Volume 7, Number 3

Managing Commercial Real Estate Concentrations

A message from the Chief State Examiner, David Scott
Ten years ago today we were wrapping up the final documentation from the failure of Maritime Bank of
California, and preparing for the closure of Westside Bank of Southern California, two of the sixteen
California banks that failed in 1993. Those were truly dark days in California banking, and in every case
the failures were attributable to the sharp and prolonged downturn in the real estate market. For those
who survived in the industry from 1992 to 1995, difficult lessons were learned, and new ways of
managing risk were adopted.
Different types of commercial real estate credits have different risk factors. Terrorism fears can have a
dramatic effect upon hotel/motel credits, but minimal adverse effect upon strip malls; a collapse in the
Dot.com industry can leave millions of vacant square feet of space in the San Francisco Bay area, but not
effect demand for equivalent space in the Inland Empire of Southern California; what are the sources for
commitments for permanent financing on your construction loans, and how reliable are they. The first
step of managing your risk is to segment your real estate loan portfolio by type of property and location,
and identifying those with a high level of risk for a specific risk factor. This risk assessment should be
discussed with the board of directors, and comprehensive policy of risk diversification adopted.
All concentrations should be avoided when possible, however, like a twisting stretch of mountain road
there are sometimes no adequate alternatives. Even if you determine that your market precludes avoiding
a high level of real estate related credit exposure, there are still a number of things which you should be
doing to manage and mitigate that risk. The first step of risk management is always the determination of
how much risk you have already accepted.
2 Monthly Bulletin September, 2003
DFI-sponsored Legislation Signed by the
Governor
The Department of Financial Institutions sponsored three bills during the 2003 legislative session. All
three bills were signed by the Governor in September and have been chaptered into law, effective January
1, 2004. Summaries and links to the chaptered versions of these bills follow:
AB 1355 (Chapter 445, Statutes of 2003): Financial Institutions.
This bill authorizes the Commissioner of Financial Institutions to impose civil money penalties for acts
that violate applicable laws relating to financial institutions.
http://www.leginfo.ca.gov/pub/bill/asm/ab_1351-1400/ab_1355_bill_20030922_chaptered.pdf
AB 1774 (Chapter 404, Statutes of 2003): Financial Institutions.
This bill makes various clean up changes to certain sections of the Financial Code as administered by the
Department. Among other provisions, this bill amends Financial Code Section 772 to set the same
standards, both in statute and regulation, for banks’ and trust companies’ investments in limited liability
companies and business trusts, or other similar business organizations as they currently have for
corporations. Also, the bill amends Financial Code Section 3375.5 to relieve state-chartered banks from a
prohibition involving transactions for family trusts that does not exist for their federal counterparts.
http://leginfo.ca.gov/pub/bill/asm/ab_1751-1800/ab_1774_bill_20030917_chaptered.pdf
AB 1775 (Chapter 456, Statutes of 2003): Money Transmitters Abroad.
This bill increases shareholders’ equity for a Transmitter of Money Abroad from $250,000 to $500,000.
http://leginfo.ca.gov/pub/bill/asm/ab_1751-1800/ab_1775_bill_20030922_chaptered.pdf
New Spanish Language Brochure
On September 17, 2003, the Department of Financial Institutions (DFI) released Información para
Clientes de Instituciones Financieras del Estado, a Spanish version of its English-language brochure
Information for Customers of State Financial Institutions. The Spanish translation is the second nonEnglish consumer publication offered by the DFI. The new brochure provides information on financial
institution regulators along with contact information. Steps to file a consumer complaint are also
provided. Información para Clientes de Instituciones Financieras del Estado is also available on the DFI
Web site, on the Consumer Services page and also on the Press and Publications page. Information about
ordering printed copies of DFI publications is available on the same site at
http://www.dfi.ca.gov/consumer/brochures.asp.
