La Jolla Bank crash to cost regulator $882 million

Calcutta News.Net
Friday 19th February, 2010

La Jolla Bank, FSB, La Jolla, California, was closed down on Friday by the Office of Thrift Supervision.

La Jolla Bank was a federally-chartered savings bank, with full service offices located in California and Texas, and loan production offices in California, Arizona and New York. Founded in 1985, the bank's headquarters were in Rancho Santa Fe, California. It operated10 branch offices plus additional loan offices.

The Office of Thrift Supervision on Friday appointed the Federal Deposit Insurance Corporation (FDIC) as receiver to the bank. FDIC said later the failure of the La Jolla bank will cost its Deposit Insurance Fund $882.3 million.

To protect the depositors, the FDIC entered into a purchase and assumption agreement with OneWest Bank, FSB, Pasadena, California, to assume all of the deposits of La Jolla Bank, FSB.

The ten branches of La Jolla Bank, FSB will reopen on Monday as branches of OneWest Bank, FSB. Depositors of La Jolla Bank, FSB will automatically become depositors of OneWest Bank, FSB. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from OneWest Bank, FSB that it has completed systems changes to allow other OneWest Bank, FSB branches to process their accounts as well.

Over the weekend, depositors of La Jolla Bank, FSB can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed, the FDIC said. Loan customers should continue to make their payments as usual.

As of December 31, 2009, La Jolla Bank, FSB had approximately $3.6 billion in total assets and $2.8 billion in total deposits. OneWest Bank, FSB did not pay the FDIC a premium for the deposits of La Jolla Bank, FSB. In addition to assuming all of the deposits of the failed bank, OneWest Bank, FSB agreed to purchase essentially all of the assets.

The FDIC and OneWest Bank, FSB entered into a loss-share transaction on $3.31 billion of La Jolla Bank, FSB's assets. OneWest Bank, FSB will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

OneWest Bank, FSB's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. La Jolla Bank, FSB is the 20th FDIC-insured institution to fail in the nation this year, and the second in California. The last FDIC-insured institution closed in the state was First Regional Bank, Los Angeles, on January 29, 2010.

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