ESCONDIDO , In contrast to the long-term trend of San Diego County-based banks being bought by outside financial firms, a group of local investors has announced plans to purchase Palomar Community Bank from its out-of-town owner.
Rick Sanborn, president and CEO of the Escondido lender, said his investor group is attempting to buy the one-branch bank from Community West Bancshares of Goleta.
“It’s basically a management buyout with the assistance of some other investors,” Sanborn said. Late last month, the concerned parties signed an intent letter to exchange all the stock of Palomar Community Bank for a combination of debt and cash, he said.
The purchase price is estimated at between $10.5 million and $11 million, he said. Under terms of the intent letter, the parties will attempt to sign a definitive agreement before Nov. 30. He said more details of the transaction would be released when the agreement is signed.
Palomar Community Bank has $75 million in assets, Sanborn said.
“We do pretty much everything right now, but our focus will be on business banking and lending,” Sanborn said. “We want to maintain the institution as a local community bank and serve North County. Our future plans involve expanding within North County.”
Sanborn, 38, hopes he has a local banking heavyweight waiting in the wings to help run the bank. His father-in-law is Peter Q. Davis, former Bank of Commerce president.
Davis is bound by a non-competition agreement with U.S. Bancorp, which acquired Bank of Commerce two years ago. The non-competition agreement expires next year, Sanborn said.
“This purchase is quite contrary to what is happening in the banking industry around here,” Sanborn said. “Most local bank presidents and boards are looking to sell, but we’re just the opposite.”
Sanborn has been employed at Palomar Community Bank since March 1999, when he was hired as chief operating officer. He was elected president and CEO in June of that year.
Palomar Savings Bank opened in 1984. In 1998, it joined forces with Community West Bancshares in order to expand the loan services available, Sanborn said.
Lew Stone, president and CEO of Community West Bancshares, said proceeds from the Palomar sale would allow his company to commit more resources to its subsidiary, Goleta National Bank.
Frank Riolo, president and CEO of Borrego Springs Bank, sees an analogous situation with the Palomar purchase to the one he and other minority investors in his bank faced in 1989. At the time, Bank of San Diego owned 51 percent of Borrego Springs Bank.
Riolo’s investor group bought Bank of San Diego’s share.
“Community West Bancshares needed to restructure Goleta National Bank, which is a big Small Business Administration lender,” Riolo said.
Palomar’s local investors will be purchasing a bank that is already up and running with assets and an experienced staff, he added.
“That way, you’re not going to have to absorb start-up costs and the expense of growing a new bank to the size where it can support itself,” Riolo said.
