TARP: SCVBank hopes for local investor from this week’s Treasury auction

February 27, 2013
Santa Paula News

Santa Clara Valley Bank (SCVBank) is about to trade in a government shareholder for what bank officials are hoping is a more localized investor this week through the Treasury Department’s TARP auctions of their stake in nine banks.

The move, according to SCVBank President/CEO Cheryl Knight, is a good one for the bank and one that was requested. On Monday morning the Treasury began the auction for the shares, which it expects to close on Thursday evening. 

Santa Clara Valley Bank, founded in 1998, has $137-million in assets. The Treasury has had a $2.9 million stake in the bank. 

The total value of the preferred stock and debt the Treasury plans to sell is approximately $158 million and represents its full TARP holdings in nine banks. The TARP was based on the 2009 performance of SCVBank, including real estate-related issues within its portfolio.

At that time the Great Recession, real estate market crisis, high unemployment and tightening government restrictions affected financial institutions throughout the nation and made it a particular challenging period for banks. About two-thirds of the nation’s banks were ordered into the TARP program at about the same time as SCVBank. 

The bank’s main office is on East Main Street, and there are branches in Santa Paula, Fillmore and Valencia. 

Board Chairman Scott Rushing and the late Don Olivier spearheaded the creation of Santa Clara Valley Bank when the city’s then only community bank, Citizens, was sold to Santa Barbara Bank & Trust. The pair raised the capital in record time. Rushing announced Monday the Treasury intends to auction SCVBank’s Series A and Series B Fixed Rate Non-Cumulative Perpetual Preferred Stock. 

Knight said the auction will benefit SCVBank: “I think this is a good thing for the bank.... We asked to be included in these auctions because they provide the opportunity of local ownership of stock” now held by the government.

Under an agreement with the primary regulator, the Office of the Comptroller of the Currency (OCC), the bank was also prohibited from paying dividends without prior approval. The bank paid all dividends on the Securities through February 15, 2010 and thereafter was notified by the OCC that SCVBank should cease payment of dividends on the Securities until such time as the OCC Agreement has been terminated. 

There were no penalties carried on the original $2.9 million TARP and SCVBank agreement.

“We think it is good we’ll no longer have government ownership,” said Knight. “While the TARP served its purpose,” the bank will only benefit from local investors “rather than having the government as one of our owners.... I’m very happy for the auction to take place and am very interested” in finding out whether an institutional type bank investor or a local investor is the top bidder.

The government is estimating the outcomes of the auctions will be announced March 6.

With a new investor, as well as being shed of government TARP restrictions, “there is no downside to the bank,” said Knight. “This is something we wanted.”

According to the statement issued by the Treasury, other companies whose TARP stakes are included in the auction are the $216 million-asset Boscobel Bancorp in Boscobel, Wis.; the $425 million-asset Coastal Banking in Beaufort, S.C.; the $425 million-asset CoastalSouth Bancshares in Hilton Head, S.C.; the $439 million-asset First Reliance Bancshares in Florence, S.C.; the $394 million-asset Northwest Bancorporation in Spokane, Wash.; the $567 million-asset Southcrest Financial Group in Peachtree City, Ga.; and the $830 million-asset Queensborough Company in Louisville, Ga.

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