Valley State Bank Agrees to Takeover by Capital Bank

Valley State Bank, an Encino financial institution buffeted by loan losses and a $600,000 embezzlement, has agreed to be acquired by Capital Bank of California in a stock transaction not likely to exceed $3 million, Capital chairman Abel Holtz said.

Capital, a unit of Miami-based Capital Bancorp, is based in Century City. Valley State’s five offices are all in the San Fernando Valley, and, Holtz said, the acquisition offers an opportunity to expand into the Valley market.

Founded in 1979, Valley State lost $1.7 million in 1985. In 1983 and 1984 it lost a total of $976,035. It has not yet released 1986 financial results, but last Dec. 30, it discovered that $600,000 had been embezzled from its precious-metals operation.

Capital Bancorp may have its own problems. The Miami Herald reported March 19 that the FBI and the U.S. Attorney’s office in Miami are examining charges that Capital Bancorp engaged in illegal lending practices and extorted from borrowers to make political contributions to state officials.

Holtz, a well-known Miami philanthropist who emigrated from Cuba 26 years ago, denied any wrongdoing or investigation.

Valley State Bank reported assets of $94.5 million March 31. Holtz, 52, said Capital Bancorp has total assets exceeding $1.2 billion.

The merger, likely to take four months, needs approval from the Federal Deposit Insurance Corp., the state Banking Dept., the Justice Dept., and the shareholders.