Borrego Springs Bank Buyout OKd

Directors of the Borrego Springs Bank, which specializes in financial services for Native Americans, have given the go-ahead for the bank’s majority shareholder -- the Viejas Band of Kumeyaay Indians -- to buy out minority investors.

The proposed deal would pay $23.7 million in cash to minority shareholders in the three-branch San Diego County bank, which had struggled for many years.

The Viejas band began investing in Borrego in 1996, later increasing its share to 70% as the institution developed specialized loans for tribes, financial literacy and credit counseling programs and casino-support services. It also focuses on small-business lending.

In announcing the deal last week, Anthony R. Pico, chairman of the Viejas and a bank director, thanked the shareholders for providing the needed trust and support “to pioneer a new banking path into the emerging Native American economy.”

Borrego’s minority shareholders, mainly local residents who have stuck with the bank since it opened in 1982, “should be ecstatic,” said community bank investor Hans W. Schroeder, a portfolio manager at Green Street Capital Management in San Francisco.

He said the bank’s stock price languished for years below the initial offering price, even after the Indians invested.

In recent years, gambling-related operations began generating “tremendous” fees, Schroeder said, and the bank’s profit last year topped $1 million on $14.7 million in revenue.

The buyout, subject to approval by shareholders and regulators, is expected to close before the end of the year.