SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 2003
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CENTRAL COAST BANCORP
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(Exact name of registrant as specified in its charter)
STATE OF CALIFORNIA 0-25418 77-0367061
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(State or other jurisdiction) (Commission file (I.R.S. Employer
of incorporation or organization) number) Identification No.)
301 Main Street, Salinas, California 93901
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(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number including area code: (831) 422-6642
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Not Applicable
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(Former name or former address, if changed since last report).
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Item 5. Other Events
Community Bank of Central California (the "Bank"), a subsidiary of
the Registrant, reports that a hearing was held June 11, 2003, in
the Monterey County Superior Court, on the Application for Writ of
Mandate by the City of King related to the return from the Bank of
approximately $4.4 million which the City of King alleges are
general fund monies it deposited with the Bank in a certificate of
deposit. As disclosed previously in the Registrant's Form 8-K
Current Report filed April 11, 2003, the certificate of deposit was
assigned to the Bank as collateral security for a loan in the
amount of $4.4 million made by the Bank to a private real estate
developer (a limited liability company) in connection with a
redevelopment project undertaken by the borrower under a contract
with the City of King and/or its Community Development Agency. The
aggregate amount of the two loans currently outstanding and past
due in respect of this project is approximately $9.0 million. The
other loan made by the Bank to the developer of this project is
secured by a first deed of trust on the project in the approximate
amount of $4.6 million. The certificate of deposit matured on
March 30, 2003 and the $4.4 million loan became due on April 3,
2003. Because the loan was not paid on the due date, the Bank
considers the loan impaired under applicable accounting standards.
The Bank advised the City of King of its intention to apply the
proceeds of the certificate of deposit to payment of the loan.
At the hearing held June 11, 2003, the Superior Court Judge
verbally ruled that there was insufficient evidence of a
legislative act by the City of King and that the Mayor of the City
of King therefore lacked authority to pledge or assign the
certificate of deposit to the Bank. Community Bank strongly
disagrees with the outcome of today's hearing. The City of King
and its Community Development Agency knowingly entered into an
agreement with the Bank to pledge a $4.4 million certificate of
deposit.
The City of King and its Community Development Agency promised to
provide financial incentive to the Bank to make a loan to the
developer of the project. As a result of the project, the City of
King now has a brand new development including a Hartnell Community
College classroom facility, a theatre, a childcare center and
commercial space in the formerly blighted center of the City of
King. The development will generate jobs, and tax revenue to
support the City's operations for many years into the future, and
will bring in other commercial development to help the City's
financial position. The City of King and the Community Development
Agency knew that there would be substantial economic benefits and
that's the reason they were willing to commit City and
redevelopment funds to support the project. The judge's ruling
potentially gives the City a multimillion dollar windfall, because
it has the project it wanted, plus the increased tax revenue and
many other tangible and intangible benefits; and it does so
possibly at the Bank's expense.
The Bank is extremely disappointed that the City of King and its
Community Development Agency, after inducing the Bank to make the
loan by assigning the certificate of deposit has reneged on their
agreement to support the financing for the project. The City's
refusal to honor its obligations to the Bank is particularly
troubling in view of the City's active solicitation of the Bank as
a lender on the project.
If the Judge's decision is not reversed on appeal and becomes
final, the Bank could sustain the loss of the certificate of
deposit as collateral security for the loan. In such event, the
entire $4.4 million would likely become a charge to the Bank's
allowance for loan losses because the nature and extent of other
sources of recovery available to the Bank are uncertain at
present. The outcome of this dispute continues to be uncertain at
the present time; however, the Bank intends to vigorously defend
its rights in respect of the certificate of deposit and has
instructed its attorneys to take all necessary steps to initiate
appeal of the decision.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CENTRAL COAST BANCORP
Date: June 11, 2003 By: /s/ ROBERT M. STANBERRY
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Robert M. Stanberry, CFO
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