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Valencia Cuts Staff and Sells Some Assets

April 09, 1985|JOHN O'DELL | Times Staff Writer

In a series of moves aimed at paring operating costs, strengthening its management and boosting its depleted capital base, Valencia Bancorp of Santa Ana said Monday that it has cut its staff by 15%, sold more than $10 million in assets and restructured its senior management.

In addition, the bank holding company, parent of Valencia Bank, said that Ray L. Smith, Valencia's founder, has retired as chairman and chief executive of the bank and the holding company.

Harvey Ferguson, who has been president and chief operating officer of the bank and its parent, will assume the added duties of chief executive officer of both companies. The chairmanship will remain vacant for an undetermined time, according to Kenneth Slezak, senior vice president and marketing director for the bank.

Slezak said that neither Smith's retirement nor any other management change was ordered by the Federal Deposit Insurance Corp. or any other regulatory agency. The bank has been operating under FDIC orders to raise new capital for more than a year now. Smith, who founded Valencia in 1971, has been planning to retire for several years, Slezak said, and found this the best time to do so. "It shows he has faith in the new executive team," Slezak said.

A new executive committee, consisting of Slezak; Robert Buerki, Valencia Bank's executive vice president; Philip Harford, senior vice president and cashier, and Donna Dahl, vice president for personnel, has been formed to work with Ferguson in planning Valencia's operations and future strategies.

Slezak said the committee members have been working together informally since last year, when Ferguson was named president to replace Gene Hobday, who left in a contract dispute with the foreign group that was then seeking to purchase Valencia for $11 million cash.

Valencia Bancorp announced last week that it had called off the yearlong negotiation with Credito del Peru Holding Corp. of the Cayman Islands, owner of Peru's largest private bank, Banco de Credito del Peru.

Losses Have Grown

In the same announcement, Valencia said its 1984 losses, previously reported to state regulators as $2.1 million, had soared to $5.7 million and that its capital as of Dec. 31 had shrunk to $3.8 million, or only 2.8% of the bank's assets of $133 million.

The Federal Deposit Insurance Corp. had ordered Valencia last year to boost its ratio of capital to assets to at least 7.5% by March 31, a goal the bank has failed to meet.

In a written statement released late Monday, Ferguson said that Valencia has terminated 30 staff members from "every department and branch and (at) all levels" in an effort to cut operating expenses.

The layoffs pare the bank's staff to about 170 employees, Slezak said Monday, down from a high of nearly 285 in 1982.

In addition, Ferguson announced Monday that Valencia has sold its leasing division to Roger Penske Cadillac's auto leasing division for an undisclosed sum and sold an additional $6.3 million worth of assets in a move aimed at improving the bank's liquidity and capital.

Sold Mainly Loans

Slezak said the assets sold were mainly loans. He declined to reveal the price Penske paid for the bank's leasing division but said it was more than $4 million.

Last week, Valencia Bancorp said it seized $5.2 million that Credito del Peru had on deposit at Valencia Bank as a condition of its acquisition negotiations. The bank seized the money, Valencia said, because of an alleged breach of contract by Credito, which has denied any improprieties but declined further comment.

Banking consultant Gerry Findley said Friday that he believes Valencia is doing what it must do to "stay alive."

The bank's efforts to pare down operations and increase capital can work, Findley said, "if they can also hold onto some of the Peruvian money and can recover on their bonding claim" in an unrelated $6.5-million misappropriation of funds from the bank's trust department.

The trust fund problems have not yet affected Valencia's financial situation because accounting rules don't call for the bank to show a loss until an exact amount is established. The bank is blaming the misappropriation of trust funds on the unauthorized investment activities of several former employees. It has asked its bonding underwriters to replace the money and, if they do, there would be no loss to the bank.

Slezak said Monday that Valencia is still considering the sale of further assets and will continue to review operating costs in an effort to trim everything possible from its overhead.

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