Barnes to Get Control of Mission Valley Bank : Cost Cutting Expected From Man Who Led Rescue of Mission Viejo National

Jack R. Barnes, the banking executive who led a rescue of Mission Viejo National Bank 2 years ago, has reached a definitive agreement to buy a majority stake in Mission Valley Bank of San Clemente for $1.4 million, Barnes and bank officials said Thursday.

The agreement, which requires regulatory approval, would give Barnes’ Allied Bancorp a stake of 51% or more in Mission Valley, Orange County’s smallest bank.

Under the pact signed by Mission Valley directors, Barnes will offer to buy at least 117,300 shares of the bank’s stock for $12 a share. After buying all shares tendered by other stockholders, additional shares will be provided by Mission Valley directors, who own 55% of the stock, he said.

Barnes, who has a reputation as a hard-driving, cost-cutting manager, has already told employees at the bank that he intends to operate Mission Valley the way he operates Mission Viejo National.

That means cutting costs, including salaries, and implementing an incentive program to reward good work.

“I’ve said it a thousand times: We’ll have wages to eat on, quarterly bonuses to buy a new car or house and annual stock options to get rich on,” he said.

Mission Valley has produced modest profits in only 2 of the 5 years it has been in operation. It posted a $140,000 loss in the first 9 months of this year.

Barnes has been serving as a consultant to Mission Valley since Oct. 1. He said his program is already turning the bank around.

Since the end of September, Mission Valley has earned $82,000 and is expected to earn enough in the fourth quarter to at least break even for the entire year.

The bank also has grown from $13.2 million in assets at the end of September to $16.9 million, he said.

Despite the losses, Mission Valley is not in any serious trouble. Its $1.5 million in capital is well above the amount required by regulators. Its overall performance, however, has been lackluster.

Directors hope that Barnes will energize the bank’s operations, Stewart Mortensen, the bank’s chairman, said in a prepared statement.

“Our bank has had a difficult time finding dynamic leadership,” Mortensen said. But he said that with its location, customer base and Barnes, the bank now is in a position to grow.

Barnes took over operations of Mission Viejo National Bank in September, 1985, a year in which it had lost $1.9 million and appeared ripe for regulators to move in and close it.

But his cost-cutting methods, incentive plan and mortgage banking activities contributed to a $1.4-million profit in 1986 and positioned Mission Viejo National to become one of the county’s better-performing banks.

Barnes’ manner, however, did not endear him with his employees or colleagues, and he quit at the end of September in a dispute with the bank’s chairman and largest stockholder, William T. Brady.

Barnes still maintains a 13% beneficial interest in the company that owns Mission Viejo National but, he said, that interest doesn’t conflict with his proposed majority ownership and operation of Mission Valley.