DFI Monthly Bulletin – April 2003

Apr 1, 2003

Volume 6, Number 10

Women Providing Help to al-Qaeda FBI Warns

The Federal Bureau of Investigation (FBI) is telling law enforcement agencies across the nation to be
aware that the al-Qaeda terrorist network may be using women to carry messages, handle financial
transactions and provide other logistical support. The information in the FBI’s weekly bulletin to 18,000
state and local police agencies follows the global alert issued last month for a Boston woman wanted by
the FBI for questioning about possible links to al-Qaeda. The bulletin says that al-Qaeda uses women to
open bank accounts, to raise and deliver money and to transfer it among accounts, all in an attempt to
reduce the chances of legal scrutiny. “Law enforcement agencies should remain alert to the potential that
women may be used to facilitate al-Qaeda financial transactions and should report suspicious activity to
the nearest Joint Terrorism Task Force,” the April 23 FBI bulletin states. All licensees are reminded to
exercise diligence with respect to any financial transactions, which raise questions of suspicious activity,
including those involving female customers.
FDIC Issues Guidance on Sarbanes-Oxley
Corporate Governance for Non-Public Banks Under $500 Million
The Federal Deposit Insurance Corporation (FDIC) recently issued guidance on the effect of the
Sarbanes-Oxley Act on FDIC-insured banks, including banks with less than $500 million in total assets
that are not public companies. Generally, banks of this size that are not public companies (or subsidiaries
of public companies) do not fall within the scope of the Sarbanes-Oxley Act and the SEC’s implementing
regulations. Also, FDIC-supervised banks that have less than $500 million in total assets as of the
beginning of their fiscal year are not subject to the annual audit and reporting requirements of Section 36
of the Federal Deposit Insurance Act.
Nevertheless, the FDIC has determined that certain provisions of the Sarbanes-Oxley Act represent sound
corporate governance practices that smaller, non-public banks are encouraged to adopt and implement.
The FDIC has summarized certain provisions of the Sarbanes-Oxley Act that it believes are relevant to
FDIC-supervised banks with less than $500 million in total assets that are not public companies. The
2 Monthly Bulletin April, 2003
sound corporate governance practices are detailed in a document that is available at the FDIC Web site,
http://www.fdic.gov/news/news/financial/2003/FIL0317a.html. Although the guidelines are not
mandatory for smaller, non-public companies, the FDIC and the Department of Financial Institutions
recommend that each institution consider adopting and implementing the recommended practices to the
extent feasible given its size, complexity, and risk profile.
OCC Issues Revised Internal and External
Audits Handbook after Sarbanes-Oxley
Internal and External Audits, a booklet issued by the Office of the Comptroller of the Currency (OCC),
has been revised to clarify OCC guidance with respect to internal and external audits at national banks.
The booklet discusses how auditor independence has been redefined by the Sarbanes-Oxley Act of 2002,
implementing rules and regulations of the Securities and Exchange Commission, and the recently revised
“Interagency Policy Statement on Internal Audit and Its Outsourcing.” A copy of the handbook is
available at the OCC Web site, http://www.occ.treas.gov/index.htm.
New on the DFI Web Site–Corporate
Governance Page
Resources for bank officers and directors
As part of the Department of Financial Institution (DFI)’s ongoing efforts to address supervisory issues,
the Department will provide useful information and guidance to help foster safe and sound banking
practices. The DFI Corporate Governance Page was launched in April to draw attention to corporate
governance issues and present information related to corporate governance for banks and their directors
to consider in helping them fulfill their duties and responsibilities. This new online resource is located on
Grace Foreign Exchange Corporation
Voluntarily Suspends Accepting New Business
Grace Foreign Exchange Corporation, a state-licensed transmitter of money abroad, based in San
Francisco, California has voluntarily suspended accepting any new business as of April 12, 2003.
Grace Foreign Exchange Corporation was licensed by the State of California in 1981. The Department of
Financial Institutions (DFI) continues to monitor the situation, including all transmissions accepted by
consumers before April 12, 2003.
Grace Foreign Exchange Corporation plans to reopen following a reorganization of their corporate
Consumers who wish to file a claim should call 1-800-622-0620. Or contact the Transmitter of Money
Abroad office of the DFI, by calling Julio Prada at (415) 263-8540 or e-mail: jprada@dfi.ca.gov.
