Monthly Bulletin – August 2000

State of California

Department of Financial Institutions

California Seal

Monthly Bulletin

Volume 4, Number 2

August, 2000

Collateral Dependent Lending

It is the expectation of the Department of Financial Institutions that all loans and leases originated, or purchased from third parties, shall have a clearly defined source of repayment. While taking real or personal property as collateral to provide secondary support of the loan may be a prudent credit practice, collateral protection is not a substitute for a defined source of repayment. "Sale of collateral" is generally not considered a satisfactory primary source of repayment. Exceptions would be where the loan proceeds were used to acquire the property with the intent of resale, or the borrower’s business is the sale or development of the pledged collateral which represents their inventory held for sale.

Similar problems result from the acquisition of loans from third party lenders where the principal reliance is upon repurchase, or recourse agreements given by the seller rather than the ability of the borrower to meet the stated repayment terms.

History has demonstrated that the ability to foreclose on collateral, or enforce repurchase or recourse agreements, can be subject to extensive delays through the judicial system. Legal action on behalf of borrowers can not only result in severe deterioration in the collateral value by the time possession is obtained, but also loss of collateral rights through documentation deficiencies or other defenses which may be raised.

During the examination process any individual credits identified which fail to have a realistic primary source of repayment will be subject to adverse classification. Lending programs which do not require each loan to have a realistic primary source of repayment will be considered an unacceptable banking practice.

Attention Transmitters of Money Abroad

Corporations may hold a controlling ownership interest in companies licensed to transmit money abroad by the Department of Financial Institutions. The increasing numbers of acquisitions or mergers which are occurring in the financial services industry may result in one corporation directly or indirectly acquiring control of a company licensed to transmit money abroad. Financial Code Section 1804 (a) states "No person shall, directly or indirectly, acquire control of a licensee unless the commissioner has first approved in writing the acquisition of control." The commissioner shall not approve the application unless the commissioner finds that the applicant and its officers and directors are of good character and sound financial standing; the applicant is competent to engage in the business of receiving money for transmission; and it is reasonable to believe that, if the applicant acquires control of the licensee, the applicant will comply with all the applicable provisions of the Financial Code and any regulation or order issued under the Financial Code. It is important that corporations and their legal counsel closely review the ramifications of a proposed acquisition or merger, including whether the transaction would result in direct or indirect control of a company licensed to transmit money abroad. If such is the case, it is essential that an application to acquire the company licensed to transmit money abroad be filed before the merger or acquisition takes place. A monetary penalty or other sanctions may result if the acquisition takes place in violation of the law. An application to acquire control of a transmitter should be filed at least 90 days prior to the direct or indirect change of control of a transmitter. If you have any questions regarding the above, please call Arlene Rutherford at (415) 263-8540.

Monthly Activity Report

Commercial Bank Activity

New Banks

Proposed Location: in the vicinity of Broadway and Stowell Road, Santa Maria, Santa Barbara County
Filed: 7/28/00
Correspondent: James D. Glines
2429 Professional Parkway #103, Santa Maria, CA 93455
Phone: (805) 934-8525

Proposed Location: Sunland and Glenoaks Boulevards, Sun Valley, Los Angeles County
Filed: 7/17/00
Correspondent: Gary Steven Findley
1470 North Hundley Street, Anaheim, CA 92806
Phone: (714) 630-7136

4570 Executive Drive, Suite 110, City and County of San Diego
Approved: 8/22/00
Correspondent: Cristin Reid English, General Counsel
Sunrise Capital Corporation
200 N. Washington Square, Lansing, MI 48933
Phone: (517) 487-6555

Proposed Location: 8365 North Fresno Street, City and County of Fresno
Filed: 8/8/00
Correspondent: J. Mike McGowan
870 East Ridgecrest Drive, Fresno, CA 93720
Phone: (559) 433-0924


Bank of Lake County, Lakeport, with and into Westamerica Bank, San Rafael
Effected: 8/18/00

First Bank & Trust, Newport Beach, with and into Redwood Bank, San Francisco
Filed: 7/20/00

First Bank of California, Sacramento, with and into Redwood Bank, San Francisco
Filed: 7/20/00

First Bank Texas National Association, Houston, Texas, with and into Redwood Bank, San Francisco, California
Filed: 7/20/00

First Counties Bank, Clearlake, with and into Westamerica Bank, San Rafael
Filed: 8/16/00 Approved: 8/22/00

San Benito Bank, Hollister, with and into First National Bank of Central California, Salinas
Effected: 7/31/00

Application for Trust Powers

1026 Grand Avenue, Arroyo Grande, San Luis Obispo County
Filed: 7/31/00

Industrial Loan Company Activity

Sale of Partial Business Unit

Fremont Investment and Loan, Anaheim, California, to sell the Modesto Branch, located at 1301 J Street, Modesto, California, to Guaranty Federal Bank F.S.B., Dallas, Texas
Filed: 8/7/00

Credit Union Activity

Conversions to State Charter

ACU Federal Credit Union, Redwood City, to convert to state charter under the name America’s Choice Credit Union
Effected: 8/28/00

North County Federal Credit Union, San Diego
Filed: 7/12/00


Associates Mechanical Federal Credit Union, San Diego, with and into Point Loma Credit Union, San Diego
Filed: 8/2/00

California State Employees No. 122 Credit Union, Atascadero, with and into The Golden 1 Credit Union, Sacramento
Filed: 7/31/00

Electricians #595 Credit Union, San Leandro, with and into UFCW of Northern California Credit Union, San Leandro
Effected: 7/13/00

FENC Federal Credit Union, Redding, with and into California State Credit Union No. 13 dba North State Public Employees Credit Union
Filed: 7/21/00

JSD Federal Credit Union, Daly City, with and into Provident Central Credit Union, Redwood Shores
Filed: 8/16/00

West Los Angeles Japanese Credit Union, Los Angeles, with and into Nikkei Credit Union, Gardena
Filed: 6/27/00

Voluntary Surrender of License

714 California Avenue, Venice, California
Discontinued: 6/26/00


We have been advised by WebBank, a Utah Foreign (Other State) Industrial Loan Company, that the following facilities did not open on March 15, 2000, as published in the February 2000, issue of the Monthly Bulletin:

  • 9781 Magnolia Venue, City and County of Riverside, State of California
  • 4915 Moreno, City of Montclair, County of San Bernardino, State of California


Commissioner of Financial Institutions

Bulletin for month ended
August 2000, issued pursuant
to Financial Code, Section 258

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