SDNB Financial Acquiring 4 Mortgage Banking Firms

SDNB Financial Corp., parent of San Diego National Bank, climbed into the competitive mortgage banking ring Tuesday by acquiring four subsidiaries of a firm co-owned by an SDNB director.

SDNB agreed to buy four mortgage banking subsidiaries of Lenders Corp. in an exchange of common stock valued at about $3 million, the company said Tuesday.

The four subsidiaries service about $90 million in loan volume; that figure is expected to reach $150 million by year’s end, SDNB officials said.

SDNB formed a mortgage banking subsidiary in 1984, but it has been dormant.

“We wanted to get into the mortgage banking field,” SDNB President and Chief Executive Murray Galinson said. “And rather than doing it as a start-up, we’re right in it immediately.”

Founded in 1983, Lenders Corp. is owned by James Shadlaus and Scott M. Ferguson, an SDNB director. The four operations acquired by SDNB include Lenders First Corp., Lenders Mortgage Corp., Abbey Mortgage Corp. and LC Service Corp.

The newly acquired companies will be called SDNB Mortgage Banking Group, according to Galinson.

The 80 employees of the Lenders Group subsidiaries will be retained by SDNB and the operations will remain in their present offices, located in SDNB’s headquarters office building, Galinson said in an interview.

The deal is contingent on shareholder and regulatory approval, with completion expected in March, Galinson said.

Because of the potential conflict of interest, Ferguson did not vote on the acquisition, according to Galinson.

SDNB and Lenders Group have a longstanding business relationship, with SDNB serving as Lenders’ banker.

Terms of the acquisition call for the exchange of about 200,000 shares of SDNB stock--two-thirds immediately and one-third over the next one to five years, depending on SDNB’s profitability, Galinson said.

SDNB valued its stock at $14 per share, far above the market value of $9.50 per share. “They’re paying what we feel our adjusted book value is,” Galinson said.

Eventually, Lenders Group will own nearly 16% of SDNB common stock.

In a prepared statement, Ferguson said the acquisition is a “good fit for both Lenders and SDNB.”

SDNB officials described the purchase as beneficial both for “bottom-line performance and future profitability.” As of Sept. 30, 1986, San Diego National Bank had assets of $100 million and nine-month earnings of $690,000.

Ferguson will continue to direct the remaining Lenders Corp. operations--which include an automobile/equipment leasing firm and an insurance division--and will become chairman of the new SDNB mortgage banking subsidiary. Other directors of the new subsidiary include Shadlaus, Galinson and Charles I. Feurzeig, chairman of SDNB.