Magazine article American Banker

Bank's Directors Fork over $11M to Satisfy OCC Order

Magazine article American Banker

Bank's Directors Fork over $11M to Satisfy OCC Order

Article excerpt

Directors at Goleta National Bank in California are digging into their own pockets to lift it out of regulatory hot water.

With the $246 million-asset bank under orders by the Office of the Comptroller of the Currency to raise capital, the 11 board members planned to pay out an average of $1 million each to buy stock in the bank.

The OCC recently issued a "prompt corrective action" order against Goleta National, in which it states that loan securitizations worth $203 million -- completed in the fourth quarter of 1998 and the second quarter of this year -- have left the bank "significantly undercapitalized."

Lew Stone, president and chief executive officer of Goleta's parent company, Community West Bancshares, said the order was imposed because of a miscalculation of the bank's Tier 1 capital. According to Mr. Stone the OCC said Goleta lacked enough regulatory capital to support the "residual interests" it holds in connection with sale of the loans.

Mr. Stone said he received notice of the order by telephone, though he would not disclose when. He also said Goleta National had not intentionally misled the regulator and is working to resolve the matter quickly.

"It is important to understand that we have properly accounted for these transactions under generally accepted accounting principles," said Mr. Stone. "We are looking for a short-order resolution."

Since the OCC does not comment on such orders, it is not known how much Tier 1 capital Goleta was required to have. …

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