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FDIC Enforcement Decisions and Orders

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   [10,900] In the Matter of Pacific Thrift and Loan Company, Woodland Hills, California, Docket No. FDIC-93-231b (11-10-93)

   Bank to cease and desist from such unsafe or unsound practices as paying excessive fees to affiliates in such a manner as to produce operating losses; operating with a large volume of volatile liability deposits; operating with inadequate provisions for liquidity and funds management; and operating in violation of applicable laws or regulations. (This order was terminated by order of the FDIC dated 5-30-95. See ¶16,008.)

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   [.1] Violations of Law—Eliminate/Correct
   [.2] Asset/Liability Management—Written Policy—Minimum Requirements
   [.3] Liquidity Ratio—Increase Required
   [.4] Affiliated Organizations—Transactions With—Written Agreements Required

In the Matter of

PACIFIC THRIFT AND LOAN
COMPANY

WOODLAND HILLS, CALIFORNIA
(Insured State Nonmember Institution)
ORDER
TO
CEASE AND DESIST

FDIC-93-231b

   Pacific Thrift and Loan Company, Woodland Hills, California ("Insured Institution"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Insured Institution and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated October 26, 1993, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Insured Institution consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Insured Institution had engaged in unsafe or unsound banking practices and had committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Insured Institution, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking practices and violations of law and/or regulation:
   (a) paying excessive fees to affiliates in such a manner as to produce operating losses:
   (b) operating with a large volume of volatile liability deposits:
   (c) operating with inadequate provisions for liquidity and funds management; and
   (d) operating in violation of section 23B of the Federal Reserve Act, 12 U.S.C. § 371c-1, made applicable to state nonmember insured institutions by section 18(j)(1) of the Act, 12 U.S.C. § 1828(j)(1), as more fully described on pages 6-a through 6-a-3 of the Report of Examination as of June 7, 1993; section 1135 of Title 10 of the California Code of Regulations, as more fully described on page 6-a of the Report of Examination as of June 7, 1993; section 337.6 of the FDIC's Rules and Regulations, 12 C.F.R. § 337.6, as more fully described on page 6-a-3 of the Report of Examination as of June 7, 1993; section 349.3 of the FDIC's Rules and Regulations, 12 C.F.R. § 349.3, as more fully described on page 6-a-3 of the Report of Examination as of June 7, 1993; Part 350 of the FDIC's Rules and regulations, 12 C.F.R. Part 350, as more fully described on page 6-a-4 of the Report of Examination as of June 7, 1993; and section 18320 of the California Financial Code, as more fully described on page 6-a-4 of the Report of Examination as of June 7, 1993.
   IT IS FURTHER ORDERED, that the Insured Institution, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

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   [.1] 1. Within 60 days from the effective date of this ORDER, the Insured Institution shall eliminate and/or correct all violations of law which are more fully set out on pages 6a through 6-a-4 of the Report of Examination of the Insured Institution as of June 7, 1993. In addition, the Insured Institution shall take all necessary steps to ensure future compliance with all applicable laws and regulations.

   [.2] 2. Within 60 days from the effective date of this ORDER, the board of directors shall develop a comprehensive asset/liability management policy. The policy shall establish standards consistent with generally accepted prudent banking operations consistent with generally accepted prudent banking operations by giving specific consideration to establishing a range for the Insured Institution's volatile liability dependency ratio, as computed by the FDIC in its Reports of Examination, and which ratio shall, within 180 days from the effective date of this ORDER, be reduced to not more than seventyfive (75.00) percent; and within 360 days from the effective date of this ORDER, be reduced to not more than fifty (50.00) percent. The requirements of this paragraph shall not be construed as standards for future operations, and the Insured Institution's volatile liability dependency ratio shall be maintained at a level consistent with prudent banking practices.

   [.3] 3. Within 60 days from the effective date of this ORDER, the Insured Institution shall adopt and implement a written policy to increase its liquidity. The Insured Institution shall increase its liquidity ratio, as computed by the FDIC in its Reports of Examination, to not less than five (5.0) percent by March 31, 1994 and to not less than ten (10.0) percent by June 30, 1994.

   [.4] 4. Within 60 days from the effective date of this ORDER, the Insured Institution shall develop, adopt, and implement a written policy satisfactory to the Regional Director and the Commissioner, which policy shall govern the relationship between the Insured Institution and its affiliates, and shall reduce the payment of any management, consulting, or other fees or funds of any nature, directly or indirectly, to or for the benefit of the Insured Institution's affiliates to only those fees or funds paid in connection with necessary and reasonable services performed by the Insured Institution's affiliates on behalf of or for the benefit of the Insured Institution.
   5. Within 30 days of the end of the first quarter following the effective date of this ORDER, and within thirty (30) days of the end of each quarter thereafter, the Insured Institution shall furnish written progress reports to the Regional Director and the Commissioner detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports shall include a copy of the Insured Institution's Report of Condition and the Insured Institution's Report of Income. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and the Commissioner have released the Insured Institution in writing from making further reports.
   This ORDER shall become effective ten (10) days from the date of its issuance.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated at San Francisco, California, this 10th day of November, 1993.
   Pursuant to delegated authority.

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