3 Monthly Bulletin April, 2003
Reminder: Credit Unions Must Amend Articles
of Incorporation by December 31, 2003
With the passage of Assembly Bill 2157 (Papan) (effective September 30, 2002), Section 14101 of the
Financial Code was amended to change the purpose clause that appears in every state-chartered credit
union’s articles of incorporation. Further, Section 14101 requires that each credit union must amend its
articles to reflect the new purpose clause. The amendment to the articles must be approved by the
Commissioner and filed with the Secretary of State on or before December 31, 2003.
Please refer to Section 14101(b)(1) to find the language that must appear in the amendment. Fortunately,
the amendment to the articles may be adopted by a majority vote of the board of directors of a credit
union without a vote of the credit union’s members.
You are again reminded that a new approval procedure has been adopted by the Commissioner regarding
amendments to articles of incorporation. (See 10 CCR Section 10.103.) Any credit union proposing to
amend its articles must submit the originally signed articles amendment to the Department for approval.
Once approved, the articles amendment will be stamped “approved” and returned to the credit union.
The credit union is then required to submit the articles amendment to the Secretary of State for filing.
Once the amendment is accepted for filing by the Secretary of State, the credit union is to provide the
Department with a copy of the amendment certified by the Secretary of State as being filed with him.
Amendments to Credit Union Regulations
The Commissioner has made changes to the California Code of Regulations (Chapter 1 of Title 10
commencing with Section 30.1, and Subchapter 5, Chapter 1 of Title 10 commencing with Section
5.6000), which are both substantive and nonsubstantive in nature. This article, while not exhaustive in
content, highlights the most significant of these regulation changes. It is not intended that this synopsis
be a substitute for reading the full text of new regulations, as amended. All changes became effective on
March 29, 2003.
Section 30.30. Economic Feasibility
This section has been added to identify what the Commissioner may consider when reviewing for the
“economic feasibility” of any proposal made by an existing credit union.
Section 30.31. Equity Capital Adequacy
This section has been added to identify what the Commissioner may consider when assessing the
adequacy of the “equity capital” of a credit union.
4 Monthly Bulletin April, 2003
Section 30.50. Field of Membership: Family Member
Gives the board of directors of a credit union discretion to define the term “immediate family member” of
a member in connection with determining credit union membership eligibility.
Section 30.60. Existing Credit Union: Application for Expansion of Field of
Adds that a field of membership expansion may not occur without the Commissioner’s prior approval
(except as authorized pursuant to Section 30.73), and that a credit union may not expand its field of
membership except through a bylaw amendment. In addition, this Section provides information necessary
for the Commissioner to process a field of membership expansion.
Sections 30.71 – 30.73. Field of Membership: Definitions/Application for Eligibility
to Add Select Employee Groups/Procedure for Eligible Credit Unions to Add Select
These sections have been added to allow those credit unions granted “eligible” status by the
Commissioner an alternative process to expand their fields of membership in an expedited manner
(generally after 10 business days). These amendments would essentially allow “eligible” credit unions the
ability to add occupational-based associations consisting of 1,000 or fewer members or single employee
groups consisting of 1,000 or fewer employees more quickly and efficiently.
Section 30.71 defines terms such as “eligible” and “acceptable rating” for these purposes. Section 30.72
includes what is necessary in an application to request “eligible” status from the Commissioner, as well as
the ability of the Commissioner to revoke a credit union’s eligible status. Section 30.73 provides the
process “eligible” credit unions must follow to add qualifying occupational-based associations and single
employee groups.
Section 30.102. Delayed Availability of Funds
Provides that credit unions comply with Regulation CC (12 C.F.R. Part 229) for any delayed availability
of funds. A share account is defined as a “deposit account” for purposes of delayed funds availability
pursuant to this regulation.
Section 30.300. Investments
An amendment was made to require the Board of Directors to review the credit union’s investment
policies at least annually, rather than quarterly. In addition, a provision was added to clarify that credit
unions may make deposits in other federally insured credit unions.
