Crown Will Sell Bank at Carlsbad for $1.3 Million

SAN DIEGO — Crown Bancorp on Thursday announced a $1.3-million agreement to sell its Capital Bank of Carlsbad subsidiary to WHEC Inc., a newly formed bank holding company.

The agreement, which includes a “variable purchase” clause that could boost the sale price to $1.6 million, “represents a very sizable premium over Capital Bank’s book value . . . (and will) . . . “increase Crown’s capital accordingly,” according to a Crown Bancorp Chairman Philip Akre.

As part of the agreement, the WHEC group will purchase Crown’s $1.2-million capital note that is payable to Canadian Commercial Bank. That purchase will cancel Crown’s indebtedness on the note that Crown has “not been able to service,” according to Akre.

However, it was not possible on Thursday to determine how much of a profit or a loss Crown will report on the sale of Capital and the note payable to Canadian Commercial Bank. Crown officials on Thursday would not identify the principals of WHEC Inc.

However, one Crown board member suggested that the sale will hurt the holding company because “even though the loss in dollars (on the transaction) will be minimal, Crown will lose a potential profit center.”

Although the Bank of Carlsbad is “not profitable as of late, it would ultimately have turned a profit,” the board member said.

Crown has been trying to sell Capital Bank or arrange for its recapitalization, according to Akre’s past statements. Crown is the holding company for Bank of Coronado and Capital Bank of Carlsbad.

As part of the agreement, the WHEC group will increase shareholder equity in the Capital Bank through a $1.3-million capital infusion. At the end of November, Capital Bank had shareholders equity of $742,000 and total assets of $5 million.

The agreement with WHEC Inc. evidently brought to an end Canadian financier Dallas Stanley’s efforts to purchase the troublesome note from Crown and gain entry to Crown’s board of directors.

“(Stanley) made an offer to recapitalize the bank and the offer was to be responded to by (Wednesday),” said Stanley’s attorney, Roy Bell. “They didn’t even give me the courtesy of a response.”

“Now we regretfully own stock in (Crown),” Bell said. “I say regretfully because this sale is going to devalue our stock.”