Federal regulators late Friday closed Center National Bank, a 4-year-old Woodland Hills financial institution that was plagued by bad loans.
Center was declared insolvent by the U.S. Comptroller of the Currency. It will reopen Monday morning as a branch of Encino-based Independence Bank, said Laurence D. Schannault, deputy regional director for the Federal Deposit Insurance Corp.
Federal regulators said customers’ funds will not be affected by the shutdown. Their accounts, however, will be shifted to Independence, the largest bank with headquarters in the San Fernando Valley.
Center’s collapse was the 32nd bank failure in the country this year and the second in California.
Independence is acquiring 2,500 deposit accounts totaling $36.7 million and assets of $19.7 million from Center, a one-branch bank.
It paid a premium of $322,000 for the right to take over Center but received an advance of $16.9 million from the FDIC to complete the transaction.
Founded in 1982
Another $18.7 million in Center assets, apparently problem loans, will be assumed by the FDIC. FDIC officials said Center was closed because of deterioration in its loan portfolio.
Founded in June, 1982, by a group of San Fernando Valley real estate and business executives, Center was a federally chartered institution that made money in 1983 and 1984 but eventually succumbed to loan losses.
Center was under federal scrutiny for weeks, officials said.
“I was there for two months and realized the bank had problems that were just incurable,” said Paul E. Brandt, a veteran banker brought in as president early last December to try and save Center. He left in early February, and federal regulators said other Center executives have left the bank recently as well. Center officials could not be reached for comment.
Independence earned $933,000 last year and reported assets of $232.2 million as of Dec. 31, 1985. It was acquired in October for $23 million by Saudi financier Ghaith Pharaon.