3 Monthly Bulletin September, 2003
Trust Call Report Forms now Distributed from
DFI Web Site
Completed reports may be filed by Email
The Department of Financial Institutions (DFI) is using the Web and email to distribute information to
and receive information from its licensees and other reporting institutions. In keeping with this policy,
trust companies, trust departments of state chartered banks and national banks, federal savings banks and
foreign (other state) banks authorized to engage in the trust business will no longer receive hard copy call
report forms and diskettes. These institutions will now be able to download, store and print the call report
forms in Excel format from the DFI Web page, and submit their reports as email attachments starting
with the Third Quarter 2003 Call Report. Instructions for preparation of the reports are also on the DFI
Web site in PDF format.
Letters explaining how to download, prepare and return the forms were mailed to all reporting institutions
on September 30, 2003. Interested persons should visit the forms site on the DFI Web site at
http://www.dfi.ca.gov/forms/ or contact Patrick Carroll at (415) 263-8559 or by email at
pcarroll@dfi.ca.gov for more information.
CSBS to Sponsor State Banking Summit and
Leadership Conference in Washington, DC
On November 5th and 6th, the Conference of State Bank Supervisors (CSBS), is sponsoring a State
Banking Summit and Leadership Conference that will bring together a variety of leading banking industry
speakers on hot button issues. Topics that will be covered include:
· expanded powers available to state chartered banks;
· a general counsel panel featuring the FDIC, Federal Reserve and CSBS;
· a frank discussion about the steps states are taking to ensure the state charter remains the primary
choice in the nation’s dual banking system.
The summit will be held at the Wyndham Hotel in Washington DC. The cost of the Summit and
Leadership Conference is $350, which includes a networking reception scheduled on November 5th,
featuring leadership from the FDIC, Federal Reserve, and CSBS Chairman Mick Thompson. The
program itself will take place on November 6th and will feature influential speakers including Dr.
Gregory Mankiw, Chairman of President Bush’s Council of Economic Advisors.
In order to spark the most diverse and productive discussions, we are inviting financial institution
attorneys, trade association representatives for financial services – both in Washington and in the states,
state bank department regulators and their counsel, federal banking regulators, bank consultants, bankers,
and other associations and thought leaders with a vested interest in the dual banking system. Similarly,
our speakers reflect individuals from this diverse cross section of financial industry professionals.
4 Monthly Bulletin September, 2003
We hope you will consider attending this unique program and networking opportunity. I have included a
working agenda and registration form. If you have any questions about the program, please contact
CSBS at (800) 886-2727.
Commercial Bank Activity
New Banks
Bay Business Bank
1280 Civic Drive, Walnut Creek, Contra Costa County
Correspondent: Maryam Hamzeh
Carpenter & Company
5 Park Plaza, Suite 950
Irvine, CA 92614
Phone: (949) 261-8888
Withdrawn: 9/22/03
Pacific City Bank
3701 Wilshire Boulevard, Suite 100, Los Angeles, Los Angeles County, 90010
(213) 210-2000
Officers: Jung C. Chang, President & Chief Executive Officer
John J. Kennedy, Executive Vice President & Chief Operating Officer
Daniel A. Graff, Chief Financial Officer
Henry Kim, Chief Credit Officer
Capitalization: $17,875,000
Opened: 9/18/03
Santa Cruz County Bank
Near the intersection of Soquel Avenue and Ocean Street, Santa Cruz, Santa Cruz County
Correspondent: Grace Wickersham
Carpenter & Company
Five Park Plaza, Suite 950
Irvine, CA 92614-8527
Phone: 949-261-8888
Approved: 9/5/03
Conversion to State Charter
Mission Community Bank, N.A. San Luis Obispo, to convert from a national bank to a state-chartered
bank under the name Mission Community Bank
Filed: 7/29/03
5 Monthly Bulletin September, 2003
Mergers
Arlington National Bank, Arlington, Texas, with and into Wilshire State Bank, Los Angeles
Approved: 9/15/03
General Bank, Los Angeles, with and into Cathay Bank, Los Angeles
Approved: 9/5/03
Kaweah National Bank, Visalia, with and into Citizens Business Bank, Ontario
Effected: 9/19/03
Modesto Commerce Bank, Modesto, with and into Bank of Stockton, Stockton
Filed: 9/9/03
Ojai Valley Bank, Ojai, with and into Mid-State Bank & Trust, Arroyo Grande
Approved: 9/17/03
Acquisition of Control
Betty Leonard and Harold Williams, to acquire control of Whittier Trust Company, South Pasadena
Approved: 9/19/03
Heritage Oaks Bancorp, to acquire control of Hacienda Bank, Santa Maria
Approved: 9/11/03
Sweeney Family Trust, to acquire control of First Regional Bank, Los Angeles
Filed: 9/29/03
Western Sierra Bancorp, to acquire Auburn Community Bank, Auburn
Filed: 9/22/03
Yong Oh, to acquire control of Uniti Bank, Buena Park
Approved: 9/11/03
Premium Finance Company Activity
New Premium Finance Companies
Capitol Payment Plan of California, Inc.
