Federal action against Santa Lucia Bank

March 2, 2011


Santa Lucia Bank received an enforcement action by federal regulators telling its board of directors to improve oversight of the bank’s management staff and operations, according to a written agreement signed late last year.

Bank officials agreed to correct all violations of law and regulation cited in an examination report (which is not available to the public), the agreement says.

During an examination of the bank last year by the Federal Reserve Bank of San Francisco, regulators discovered an originally reported loss of $1.9 million for the first quarter of 2010 was incorrect and that the actual amount was approximately $9.1 million.

Shortly thereafter, bank officials fired James Cowan, former chief administrative and chief credit officer of the bank.

On Dec. 31, a week after regulators signed a written agreement with the bank, the bank announced the retirement of John McNinch as executive vice president and credit administrator.

The bank, which operates four branches in San Luis Obispo and Santa Barbara counties, reported a 2010 net loss of $14.8 million. Stock plummeted from $10 a year ago to a current $1.80.

“Their (regulators) main concern is undercapitalization,” said Doug Filipponi, vice chairman of the bank’s board of directors. “The economy is the main thing that is happening here and in a few years we will be back on our feet.”

In a February news release, the bank reported it had in excess of $26 million in non-performing loans, referring to loans in which borrowers are behind on their payments.

As part of the Dec. 23 enforcement action, federal regulators ordered officials of Santa Lucia Bank to come up with a plan to improve the banks financial stability by getting repayment, amortization, liquidation or recapitalization of every nonperforming loan in excess of $500,000.

The bank has less than 30 days to submit a business plan that outlines how the bank plans to improve its overall condition in 2011.

Newly elected Assemblyman Katcho Achadjian (R-San Luis Obispo), John Hansen, Jerry DeCou III, Larry Putnam, Paul Moerman, Stanley Cherry, Jack Stinchfield, Jean Hawkins and Filipponi occupy salaried seats on the bank’s board of directors.

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There are still almost a thousand “zombie” banks across the US, some right here in SLO county, that are just marking time before they are called up for their turn on Bank Failure Friday. These banks are not the victim of rogue regulators or a wicked worldwide scheme on their meager deposits. Rather, they simply lent recklessly to people without the ability to repay.

Now about the overall banking system itself being a massive game of confidence, a con game, which depends on Federal Reserve Bankers, who are unelected and should therefore speak for no one but who in fact run virtually the entire US economy, the overnight repo market, the folly of borrow-short-lend-long, and fractional reserve banking, well that’s another matter altogether.

The big banks received Government bailouts after going upside down. Then the Feds come to town and force the small banks to be taken over by the large banks they bailed out? Not much of a surprise really. Is there anyone out there that still doesn’t believes our true government is the Corp. CEO’s that are paid tens of millions upon retirement for a job well done stealing from us.

How many banks in our community are having trouble? I know Pacific Capital Bank is having problems as seen at http://www.pacificcapitalbancorp.co

The easier question is how many banks are NOT having trouble.

Incorrectly reporting a $9.1 million loss as a $1.9 million loss? Missing a typo of that magnitude is pretty hard to do, which leads me to believe it may have been done intentionally to obscure the true financial condition of the company while reserving the “clerical error” excuse should it ever come to light. That’s not how a bank should behave. Anyone with deposits that exceed the FDIC guarantee might consider diversifying.

I have always liked this bank. It is nice to have local banks, that are not run from outside of our county!

This is the bank the crooks at Hurst used, in case that is pertinent.

Dear Mrs. Velie, it is certainly amazing how you miss connect all the dots related to my leaving Santa Lucia Bank. I submitted my retirement letter to President John Hansen 3-months prior to the bank receiving an enforcement action from the regulators. My decision to retire was based on personal reasons and was totally unrelated to any “problems” occuring at the bank. While my personal reasons are really none of your business, I will expand so even you might be able to understand. My wife has had ovarion cancer since 2006. Her chemoterapy treats have caused her to have nerapathy in her hands and feet that makes it difficult for her to walk. While she is still able to travel and get around, we decided I should retired so we could have some quality travel time together. Secondly, in 2010 I became the trustee of a large estate. The size and complexity of the trust required considerable time on my part and the only manner in which I could adequately manage the trust was to devote my attention to the trust on a full time basis. These are the facts, do with them as you please, John McNinchl.

John, The nice thing about an online media source complete with a blog is that you have the opportunity to share your thoughts and your side of the story. This article simply mentions when the bank announced your resignation and I suppose that there are certainly those who might attempt to “connect the dots”. I for one and it appears many others find your response credible.

Best wishes to you and your family.

I have known John and have worked with him. I believe him to be an honest man of integrity. I am very sorry to hear about the illness of his wife and wish he and his family the best. If anything, I think it was an unplanned blessing that he retired when he did.


I will keep you and your family in my prayers. Thank you for being a person who was a joy to work with many years ago.

Are you sure? SLB is my bank, I try to keep an eye on them. I like SLB, I hope that everything works out for them.

I am not so sure about that. Heritage Oaks iss the bank isn’t it? I always believed SLNB to be on the up and up. I hope I am not wrong :-(

Parcially-that was Mission-Former BOD’s are partners in other “ventures” There’s some nice guys on the board…then the others…Comes around goes around-

These two are gathering the dues that they got coming to them…

One thing after another-Bad Ju Ju-

Gee the bank reports a 9.1 million loss as a 1.9 million loss? A simple accounting mistake or something else in the works? I thought Bankers were supposed to be good with addition and subtraction?

But wait … I see that their web page prominently features good ol boy Tom O’Malley … That sums it all up for me …. something crooked going on…

Where is O’Malley on this? He usually steps out and takes credit for anything that happens in ATown.

Is O”Malley on the Board of Directors? He is always bragging about his economic degree and experience.

I have banked with Santa Lucia Bank for 20 years and will continue to do so. If the loss for 1st quarter of 2011 truely was misstated, then someone needs to pay. From the sound of things, the directors agreed with the regulator’s assessment if they canned the CAO.

Keep in mind through all of this regulatory hoopla that the local and regional banks flourished in the Central Coast because they have offered great service and have been engaged in the community. And it’s just that reason that they have kicked the corporate megabanks collective butts over the past 20 years. Now they’re gonna pay.

The feds are using the banking and real estate crisis to rain retribution on the small regional banks. They march in with moving nondefined standards and tell the local banks that they are not in compliance. Next thing you know they strip out the nonperforming loans which are swapped out with FDIC money and sell the balance for pennies on the dollar to the highest bidder from the big city. Lessons learned from Tammany Hall (or Chicago politics).

I’m not saying these local banks don’t have capitalization problems, they do. I’m just saying that big banking business is capitalizing on the opportunity and this administration for all of what it states to be, (remember “Yes We Can”?), is no different from the previous administration. The banking industry and their lobbiests are the winner and the taxpayer and small town businessman is the loser.

And finally, don’t confuse these local banks with the mortgage banking or investment industries.

I fully support SLNB and have all my accounts there. While I am keeping watch over this issue, I am confident they will do what is necessary for the good of their customers. Thank you, SLNB, for your excellent service all these years.