By Pacific Coast Business Times Staff Monday, June 14th, 2010

With a tri-county banking veteran as its new CEO and a $25 million infusion of capital from a private equity firm, San Luis Obispo-based Mission Community Bancorp is poised to make some big moves in the coming months.

Mission Community Bancorp is a publicly traded banking firm and the holding company for Mission Community Bank, which has four branches throughout San Luis Obispo County and Santa Maria and assets of $195 million.

Former Mid-State Bank & Trust and Rabobank executive Jim Lokey was recently brought out of retirement to head Mission Community Bancorp as chairman and CEO. The company’s former CEO, Anita Robinson, will remain as its president and as the CEO of Mission Community Bank.

Mission has received a total of $25 million in capital from Carpenter Fund Manager since December 2009, when the Irvine-based private equity firm purchased 70 percent of the banking company. Under that purchase agreement, Carpenter has three board appointments, of which Lokey is one.

Lokey, 64, was the president and CEO of Arroyo Grande-based Mid-State Bank & Trust for seven years, until it was snapped up by Dutch giant Rabobank in a historic 2007 acquisition. He spent two years with Rabobank as its regional president before retiring in 2009.
Now Lokey’s back in business, with big plans for Mission Community.

With its capital infusion, the Carpenter group is trying to building a “super community bank,” Lokey said, which could handle “virtually all the financing needs in the three counties” of Santa Barbara, San Luis Obispo and Monterey.

On the phone from Washington, D.C., Lokey said the Carpenter fund approached him informally last year, after he retired from Rabobank, about becoming involved with their firm. “It’s been off and on,” Lokey said. “I’ve know Ed Carpenter and the Carpenter group for at least 15 years. … They had asked me to do some consulting and speaking when I first went into retirement.”
Over the past three months, the Carpenter group talked to him about joining the Mission Community board. He came on as chairman in early May and was soon named CEO.

“I was retired. I wasn’t looking to get back into banking per se, but I had done it for years,” Lokey said. “The industry is going through very interesting times these past few years. I felt that I can and do still have something to give back. … I’d like to help rebuild the community bank franchises that I think are so important to this country.”

Carrol Pruett, a former top executive at Mid-State Bank & Trust, worked with Lokey during his tenure there. “He has experience in running a much larger organization and making the bottom line work,” Pruett said.

Acquisitions ahead

With $195 million in assets, Mission is currently one of the region’s mid-sized community banks. Its peers include San Luis Obispo-based American Perspective Bank and Ventura-based County Commerce Bank. Both of those also have a handful of branches and assets in the $150 million to $200 million range.

Building the Mission Community banking brand will likely include some strategic acquisitions. “We are very well positioned to make some acquisitions and we would, given the right opportunities,” Lokey said.

There are three directions for the firm to grow, he said. “Having capital and having the balance sheets in good standing with the regulators would allow us to grow organically through new clients,” he said. “And if other banks were interested in joining with us, we will have the capital for private market mergers and acquisitions.”

Finally, if other banks in the area fail, Mission said it would be in a position to work with the FDIC to scoop up troubled bank assets. However it grows, Mission will likely remain “a Central Coast bank,” Robinson said.

Like most tri-county banks, Mission has struggled over the past few years. It posted a $6.9 million loss in 2009, compared to a $3.8 million loss in 2008, as demand for loans slacked off and its loan loss provision increased. Total assets dropped by 10.4 percent last year.

“It’s not too different from what a lot of banks are experiencing. Really, it’s an indication of what’s going on in California and also on the Central Coast,” said Robinson, who has been the bank’s CEO since its inception in 1996.

Even as the economy improved, Mission posted a first-quarter loss of $386,000 compared to income of $204,000 in the first quarter of last year.

Robinson said the bank has started its turnaround. “Our core earnings — net interest income — have significantly improved year-over-year,” she said. The bank saw interest income increase 23 percent to $1.8 million in the first quarter.

Deposits have grown significantly since the bottom of the recession, and the Carpenter capital infusion will further help to bolster capital levels and open opportunities for growth.
Mission’s tier one leverage ratio — its capital divided by its assets — was 10.2 percent at March 31. Its risk-based capital ratio was 14.5 percent. Federal regulatory guidelines to be considered “well capitalized” are 5 percent and 10 percent, respectively.

Robinson agreed that capital is key, especially in the current economy. “I don’t think you can ever say you have too much,” she said. “It’s critical to show you have capital, can access it and can put it to work. We have access to capital and I believe we can put it to work.”

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