San Diego Business Journal

CORONADO FIRST BANK

CEO: Maria Kunac.

Assets: $161.2 million.

Net income: $735,000 in 2011.

No. of local branches: Two.

No. of local employees: 28.

Headquarters: Coronado.

Year founded: 2005.

Company description: Commercial bank.

The newly combined Coronado First Bank has released new figures about its purchase by Embarcadero Bank.

Chairman Steve Rippe, who took that title last month along with holding down the chief credit officer’s job, said the price paid by Embarcadero was $8.8 million, down from the originally estimated price of $9.3 million when the deal was first announced in March 2011. The deal closed in November.

The price Embarcadero paid CFB shareholders was $6.30 per share, down from the $6.91 per share estimate when the deal was announced initially.

Rippe, who replaces Jerry Suppa as chairman, objected to an assessment that neither bank was doing much lending in recent years, saying CFB was constrained due to its sagging capital levels, but Embarcadero was making plenty of loans.

In its first two and a half years, Embarcadero didn’t make many loans because the bank didn’t like the lending environment, Rippe said. That changed in the second half of its five-year existence. Embarcadero opened in December 2006 with $21.5 million in capital, still a San Diego record for new banks.

More Active Lender

Going forward, the new CFB should be more active in the local lending market, he said.

“We have a very strong balance sheet, our credit quality is very good, and we’re eager to grow our loan portfolio,” Rippe said.

The combination of two of the county’s smallest lenders resulted in a bank with about $161 million in assets, but only $116 million in loans.

Some 40 percent of the loans are backed by commercial real estate such as offices, retail and industrial properties. Apartment loans make up the next highest group with 26 percent; 17 percent for residential mortgages; 10 percent, commercial and industrial; and 7 percent, construction, the bank said.

The bank’s legal lending limit is about $6 million, but practically, it’s about $3 million. Most business customers have annual revenue from $1 million to $25 million, Rippe said.

The combined CFB reported net income for 2011 of $735,000, with the bulk of those profits coming from Embarcadero. Through the first nine months of 2011, the old CFB reported a net loss of $841,000. The bank never made a profit in its six years.

The acquisition hit a stumbling block out of the gate when CFB’s shareholders objected to the price and got Embarcadero to pony up an additional $300,000. The acquired bank’s shareholders voted for four of the 11 board members, and effectively terminated its former chief executive, Bruce Ives.

Getting to Know You

Maria Kunac, Coronado First’s new chief executive, said the merger of the two banks has gone well, despite its length. “The merger process was a long one, but it’s given us the opportunity to get to know each other,” she said.

In addition to not retaining Ives, who was paid a $50,000 severance, the new bank retained Phil Chapman, the chief credit officer, for only a month. Chief Financial Officer Paul Cable has only a month left on his contract, she said.

In all, the bank laid off four employees and has 28 workers in two offices, the main headquarters at 801 Orange Ave. in Coronado, and a branch at 1370 India St. in Little Italy. It closed Embarcadero’s office at 110 W. A St. in downtown San Diego.

Kunac said the merged bank has assimilated some of the loan products of the old CFB, but will no longer offer loans guaranteed by the U.S. Small Business Administration. It also plans to de-emphasize single-family mortgages.

Several industry sources said the combined CFB has a much better chance of succeeding, given that the resulting bank will be bigger and more efficient, and can better withstand a still tepid borrowing climate.

“The whole point of this transaction is the efficiencies and synergies that are realized by putting these two organizations together,” said Rick Levenson, president of Western Financial Corp., a local investment banking firm specializing in community banks. “It’s become clear that in this environment for a bank to be profitable, it has to become larger.”