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Shareholder’s Opposition Part of Rocky Road for Merger

The planned merger of Chula Vista’s Vibra Bank and Pacific Commerce Bank in Los Angeles may not go as smoothly as the banks’ top management would like.

According to the joint proxy statement issued last month, Enrique Schon, Vibra’s largest shareholder, has expressed opposition to the transaction.

Schon’s opposition and other potential pitfalls are outlined in the 432-page proxy statement, a report given to company shareholders contemplating the sale of a business.

Schon, who resigned as the chairman of the board last year, owns 9.6 percent of the bank’s shares. But he also has options to purchase an additional 42,000 shares that could bring his total stake to 14.5 percent of outstanding common shares.

Schon said he thinks the bank would be better off on its own for at least a few more years rather than selling now. “I think this transaction comes too soon to truly maximize value and that as the bank would have continued to grow and prosper, it would have been more likely that the bank could have been an acquirer instead of a seller,” he said in an email.

The merger that was first announced in October would create a bank with about $350 million in total assets and four branches here and in Los Angeles. By combining two small banks, the merged entity would have a much better chance of competing for business, the banks said.

In January, the transaction received approval from the Federal Reserve Bank of San Francisco. Approval from the state’s Department of Business Oversight was expected by last week. It still requires majority approval of both banks’ stockholders.

The proxy statement says Vibra Bank has secured agreements from the bank’s remaining directors and executive management but those agreements total only 15 percent of the total outstanding shares of 738,865.

If a majority of Vibra’s shareholders reject the proposed merger, Vibra could be obligated to pay Pacific Commerce Bank its transaction expenses of up to $200,000 and possibly an additional $400,000 termination fee, according to the proxy statement.

The transaction calls for PCB to pay Vibra shareholders 1.2 times Vibra’s tangible book value as of the month before the deal closes. As of Dec. 31, Vibra’s book value was $19.31, which means the per share to be paid is $23.53. That means the aggregate value for the single office bank is $17.4 million.

Frank Mercardante, CEO of Vibra since early 2014, said after transaction expenses are added in, and changes to its securities portfolio are factored, there’s not much change from the price when the deal was announced in October.

If the merger is completed, Mercardante will become chief executive for the merged bank that will be known as Pacific Commerce Bank, and he will receive a base salary of $300,000, an increase from his current annual salary of $216,000.

The proxy statement said the role of Scott Andrews, CEO of Pacific Commerce, post-merger ‘has not yet been determined.’ Mercardante gave no further details. In June, Andrews, who formerly was CEO of San Diego- based Sunrise Bank, signed a three-year contract with PCB, at an annual base salary of $267,800, with stepped increases this year and 2016 to nearly $276,000 and $284,000.

Counting his bonus, the value of options, and all other compensation, Andrews’ total package in 2013 came to $374,406, the proxy statement shows.

The deal calls for PCB’s top officers to be retained. They are Richard Koh, CFO; Gary Weitner, chief credit officer; Leonard Zazula, chief operations and risk officer; Georgiana Yoshioka, chief administrative officer; and Eric Karasawa, commercial banking manager. The average salary for the officers in 2013 was nearly $143,000.

Three of Vibra’s officers had change of control agreements that the bank negotiated. The largest payment would go to Chief Credit Officer Gail Jensen-Bigknife for about $187,000.

At the completion of the agreement, three Vibra directors would join the board of directors of the new bank: Max Freifeld, Luis Maizel, and Mercardante. The new board would have 12 members.

• • •

Vibra gets into black: Vibra reported 2014 net income of $931,000 compared with a net loss of $124,000 for 2013.

Total loans declined 16 percent to $89 million, while total deposits dropped 7 percent to $125 million. Total assets fell 5.5 percent to $140.4 million. The bank exceeds all the minimum capital ratios to be considered ‘well-capitalized,’ with total risk-based capital at 20.42 percent, or double the minimum.

• • •

SDCCU gets bigger: San Diego County Credit Union, the area’s largest credit union, grew by about $400 million last year to bring its total assets to about $6.7 billion.

The credit union reported 2014 net income of $95.5 million, up from $90 million in 2013.

SDCCU said its total membership expanded to nearly 280,000, an increase of about 8 percent from the prior year.

Send any news about locally-based lenders to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.

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