Wall Street Financial Bids to Control SDN Bancorp

Times Staff Writer

SDN Bancorp, the holding company for San Dieguito National Bank, has signed two agreements that, if approved by regulators, evidently would turn a controlling share of the company’s stock over to Wall Street Financial Corp., a little-known Honolulu-based company.

Under terms of the agreement announced Monday, SDN Bancorp already has sold 4.9% of its outstanding shares to Wall Street Financial for $92,000. Wall Street Financial also “lent” SDN Bancorp another $408,000, according to an SDN Bancorp release.

SDN Bancorp has traded recently at $1.50, its low for the past year. It traded at a high of $4 during the past year.

Two banking-industry observers contacted Monday described the proposed deal as a “bailout” of financially troubled SDN Bancorp, which has been trying to correct a string of problem loans that date back to 1985.


To Bolster Capital

SDN Bancorp plans to use most of Wall Street Financial’s investment to bolster its capital, according to a press release issued Monday by SDN Bancorp. That added capital would raise San Dieguito National’s capital ratio to 7.3%, up from 6%, according to the release.

Wall Street Financial also has agreed to acquire “an additional 50.1% of SDN Bancorp in the form of new stock to be issued.” However, a spokesman for the company suggested that Wall Street Financial actually would end up with 50.1% of the holding company’ outstanding shares after the new stock is issued.

If the deal is cleared by regulators and shareholders, San Dieguito National Bank would become “the first franchise bank in The Wall Street Financial Centers franchise network,” Gordon Rapozo, chief financial officer of Wall Street Financial, said Monday during a telephone interview.


Wall Street Financial is a relatively new company that “has spent the past few years getting our plan put together,” The SDN Bancorp deal “is our first endeavor in the field,” Rapozo said.

Based in Honolulu

Wall Street Financial is traded over the counter and has executive offices in Honolulu. It hopes to become “a franchiser of small financial institutions . . . (not unlike) First Interstate Bank or First Nationwide,” Rapozo said. “But we’re not going to do it on that large a scale. We’re (dealing with) little banks and financial institutions.”

Wall Street Financial will acquire banks that will be converted into “Wall Street Financial Centers,” Rapozo said. Acquired banks would then open franchises in their area, according to Rapozo.


Wall Street Financial’s “ultimate plan” is to “use SDN Bancorp as the holding company for a number of other transactions where they would acquire an ownership position in banks across the U.S.,” according to the release.

San Dieguito National Bank reported a $1.3-million net loss for the year ended Dec. 31, 1987. It reported $54.5 million in year-end assets and $45.2 million in deposits.

In late March, SDN Bancorp President Paul E. Schedler described 1987 as “a thorny year where valuable human and financial resources were used to correct old problems rather than to move forward. The root of the problem remains the same.”

Schedler was referring to problem loans made by a “previous administration.” Those problem loans have dogged the bank since 1985. The bank still had $813,000 in non-performing loans at the end of 1987, down from $1.8 million at the end of 1986.