Viejo Bancorp Plans to Give Investor 50% Stake : Offering: The firm--the parent of Mission Viejo National Bank--says the tentative agreement would give it perhaps $10 million in new capital.
MISSION VIEJO — The parent company of Mission Viejo National Bank said Thursday that it has tentatively agreed to give an Asian investor group a 50% stake in the firm in exchange for an expected $10 million in new capital.
The private offering of newly issued stock would provide Viejo Bancorp with enough new capital to double its size and propel Mission Viejo National into the ranks of Orange County’s larger banks. The bank currently has $147.5 million in assets.
Viejo Bancorp would not identify the investor group or its nationality.
William T. Brady, the firm’s chairman, president and chief executive, said he will turn over control of the firm to the buyers. At 65, he wants a short-term contract to continue as chairman and chief executive to ease his way into retirement.
The buyer would name a new president, Brady said.
The purchase price would be equal to the stockholders’ equity in the firm at the time the deal is closed, according to a company press release. The equity is currently $9.15 million, but Brady said he expects it to grow to $10 million by the time the deal closes sometime in the third quarter.
The transaction is subject to certain unspecified conditions, the buyer’s review of the company, completion of a definitive agreement and approval from shareholders and regulators.
The tentative deal prompted some skepticism around the county.
“We find it difficult in today’s environment to have individuals from foreign nations effectively go through the approval process to gain control of a bank,†said Gary Findley, a banking lawyer in Brea. “The amount of disclosure regulators require and the way things are structured now is much stricter than three years ago.â€
The 10-year-old bank appears to be in good financial shape. It earned $856,000 for the first nine months last year, but its bad loans accounted for nearly 4.2% of its total loans. Bankers like to keep that ratio below 1% and start worrying when it hits 3%.
In the last year, Brady said, the bank grew beyond its capacity and had to scale back. The new capital would allow it to continue its faster-paced growth.
The bank was at death’s door in the mid-1980s. After a few modestly profitable years, it plunged into the red two straight years, losing nearly $2.8 million in 1984 and 1985 and putting itself within the grasp of federal regulators.
But after a board of directors battle, Brady and Jack Barnes took over the bank’s operations in 1986. Known for an abrasive style and workaholic hours, Barnes, as president, pared costs, reduced staff, increased production and turned in a $1.3-million profit that year, mainly on the strength of the bank’s mortgage banking operations.
The bank sent commissioned loan agents throughout the area seeking loans. During the summer of 1987, it even set up outdoor lemonade stands on Sundays near new developments to attract home buyers.
A year later, Brady and Barnes had a falling out, and Barnes left. He now is president of Mission Valley Bank in San Clemente.
Mission Viejo National has continued its profitable ways, Brady said, by relying on loans to small businesses and on mortgage banking--the making and selling of mortgage loans.
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