5 Monthly Bulletin April, 2003
Section 30.306. Investments in Fixed Assets and Service Corporations
Among the amendments to this section was a reduction to the aggregate limit on real and personal
property holdings plus credit union service organization investments, from 20% of unimpaired capital and
surplus to 10% of unimpaired capital and surplus. This amendment includes a provision that grandfathers
any such aggregate holdings and investments over the 10% limit, provided no additional such holdings or
investments are made without the Commissioner’s authorization until the aggregate amount is below the
10% limit.
Section 30.401. Extensions, Refinances, Renegotiations or Revisions
What was a regulation to restrict the extension, refinance or revision of a “delinquent” loan, has now been
changed to address the extension, refinance, renegotiation or revision of any loan, regardless of its
delinquency status. General or contractual skip payment extensions are not considered extensions for
purposes of this regulation, subject to specified conditions.
Section 30.402. Charge-off of Obligations
Significant changes have been made to tighten the DFI’s charge-off regulations. Essentially, a loan
becomes subject to charge-off if a full contractual payment that reduces the principal balance of a loan
has not been received within the past 180 days, and the borrower is not under either a Chapter 11 or 13
bankruptcy reorganization. Notwithstanding this, the new regulation provides that a loan will become
subject to charge-off at the time it is deemed uncollectable by the Board of Directors or the
Commissioner. The amount of charge-off may be reduced under certain specified conditions. The Board
of Directors has up to 30 days to charge off any obligations qualifying as subject to charge-off under this
Sections 30.404 and 30.405. Regular Reserves – Maintenance and Transfers
The substantive amendments to this regulation remove the old Regular Reserve transfer requirements for
federally insured credit unions only. Credit Unions whose share accounts are insured other than by the
National Credit Union Share Insurance Fund must continue to make the required Regular Reserve
transfers. Under the conditions specified in Section 30.405, non-federally insured credit unions that have
a Regular Reserve equal to at least 6% of total risk assets may transfer any or all of the excess to
undivided earnings with board approval. Also, reserve transfers in excess of the minimum required may
be made from undivided earnings with board approval, no longer requiring prior approval of the
Section 30.700. Report Regarding Officers and Directors
The time of filing the annual report with which a credit union informs the Commissioner of the current list
of officials and the CEO has been extended from 15 days to 30 days from the date of the annual meeting
to elect officials. In addition, the required filing of any changes in a credit union’s manager or CEO has
also been extended from 10 days to 30 days from the date of change. The amended regulation
6 Monthly Bulletin April, 2003
no longer requires that credit unions immediately report changes in volunteer officials. The filing of the
annual list of officials will suffice for keeping the Commissioner informed of these changes.
Section 30.801. Loan Officer Extensions and Deferred Payments
As amended, this regulation changes the limits on the number of loan extensions and deferred contractual
payments that a loan officer can make on his or her own loan authority.
Section 30.802. Obligations Secured by Real Property
Extensive changes were made to this regulation that should be reviewed in detail. A few of the more
pertinent changes are summarized below:
1. A full title insurance policy is required for all first lien position real property-secured loans that are
not exempted by this section. An abbreviated title policy may be obtained for any junior lien real
property-secured loans where the aggregate of all junior liens held by the credit union do not
exceed $100,000.
2. Exceptions have been added to this regulation which exempt certain loans secured by real
property from the individual requirements of this regulation. These exceptions are as follows:
a. Obligations with a principal balance of $50,000 or less.
b. Loans conforming to Fannie Mae/Freddie Mac underwriting guidelines, with adequate
c. Loans defined as Alternative Mortgage Transactions, with adequate documentation to justify
this classification.
d. Any member business loan, as that term is defined pursuant to NCUA Regulations.
Section 30.901. Valuation or Appraisal of Personal and Real Property
Includes an amendment that real property security for obligations must include a valuation or appraisal in
accordance with Part 722 of NCUA Regulations.
Section 30.1000. Audit Reports
Amendments to identify the necessary components of an audit report to be considered acceptable to the
Commissioner for purposes of compliance with the statutory annual reporting requirements.
Section 30.1001. Independent Accountant
This section has been amended to refer outside accountants to Rule 101 of the Rules of Professional
Conduct of the American Institute of Certified Public Accountants to assess independence on their
business dealings with credit union clients.
