Regulators Take Over Search for Bank Buyer : FDIC Calls Several Banks in Area in Effort to Sell Valencia Bank or Get Bids for Its Assets

Federal regulators are searching for a buyer to take over the financially troubled Valencia Bank in Santa Ana, banking sources said Wednesday.

The drastic move by the Federal Deposit Insurance Corp. follows a so-far unsuccessful two-year search by Valencia for a merger partner or for investors who would infuse needed capital into the bank.

At least two mergers negotiated by Valencia have fallen through, and another agreement with a group of private investors that would pump $7.5 million into the bank has been in limbo for six months.

Valencia Bancorp, the holding company for Valencia Bank, lost $2.05 million in the first nine months of last year and $7.6 million in the previous two years.

Officials at the Federal Deposit Insurance Corp., which insures all deposits for up to $100,000 per account, have called several banks in Southern California this week seeking one to take over Valencia or to bid on its assets, banking sources said.

An FDIC employee would not comment on the reports.

“The FDIC contacted us by telephone, but we weren’t interested,” said Kenneth Walker, president of Farmers & Merchants Bank in Long Beach. Last year, F&M; entered the Orange County market when it took over the assets of failed Capistrano National Bank in San Juan Capistrano and purchased troubled Town & Country Bank in Seal Beach.

Interest Limited

“We will not be bidding on Valencia Bank,” Walker said. “We feel we have our market area already developed.”

Some banks, such as El Camino Bank in Anaheim, are interested in purchasing some of Valencia’s seven branches. Stan Pawlowski, chairman of El Camino, said he would be “very interested” in the Valencia branches that do not serve the same areas as his bank’s branches. However, El Camino officials were not among those the FDIC solicited for a bid, Pawlowski said.

Valencia Bank officials were in a board meeting Wednesday afternoon and could not be reached for comment.

In 1984, Valencia Bancorp agreed to be acquired by Credito del Peru Holding Corp. of the Cayman Islands for about $11.7 million in cash. Last April, Valencia called off the deal, claiming a breach of contract, and seized $5.2 million left on deposit by Credito del Peru.

At the same time, the bank revealed it was under FDIC orders to raise its capital to 7.5% of total assets to offset previous loan losses. The bank reduced its total assets to $104.8 million by last Sept. 30, from $133.5 million at the end of 1984. Still, its capital-to-asset ratio fell to 1.7% on Sept. 30, from 2.8% on Dec. 31, 1984, as its capital was eroded by mounting losses.

Trust Department Sued

Last July, Pacific Inland Bank in Anaheim backed out of a deal to purchase Valencia Bank’s $30-million trust department. The trust department had been the object of a lawsuit by clients who claimed former bank officials misappropriated their pension funds. Valencia settled the case last summer for $8 million.

In August, Valencia Bancorp revealed plans to sell a controlling 70% of the company’s stock to a group of six investors for $7.5 million, more than enough capital to satisfy regulators. A Sept. 15 deadline was postponed, apparently indefinitely, so that the investors could acquire money for the purchase, a bank source said earlier.

In November, Valencia reported that delays have caused it to become “less confident that the sale will in fact be accomplished.”

In recent months, a number of potential suitors have looked into buying the bank, but bank officials said previously that no other serious negotiations have been held.