Federal Deposit
Insurance Corporation

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   [¶12,014] In the Matter of Southern Pacific Bank, Torrance, California, Docket No. 03-012PCAS (1-24-03).

   FDIC issues Supervisory Prompt Corrective Action Directive restricting bank from entering into transactions not in the ordinary course of business.

(This order terminated by order of the FDIC dated 4-23-03; see ¶16,334.)

   [.1] Transactions—Restricted
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In the Matter of
SOUTHERN PACIFIC BANK
TORRANCE, CALIFORNIA
(Insured State Nonmember Institution)
SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE

FDIC-03-012PCAS

   WHEREAS, Southern Pacific Bank, Torrance, California ("Bank") is a "significantly undercapitalized" depository institution as that term is defined in Section 38(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1831o(b)(1), and Section 325.103 of the Federal Deposit Insurance Corporation ("FDIC") Rules and Regulations, 12 C.F.R. §325.103;

   WHEREAS, the FDIC's Report of Examination of the Bank as of November 18, 2002, finds the Bank's capital levels to be at a 2.04% Tier 1 leverage ratio, a 2.29% Tier 1 risk-based capital ratio, and a 3.49% total risk-based capital ratio, thus rendering the Bank "significantly undercapitalized" for purposes of the prompt corrective provisions of the Act;

   WHEREAS, the FDIC ascertained on January 23, 2003 that the Bank engaged in the following transaction:

   1. On January 17, 2003, the Bank entered into a repurchase agreement with ABS SOS Plus Partners, LTD ("ABS"). Pursuant to the terms of the repurchase agreement, ABS agreed to purchase for a purchase price of $100.0 million the Bank's Government National Mortgage Association ("GNMA") securities with a book value of $115.4 million as of January 17, 2003. The agreement requires the Bank to repurchase the GNMA securities at the original $100.0 million purchase price at the end of a 30 day period and to pay a price differential equating to an annual rate of 3.7%. This price differential at the end of the 30 day period represents an estimated cost of $308,000. During the 30 day period, Bank management has represented that it intends to invest the funds in overnight Fed Funds which yield a rate of between 1.00 to 1.50% resulting in corresponding revenue of between $83,333 and $125,000. Management has represented that it entered into the transaction in order to maintain the Bank's average assets at levels commensurate with the previous month's average assets;

   WHEREAS, based on the foregoing, the FDIC has determined that the transaction is unsafe or unsound due to the fact that, at a minimum, it has resulted in a reduction to the Bank's net interest margin and has further reduced the Bank's capital ratios. If the Bank were to continue to engage in such transactions they could further weaken the condition of the Bank and/or otherwise prejudice the interests of the Bank's depositors.

   THEREFORE, the FDIC finds it necessary, in order to carry out the purposes of Section 38 of the Act, to issue this SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE without providing notice as set forth in Section 308.201(a)(1) of the FDIC's Rules of Practice and Procedure, 12 C.F.R. §308.201(a)(1), and hereby issues the PROMPT CORRECTIVE ACTION DIRECTIVE pursuant to Section 38 of the Act, 12 U.S.C. §1831o, and Section 308.201(a)(2) of the FDIC's Rules of Practice and Procedure, 12 C.F.R. §308.201(a)(2).

   IT IS HEREBY DIRECTED that the Bank shall be prohibited from doing the following without the FDIC's prior written approval:

   [.1]1. Entering into any material transaction other than in the ordinary course of business, including any investment, expansion, acquisition, sale of assets, or other similar action with respect to which the Bank is required to provide notice to the appropriate Federal banking agency.

   This SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE shall become effective and enforceable immediately upon its receipt by the Bank.

   This SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other institution-affiliated parties of the Bank.

   The Bank may file a written appeal of this SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE within fourteen (14) calendar days from the date of the issuance of this Directive as provided in Section 308.201(a)(2) of the FDIC's Rules of Practice and Procedure, 12 C.F.R. §308.201(a)(2).

   The appeal shall be filed with Nancy E. Hall, Regional Director, Federal Deposit Insurance Corporation, San Francisco
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   Regional Office, 25 Ecker Street, Suite 2300, San Francisco, California 94105. Copies of all papers filed in this proceeding shall be served upon the Office of the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429; Michael J. Zamorski, Director, Division of Supervision and Consumer Protection, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429; A.T. Dill, III, Senior Counsel, Legal Division, Compliance and Enforcement Section, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429; and upon Joseph J. Sano, Regional Counsel (Supervision), Federal Deposit Insurance Corporation, 25 Ecker Street, 14th Floor, San Francisco, California, 94105.

   This SUPERVISORY PROMPT CORRECTIVE ACTION DIRECTIVE shall remain effective and enforceable except to the extent that, and until such time as, it shall be modified, terminated, suspended, or set aside by the FDIC.

   Pursuant to delegated authority.