortgages to burger flippers (an honorable job), to “developers” with no tenants, and businesses ramping up to meet nonexistent demand. Simply put, they lent recklessly.


I understand times are scary and in scary times people cast about to assign blame on others. But as scary as the times have been, they are to become much worse as it becomes clearer that the people running things in the USA have no idea what’s going on or what they’re going to do about it — and what’s going on is a king hell re-set of the terms of daily life, from a wet-dream robotic “consumer” techtopia to something more like the first chapter of Tobacco Road.


Sadly, no one present in the political arena appears to have a clue and, lacking clues, any ability to articulate the terms of what we face. Both major parties are hostage to nostalgia, a wish to return to the time when America could dream up any kind of machine or breakfast cereal and set matters right.


And the Tea Party aims to fix all this, to make things right again. I listen to their blather about “freedom” and all I can imagine is the sound of boots outside the door, and men in badly-fitted camo uniforms and buzzcut hair commanding me to accept John Boehner as my personal savior. Pardon me, but I don’t see how this will really improve anybody’s lot in life.


Scary times breed scary people. We can’t speak clearly anymore; we can only beat drums. All across the US self-appointed saviors are stepping up to rescue the squandered entitlements of the bygone day: Rand Paul, the Kentucky physician who subscribes to the idea that the earth is only about 4000 years old; Dan Maes, the Colorado Tea Party candidate for governor who believes that bicycling is a “gateway drug” to communism; Sharron Angle, the Nevada polymoron running John Birch Society scripts to the psychologically-convulsing blackjack dealers crowding the unemployment lines; and good ‘ol lonely Joe Miller, the hermit-attorney of Fairbanks, who only leaves his survivalist cave to drive wooden stakes through the heart of passing liberal windigos.


God help us all.


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Although not a fan of what the tea party has become, you appear to have a limited understanding of candidates like Rand Paul, who does NOT believe that theart is only 4000 years old. Rand (r), his father Ron (r), Dennis Kucinich (d), and Alan Grayson (d) are among a handful of politicians that DO have a clue. Unfortunately you have allowed the national media which is largely controlled by those who DON’T have a clue, to form your perception of those who would challenge the establishment.


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Thank-you for your informative article concerning Santa Lucia Bancorp’s financial difficulties, not the least of which concerns their understated losses which, according to your article, was understated by seven million dollars. That’s one Hell of a bookkeeping error. The bank has long advertized itself as a “local” bank. I would like to know who the shareholders are, or who exactly pooled their money to create this bank, when it was first established. Until your article, I never asked myself, “Who owns a bank? How are banks established? Where did the money come from to start this bank? Why are 98% of its investments in real estate?” I thought businesses “diversify” investments in case one part of the market does not perform as expected. Is ownership interest in Santa Lucia Bancorp a matter of public record? Would that information be accessible by the Administrator of Regional Banks in San Francisco? Thank-you for your continuing coverage of the local economy.


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Locals Katcho our Supervisor, and his friend Doug Filipponi sit on the board- ….tough times …


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Aren’t some of these loans connected to Farm Credit west Liabilities?


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All of the banks are taking a beating for sure and it’s good that the regulators are taking a close look.


However, look who’s regulating the regulators.


Once again the big banks are taking advantage of the current economic situation to force the small banks to be “acquired”. The smaller regional banks have been kicking the butts of the large national institutions for the past 15 or so years based on their local ties and superior service.


Santa Lucia has always been one of the best. They have supported small business like no one else in SLO county on a par with MidState Bank in their earlier years. They have avoided involvement with the Gearheart/Hurst syndicate.


Now it appears none of that matters as the “regulators” with their creative accounting methods will fabricate a crisis to justify a forced sale of Santa Lucia to some national institution with ties to Bernanke or someone else in this administration.


Meanwhile all of us sheep sit around bleating, blogging and waiting for a savior to lead us out of the darkness.


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i don’t know why people would mark you down, you are telling the cold hard truth. I guess not everyone is ready to accept it yet. For all the scandal and corruption we have at a local level, with people who wield too much power and are too stupid for words, it’s a hundred times worse as you go up the ladder in America.


And aside from that unfortunate reality, as a customer of Santa Lucia, I have nothing but good things to say. These are people who remember you when you come in to the branch, don’t fee you to death, treat people with respect, are responseive, and overall just run the kind of bank I like to do business with. So what if they don’t have 1,000 ATM machine and what not. Convenience comes with a price higher than its value.


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Santa Lucia Bank has all of my business, both personal and commercial. I have nothing but good things to say about them. The staff is professional yet personal and I feel this issue is another way of forcing out the home town banks. My business will stay with SLNB as long as they have their doors open. Thank you Santa Lucia Bank!


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John Maynard Keynes Saved Grandad and wrote a little essay about the kids.


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“Originally reported a loss of $1.9 million for the first quarter of 2010.”

And then the adjusted financial statement gives a NET loss of approximately $9.1 million. Boy that is more than just a clerical error. What is going on at SLNB? I always thought that they were one of the best banks in the area, I now have to wonder what is going on there. Are they too victims of Gearhart/Hurst swindle?


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Honestly, the regulators are behind this, telling the banks which loans to classify as nonperforming. People need to understand that there is something fishy afoot here. Some of these banks have, in fact, had major problems. However, the regulators are putting the screws to all of them so that they can force them into a position where they can be seized and their assets sold for pennies on the dollar to the larger banks.


I know of one specific case at a local bank where the regulators declared a loan to be nonperforming, and that loan had been paid off in cash earlier in the week. Also they have gone back and retroactively raised FDIC fees, in some cases wiping out profits earned the prior year.


So granted, the banks are having some rough times, but many of them could survive without the games the regulators are playing…. meanwhile we have huge institutions managing to hide enormous losses through other games like being able to pull funds from the Fed using bad loans as collateral.


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“I now have to wonder what is going on there. Are they too victims of Gearhart/Hurst swindle?”

Victims? I’d say more like cohorts.


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