Bank of San Pedro Accepts FDIC Reforms

The Bank of San Pedro has agreed to a host of banking reforms after an annual audit by the Federal Deposit Insurance Corp. uncovered a litany of allegedly unsafe or unsound financial practices by the institution.

Under a consent order signed last month with the FDIC, bank officials did not acknowledge any improper or illegal actions. But they pledged that the bank would not engage in a list of risky practices outlined by the agency.

Those practices include operating with inadequate equity capital and reserves, following unsatisfactory lending and collection practices, carrying a large volume of poor-quality loans, and making questionable real estate investments.

The cease-and-desist order also commits the bank to operating with a qualified management team that, among other things, has experience in improving a “low-quality” loan portfolio.

Although the FDIC’s cease-and-desist order does not reveal the agency’s specific findings, it shows that the agency has some serious concerns with the Bank of San Pedro’s financial practices--which have previously drawn criticism from state regulators challenging the bank’s loans to its directors.

“(The FDIC order) should be taken very seriously by the bank,” agency spokesman David Barr said.

Without disputing the significance of the FDIC’s action, bank President Lance D. Oak said bank officials disagreed with many of the agency’s findings. But he said officials decided to sign a consent order so there would be no lingering disagreement.