7 Monthly Bulletin April, 2003
All Licensees Reminded to Notify DFI of Office
Openings, Closings and Relocations
Starting in May, the Monthly Summary of Pending Applications will be expanded to include notices of
credit union branch openings, closings and relocations.
The Monthly Summary provides a recap of information about applications filed with the Department of
Financial Institutions (DFI) for a wide range of application types. The Monthly Summary is located on
the DFI Web site at: http://www.dfi.ca.gov/summary/summary.asp
We take this opportunity to remind all licensees to promptly provide us with written notice before an
office is to be established, relocated or discontinued. By doing so, you will help us insure that the
information we publish in the Monthly Summary will be timely and accurate.
DFI appreciates your assistance in helping to keep our records up-to-date. Questions about the Monthly
Summary may be directed to Patrick Carroll at (415) 263-8559 or by e-mail to pcarroll@dfi.ca.gov.
Commercial Bank Activity
New Bank
Bank of Escondido
200 West Grand Avenue, Escondido, San Diego County
Correspondent: Joseph D. Reid III
Capitol Bancorp Limited
200 Washington Square North
Lansing, MI 48933
Phone: (517) 3721376
Filed: 4/1/03
California Community Bank
Proposed Location: 1320 and 1334 West Valley Parkway, Escondido, San Diego County
Correspondent: Maryam Hamzeh
Carpenter & Company
5 Park Plaza, Suite 950, Irvine, CA 92614
Phone: (949) 261-8888
Approved: 4/3/03
Redwood Capital Bank
In the city of Eureka, Humboldt County
Correspondent: Maryam Hamzeh
Carpenter & Company
5 Park Plaza, Suite 950, Irvine, CA 92614
Phone: (949) 261-8888
Filed: 4/10/03
8 Monthly Bulletin April, 2003
New Banks (Continued)
Torrey Pines Bank
Proposed location: 550 West C Street, Suite 100, San Diego, San Diego County
Correspondent: Robert Sarver
PO Box 675847
Rancho Santa Fe, CA 92067
Phone: (619) 322-8811
Approved: 4/15/03
Ventura County Business Bank
366 West Esplanade Drive, Oxnard, Ventura County
Officers: Gerald J. Lukiewski, President and Chief Executive Officer
Charles A. Myers, Chief Credit Officer
John A. Podlesni, Chief Financial Officer
Phone: (805) 604-7600
Web site: www.venturacountybusinessbank.com
Capitalization: $11,005,905
Opened: 4/3/03
Central Sierra Bank, San Andreas, with and into Central California Bank, Sonora
Filed: 4/29/03
The Express Bank, Alvin, Texas, with and into Chinatrust Bank (U.S.A.), Torrance
Effected: 4/14/03
First Bank & Trust, San Francisco, with and into First Bank, Creve Coeur, St. Louis County, Missouri
Effected: 3/31/03
First Continental Bank, Rosemead, with and into United Commercial Bank, San Francisco
Filed: 4/28/03
North State National Bank, Chico, with and into Tri-Counties Bank, Chico
Effected: 4/4/03
Conversion to National Bank
Mellon 1st Business Bank, to convert to a national bank as Mellon 1st Business Bank, National
Effected: 4/1/03
9 Monthly Bulletin April, 2003
Purchase of Partial Business Unit
Cathay Bank, Los Angeles, to acquire the New York Branch of CITIC International Financial Holdings
Limited, dba CITIC Ka Wah Bank Limited, New York
Approved: 4/24/03
Sale of Partial Business Unit
California Bank & Trust, San Diego, to sell its trust assets to Western National Trust Company, Salt
Lake City, Utah
Filed: 4/1/03
Acquisition of Control
Service 1st Bancorp, to acquire control of Service 1st Bank, Stockton
Filed: 4/17/03
Approved: 4/29/03
The acquisition of control for Southwest Community Bancorp to acquire control of Southwest
Community Bank, Encinitas, was approved on March 25, 2003, not March 5, 2003 as reported in the
March 2003 issue of the Monthly Bulletin.
Premium Finance Company Activity
New Premium Finance Companies
Altair Premium Finance Corp.