21820 Burbank Boulevard, Suite 300, Woodland Hills, CA 91367
Opened: 9/25/03
ING Finance
2780 Skypark Drive, Suite 300, Torrance, Los Angeles County
Filed: 9/3/03
6 Monthly Bulletin September, 2003
New Premium Finance Companies – (Continued)
MW Premium Finance Corp.
5480 Baltimore Drive, Suite 205, La Mesa, San Diego County
Filed: 9/3/03
Professional Premium Finance Corporation
2501 E. Chapman Ave., Suite 100, Fullerton, Orange County
Filed: 9/5/03
Standard Funding of California, Inc.
135 San Leandro Way, San Francisco City and County
Filed: 8/15/03
U.S. Capital Associates of California, Inc.
21820 Burbank Boulevard, Suite 300, Woodland Hills, Los Angeles County
Opened: 9/23/03
Acquisitions of Control
Hudson United Bank, to acquire control of FPCAL, Inc., Woodland Hills
Filed: 8/25/03
Hudson United Bank, to acquire control of Westchester Premium Acceptance Corporation of California,
Woodland Hills
Filed: 8/25/03
Priority One Premium Finance, Inc. (AZ), to acquire control of Priority One Premium Finance, Inc.
Fullerton
Filed: 7/31/03
Approved: 9/19/03
Foreign (Other State) Bank Activity
New Facility
Crescent Bank & Trust (Facility – Insured Bank)
4614 Sheridan Road, Oceanside, San Diego County
Notified: 9/18/03
Discontinuance of Facility Office
Offitbank
150 California Street, 20th Floor, San Francisco, San Francisco County
Notified: 9/9/03
Discontinued: 7/1/03
7 Monthly Bulletin September, 2003
Credit Union Activity
Mergers
Coastline Community Credit Union, Long Beach, into Orange County’s Credit Union, Santa Ana
Approved: 9/3/03
Gentelco West Federal Credit Union, Long Beach, into Pacific Community Credit Union, Fullerton
Approved: 9/2/03
Sacramento County Grange Federal Credit Union, Sacramento, into Church/Co-op Credit Union,
Sacramento
Filed: 9/24/03
Change of Name
Church/Co-Op Credit Union to change its name to Capital City Credit Union
Filed: 9/26/03
Nazarene Credit Union to change its name to America’s Christian Credit Union
File: 5/27/03
Approved: 8/27/03
Effected: 9/16/03
Field of Membership
Ten credit unions received approvals to add 24 new fields of membership during August 2003.
Bylaw Amendment
Two credit unions received approval for two bylaw amendments during August 2003.
Amendment of Articles of Incorporation
Fifteen credit unions received approvals for 15 amendments of articles of incorporation during August
2003.
8 Monthly Bulletin September, 2003
Transmitter of Money Abroad Activity
New Transmitter
G&T Continental Transferencias Mundiales, Inc.
Approved: 9/18/03
Bancomercio de El Salvador, Inc.
Licensed: 9/25/03
DONALD R. MEYER
Commissioner of Financial Institutions
Bulletin for Month ended
September 2003, issued pursuant
to Financial Code, Section 258
The Monthly Bulletin is available without charge via e-mail. To subscribe, go to http://www.dfi.ca.gov/bulletin/subscription/public.asp. To
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