NEW CITY : New City’s Board Acts to Sell Bank to Tustin Pastor

Directors of financially troubled New City Bancorp have agreed to sell a majority interest in the holding company and its Orange-based New City Bank to a Tustin minister in a bid to satisfy a regulatory order that requires up to $4 million in new capital for the bank.

Details of the agreement are outlined in papers filed Friday with the Securities and Exchange Commission. The purchaser is identified in the documents as Young Ook Kim.

A spokesman for the state Department of Banking said that Kim is pastor of a church in Orange County. Neither Kim nor any official of New City could be contacted Friday for comment.

The banking department official said that Kim and bank officials have discussed the proposed purchase with regulators but have not officially sought required state approval of the deal.

Banking consultant Gerry Findley, who also is a New City shareholder, said he has never heard of Kim. He also said that the bank’s shareholders had not yet been notified of the week-old purchase agreement.

New City, founded by a group of self-described “born-again” Christians, gained early attention with its policy of making loans for church construction--an area most banks shy away from.

But its loans to commercial borrowers are what got it in trouble. New City lost $213,000 for the first half of 1986 and a reported $3.7 million in loan losses had erased the bank’s capital by September. Those losses have continued to mount since then, the SEC filing shows.

The documents filed Friday show that New City--named after the biblical reference to the “new city of Jerusalem”--has been operating under state and federal scrutiny at least since mid-1986 and is under a formal order to raise new capital or face further regulatory action.

The purchase agreement, according to the SEC filing, calls for Kim to buy about 3.5 million newly issued shares of New City Bancorp common stock at $1 per share in order to increase the capital of the bank by $3.5 million. Three current New City directors, who already have put $2.5 million in the bank since mid-1986, also have agreed as a group to purchase up to $995,000 worth of stock.

The deal would give Kim 88.4% of the holding company’s common shares outstanding, according to the SEC papers.