2501 East Chapman Avenue, Suite 100, Fullerton, Orange County
Filed: 4/7/03
Capitol Payment Plan of California, Inc.
21820 Burbank Boulevard, Suite 300, Woodland Hills, CA 91367
Filed: 4/7/03
CIBA Financial Services, Inc.
523 West 6th Street, Suite 716, Los Angeles, Los Angeles County
Filed: 4/2/03
Premium Payment Plan Inc.
2383 Buena Vista Avenue, Livermore, Alameda County
Filed: 4/2/03
RSA Premium Finance Company
2501 East Chapman Avenue, Suite 100, Fullerton, Orange County
Filed: 4/7/03
10 Monthly Bulletin April, 2003
Snowcrest Funding, Inc.
2501 East Chapman Avenue, Suite 100, Fullerton, Orange County
Filed: 4/2/03
U.S. Capital Associates of California, Inc.
21820 Burbank Boulevard, Suite 300, Woodland Hills, Los Angeles County
Filed: 4/22/03
Acquisition of Control
Independent Bank Corporation/Independent Bank to acquire control of Mepco Acceptance Corporation,
Approved: 4/11/03
Foreign (Other Nation) Bank Activity
New Office
Grand Commercial Bank
In the vicinity of Colima and Azusa Avenues, City of Industry, Los Angeles County (Wholesale Branch)
Withdrawn: 3/28/03
Discontinuance of Office
Banca Intesa S.p.A.
444 South Flower Street, Los Angeles, Los Angeles County (Nondepositary Agency)
Discontinued: 3/31/03
Banca Nazionale del Lavoro, S.p.A.
660 South Figueroa Street, Los Angeles, Los Angeles County (Representative Office)
Discontinued: 4/30/03
The Siam Commercial Bank, PCL
601 South Figueroa Street
Los Angeles, Los Angeles County
Discontinued: 9/31/01
Foreign (Other State) Bank Activity
New Facility
RBC Centura Bank, Rocky Mount, North Carolina
dba RBC Builder Finance (Facilities – Insured Bank)
9255 Towne Centre Drive, Suite 240, San Diego, San Diego County
2360 East Bidwell Street, Suite 111, Folsom, Sacramento County
2175 North California Boulevard, Suite 240, Walnut Creek, Contra Costa County
Opened: 2/1/03
11 Monthly Bulletin April, 2003
TIB-The Independent Bankers Bank (Facility – Insured Bank)
17011 Beach Boulevard, Huntington Beach, Orange County
Notified: 3/24/03
Opened: 4/25/03
Credit Union Activity
Del Monte S.F. Employees Federal Credit Union, San Francisco, into California Preferred Credit Union,
San Francisco
Approved: 8/2/01
Effected: 12/10/01
Paramount Studio Employees Federal Credit Union, Hollywood, into First Entertainment Credit Union,
Effected: 4/4/03
Providence First Credit Union, Burbank, into Priority One Credit Union, South Pasadena
Effected: 4/4/03
Field of Membership
Five credit unions received approvals to add 17 new fields of membership during March 2003.
Bylaw Amendments
One credit union received approval for one bylaw amendment during March 2003.
Transmitter of Money Abroad Activity
New Transmitter
Envios R.D. Corp.
Approved: 5/3/02
Licensed: 4/8/03
G&T Continental Transferencias Mundiales, Inc.
Filed: 4/22/03
Voluntary Surrender of License
Cong Ty Chuyen Tien Vietnam, Inc.
9304 Bolsa Avenue, Westminster, Orange County
Effected: 4/29/03
12 Monthly Bulletin April, 2003
Payment Instrument Activity
New Payment Instrument
DolEx Dollar Express, Inc.
700 Highlander Boulevard, Suite 450
Arlington, TX 76015
Filed: 9/3/02
Approved: 4/7/03
Licensed: 4/22/03
Navicert Financial Inc.
17019 Kingsview Avenue
Carson, CA 90746
Filed: 4/22/03
Commissioner of Financial Institutions
Bulletin for Month ended
April 2003, issued pursuant
to Financial Code, Section 258
The Monthly Bulletin is available without charge via email as a PDF attachment. To subscribe, please send e-mail
with your name, e-mail address, and company name and phone number to bulletin@dfi.ca.gov.