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Interim President Says ‘Thanks, But No Thanks’ to Permanent Job

Discovery Bancorp Interim President Joe Carona has the experience but no interest in the vacant chief executive position created when former CEO Jim Kelley abruptly resigned in early December.

“I do not want the job, but will stay on as chief administrative officer,” Carona said.

A banker for four decades, Carona served as CEO for about 10 years while at Sterling Bank in Los Angeles. He was also president at Columbia National Bank in Santa Monica.

Carona didn’t say what prompted Kelley’s sudden departure. “I honestly don’t know what Jim was planning,” he said.

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Along with Kelley, and a core of local investors, Carona helped organize and open San Marcos-based Discovery Bank in 2001. At $200 million in assets, the banking firm has three offices, and a commercial finance unit, Celtic Capital.

It’s hard to say why Kelley was pushed out, but Carona denied it had anything to do with the bank’s most recent financial performance in the third quarter.

For the period, Discovery reported net income of $548,000, or about half of the net profit of $1.1 million reported for the third quarter of 2006. For the nine months ended Sept. 30, the bank had a net profit of $852,000, compared to $1.4 million for the same period in 2006.

The decline in profits is no shock. That’s been true for most local lenders hurt by increased levels of problem loans and forced to set aside greater amounts of reserves. Nevertheless, this bank was still making money.

Discovery also had a big uptick in problem loans. As of Sept. 30, it held $2.3 million in nonaccrual loans, compared to $659,000 of the same type (not paying interest or principal) at the end of September 2006. The problem loans were still only 1.4 percent of the overall loan portfolio.

The bank also reported taking nearly $1 million in net charge-offs, or loans written-off at the end of September.

Carona said Discovery has done a thorough review of its portfolio, and put aside sufficient reserves to cover any potential losses.

In the meantime, the banking firm is looking for a new CEO, and will likely have someone on board within 90 days, he said.

Traded on the Nasdaq Bulletin Board under DVBC.OB, Discovery shares were trading at $20 about a year ago, but have steadily declined over the ensuing weeks, and closed at $13.40 on Jan. 2. The 52-week low was $12.05.

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Union Bank Does The Two-Step:

The market for residential mortgages may be in the dumps, but Union Bank of California is offering a product it hopes triggers new business.

The Two Step Mortgage is available to qualified borrowers for up to $5 million, for a 40-year term.

The interest for the first 15 years would be fixed, and then reset to a commonly used index, and then remain fixed for the next 25 years.

Borrowers have the ability to make interest-only payments, or pay extra on the principal, which would lower the monthly mortgage payment.

“We believe in a smart alternative to the 30-year fixed rate loan,” said Craig Cole, senior vice president at Union Bank’s mortgage division, which is headquartered in San Diego.

Because of the turmoil in the mortgage industry last year, Union has done quite well, and generated about $3.5 billion in mortgages last year, compared to $2.6 billion in 2006, Cole said. Union doesn’t sell its home loans on the secondary market and doesn’t do any subprime loans, he added.

The latest product is geared to financially healthy borrowers, and is only being offered in California, Oregon and Washington.

San Francisco-based Union Bank, a unit of UnionBanCal Corp., had assets of $54 billion as of Sept. 30, and 58 offices in the county.

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Temecula Valley Raises Capital:

Temecula Valley Bancorp filed a statement with the Securities and Exchange Commission last month for 1.75 million shares of trust preferred securities at $10 per share. Net proceeds from the issuance will be $16.5 million, or $19 million, if underwriters exercise their over-allotment option in full, according to the prospectus.

The report said the company intends to use the proceeds to fund continued growth when its retained earnings are insufficient, and to possibly repurchase stock up to $8 million. Another use is satisfying regulatory capital requirements.

TVB, which had $1.3 billion in assets as of Sept. 30, is one of the fastest growing banks in the region. At the end of 2002, the bank had only $310 million in total assets.

For the nine months ended Sept. 30, TVB reported net income of $12 million on a loan portfolio of $1.2 billion, compared to net income of $12.5 million on a loan portfolio in the prior September of $1 billion.

Traded on Nasdaq under the ticker TMCV, shares closed Jan. 2 at $11.14, and have ranged from $9.75 to $24.06 over the past 52 weeks.

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Comerica Keeps Expanding:

Comerica Bank, the former Detroit bank now based in Dallas, continues to open new branches in California and Arizona, including two more in San Diego County in recent months. The newest additions are in Point Loma and Escondido, and bring the total in the county to nine. That’s up from two offices here four years ago.

As of now, Comerica has 91 banking centers in its Western market, which includes 82 in California and nine in Arizona. In mid-2003, the market had 43 offices.

“These new offices, some of them in new markets, are helping us grow in the West,” said Mike Fulton, president and CEO of Comerica’s Western market, which is headquartered in San Jose. As of Sept. 30, Comerica had total assets of $60 billion.

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Small Change:

College Loan Corp., the student lender based in Rancho Bernardo, purchased $200 million in non-securitized student loans from a Chicago lender. CLC manages more than $10 billion in student loans, making it among the top 10 student lenders in the nation San Diego National Bank opened its newest branch, its 22nd, in Temecula. The branch is managed by Veronica Pavia-Hines Neighborhood National Bank received a $3 million deposit from San Diego County’s treasurer-tax collector last month. This follows on the heels of several other $1 million plus deposits from two other agencies, National City and the Otay Water District, through a program that allows them to receive FDIC insurance for up to $50 million in deposits. Previously, coverage was limited to $100,000 Fitch Ratings affirmed a three rating for Imperial Capital Bank’s small balance commercial servicing activities. As of Sept. 30, the San Diego bank serviced 2,900 small-balance commercial loans totaling $2.6 billion, services a portfolio of $75 million in apartment loans and manages a portfolio of real estate owned properties valued at $13.2 million.


Send any relevant finance news to Mike Allen via e-mail at

mallen@sdbj.com

. He can also be reached at (858) 277-6359.

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