Federal regulators seize San Luis Trust Bank

February 18, 2011

Agents set up tables after seizing the bank


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.

An FDIC agent speaks to bank employees

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.

Agents stacked suitcases and umbrellas near the bank’s entrance.

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.

Booty JuJu

A surprising number of our fellow citizens appear to be unaware, or purposely ignorant of the causes of the thousands of insolvent and failed banks across the fruited plain. The mere thought of greed, corruption, arrogance, bloated egos, rank opportunism, and pure, simple, grinding stupidity amongst those with whom we are supposed to entrust with our money causes the mind to blanche.

So then, let’s shine some light on the sitch so that we can sleep well, if poorer, tonight shall we?

Let’s start with The Moral Collapse of the American Working Class.

AIG head Robert Benmosche has recently pointed out that the reason his firm has enjoyed such great success is precisely because it has avoided selling insurance to the large number of Americans who believe, as he put it, “that the government is responsible for what happens to me.” As we all know, the government is responsible only for what happens to AIG.

The CEO of JPMorgan, Jamie Dimon, has whined ad nauseum about the outrageous amount of banker bashing by common (fleeced and skint) Americans.

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust. Ok?

Amazingly, these ordinary Americans don’t even appear to feel guilty for their actions. Like wild animals that have lost their fear of humans, they continue to wander down from the hills to rummage through the garbage cans for sustenance.

Subprime Lending. Oh my.

For at least two centuries the U.S. government has encouraged people who didn’t work on Wall Street to think of themselves as “equal.” This has sadly emboldened ordinary Americans to borrow money they never intended to repay, just like rich people do, and cowed the financial elite into lending it to them. You can’t forget to bear-proof the garbage cans, and expect the bears won’t notice, now can you?

The ChiComms.

The willingness of these curious people to sell us goods at ridiculously low prices is dangerous and disruptive. It encourages our poor to believe they can afford many items which they should not be able to, for instance. And the vast number of dollars these same Chinese people willingly lend to us at absurdly low rates of interest places an unfair burden on our financiers, who must find someplace to put them. If we want our financiers to perform even better than they do, we must cease to expect more from them than they can give for chrissakes.

Anyway, several Wall Street CEOs, people much much smarter then you have tried patiently to explain that the details were never their responsibility. Therefore, nobody is to blame. Matters spun a little crazy but now all is well. Ok? And anyway in the big picture, from the point of view of their firms and their earnings potential, the so-called financial crisis was a blip. They’ve already forgotten about it.

And they assume that, eventually, you will, too. And they are likely correct.


Hey!!!!!!!!!!! Mr FBI man……don’t leave yet… there’s so many other businesses here in SLO that need to be raided and cleaned out !!!!! come baaaaaaaaaaack. LOL :)


Don’t you mean “there are so many corrupt city councilmen in Atascadero ….”


Ventura Group, LLC is located at 5200 Telegraph Rd Ventura, CA 93003. The officers include Hertel Group LLC, Harbor of Santa Barbara. Ventura Group, LLC was incorporated on Tuesday, July 16, 1996 in the State of CA and is currently active. Robert Js Fowler represents Ventura Group, LLC as their registered agent.

Source: Public Record data – Department of State – Division of Corporations


What is John Ronca’s connection to this story? Will someone please print the information? Thank you.


John Ronca is the Chairman of the Board, San Luis Trust Bank.


Congrats CCN for breaking this story first. You’re awesome!


Please list the names of the directors and how much they were paid.


Did Brad Lyon do anything wrong — other than make moronic loans that is…


I have known Brad since first grade over at Sinsheimer elementary school and through high school and college. I only know Brad as an intelligent, trustworthy hard working guy. Even though I was a long time acquaintance,Brad turned my business loan down as he felt it was not a prudent business move for his bank. I certainly do not hold this against him. It’s just business.

The loans that you may be referring to as “moronic” most likely were mandated by the democrats so that “everyone can own a home” irregardless of there ability to pay back the loans. These mandates are a corner stone in our country’s recent economic demise.

Brad built a bank in our town from nothing, initially operating out of a house on Broad street and building it into a $300 million operation. Crusader, I’m thinking your ignorant blood seeking comment make you the only moron in the room.




Kelley Gearhart as well as being a dirt bag, was a master of deception. He juked many very bright people. He was crafty enough to swindle millions from honest hard working people.

I find it amusing that you argument implies that because a banker knows someone (me) for a long time he should loan me money. A bank should loan money based on the demonstrated ability to repay the borrowed money.

Kelley Gearhart borrowed and repaid millions of dollars in loans prior to his collapse. I am not saying that mistakes were not made by this bank or it’s personnel. I am saying that I have know Brad for many years and he is an intelligent good guy.

royman, how many banks have you started up? How many jobs do you provide?


I started no banks but do employee people, your right about Gearhart being a master of deception and the other things you said of him.


royman, if you do not know how the liberal democrats pushed for all the easy money to be doled out by banks, and punished the banks that “discriminated” against groups of people (those who should never have qualified for a loan), then you need to do some homewok. Talk to your buddy Barney Frank.


That is a massive oversimplification of the last 25 years of banking regulation.

Bad laws, self interest and greed dont’t stop at party lines. The greedy clowns are everywhere.


Actually I do know about that, and Barney Frank is no buddy of mine.


You must also know about the excommunication thing then… any possible TRUST implications.


Brad did not build a bank. His father Lynn did. I have nothing against Brad — I was just curious if this bank failed simply because of bad loans or was there some nefarious action going on? It doesn’t matter. It’ll come out in the wash.

You show your ignorance SLO LOCAL when you suggest that loans “were mandated by the democrats so that “everyone can own a home” irregardless (sic) of there ability to pay back the loans.” No one held a gun to anyone’s head to make such loans. It’s all about greed and easy money.

SLO LOCAL I’m thinking that my comments hit just a bit too close to home causing your panties to twist in a most painful way. Take a deep breath and settle down because all you really are doing is making an ass out of yourself by showing everyone just how ignorant you are.


Well put, I’ll join that crusade


SLBT’s customers need not worry. First California Bank’s CEO C.G. Kum is here to help.

He’s on it!

In fact, you could say that Kum’s all over it.


Now that John Ronca’s days as the chairman of the board are over he can ask Parkinson for a job …..


maybe he was worried that he that federsl regulators were going to slam him so hard that he would have to allow his buddie to let him serve time under the Sheriff’s house arrest program.


I hope the Chamber hasn’t stocked up on trinkets ‘n tees labeled “The Happiest Town in America”. It’s starting to have a hollow ring to it.