Federal regulators seize San Luis Trust Bank
February 18, 2011
By LISA RIZZO and KAREN VELIE
Federal regulators shut down San Luis Trust Bank (SLTB) in San Luis Obispo Friday because the bank was critically undercapitalized, according to the Federal Deposit Insurance Corp. (FDIC).
At 5:55p.m. Friday, just five minutes before the bank was scheduled to close for the day, the Office of Thrift Supervision (OTS) declared SLTB a failed institution.
CalCoastNews watched as dozens of federal agents moved in to take possession of the bank, begin counting cash, and securing safety depositories and hard drives.
Some 60 federal agents are expected to work until 10 p.m. to 11 p.m. tonight. Throughout the weekend they will put in 10 to 12 hour days, said FDIC spokesperson Barbara Brunson.
The bank, which had only one branch, located at 1001 Marsh St., will reopen on Tuesday as the 19th branch of First California Bank out of Westlake Village. The FDIC said the San Luis Trust’s sole branch in the reorganization will continue to accept deposits and perform other bank services.
Approximately two months ago bank regulators posted in a data room that SLTB was underfunded and banks interested in taking over a portion of the bank’s assets and debts needed to have their bids in by Feb. 11.
“We were notified Monday we were the winning bidder,” said C. G. Kum, First California Bank president and CEO.
According to Kum the assumption of SLTB, brings First California Bank’s asset portfolio to $1.9 billion. He was unsure how many of the bank’s current 30 plus employees would be retained by First California Bank.
“We will keep as many as we can but we won’t be able to keep them all,” Kum said.
Federal agents have a matter of days to reconstruct the bank’s entire balance sheet from all the paperwork and documents they can find before turning it over to First California Bank.
The FDIC and First California Bank entered into a loss-share transaction on $241.7 million of SLTB’s assets.
As of Dec. 31, SLTB had approximately $332.6 million in total assets and $272.2 million in total deposits.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $96.1 million.
The seizure follows an OTS deadline that required SLTB to be recapitalized by Feb. 15 through a merger, an acquisition or an investor.
In November, the OTS ordered the bank to submit a restoration plan detailing how it would become at least “adequately capitalized.”
On Feb. 9, the OTS issued a “prompt corrective action directive” and denied SLTB’s restoration plan.
In the directive, the OTS warned the institution that it had until Feb. 11, to submit a plan on how it would be recapitalized by Tuesday, Feb. 15.
Since SLTB’s inception in 1999, six formal enforcement actions have been filed against the bank. Based in Washington D.C., the OTS is a bureau of the U.S. Department of Treasury and is the primary regulator of federal saving institutions, including SLTB.
In 2001, following a lengthy examination, the OTS determined SLTB had engaged in unsafe and unsound acts and practices. The OTS and the bank signed a 15-page agreement in November, 2001, attempting to bring the struggling institution back into compliance.
Until the transfer is complete, former SLTB customers can access their money by writing checks and using ATM or debit cards. Checks drawn on the bank will continue to be processed. Federal regulators suggest loan customers continue to make their payments as usual.
Accounts with a balance of $250,000 or less are fully insured by the FDIC.