First Business Bank of San Diego has agreed to buy 1st Pacific Bancorp of San Diego for about $7 million and whatever is later recovered from charged-off loans and a lawsuit.

The $105 million-asset First Business would add eight branches to the three it has. The bank plans to adopt the 1st Pacific name.

During the fourth quarter, 1st Pacific's $450 million-asset bank fell below the regulatory threshold for well-capitalized institutions, and at the end of March the bank had a total risk-based capital of 8.51% and a Tier 1 risk-based capital ratio of 5.98%.

1st Pacific Bank's net chargeoffs in the fourth quarter equaled 12.39% of total loans; the losses were largely from construction and development and commercial real estate credits.

First Business, on the other hand, had a healthy total risk-based capital ratio of 23.75% and a leverage ratio of 16.85% at the end of June. Its principal shareholder, Ernest Auerbach, has committed to adding more capital.

The deal for 1st Pacific Bancorp is expected to close in the fourth quarter.

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