DFI Monthly Bulletin – December 2008

Dec 1, 2008

Volume 12, Number 6

Message from the Commissioner

January 7, 2009
To: California State Chartered Financial Institutions
From: William S. Haraf, Commissioner of Financial Institutions
Re: Ten “Watch List” Items for 2009 – 2010
Hello Everyone,
Many of us at the Department of Financial Institutions are happy to be through with 2008, a truly
“annus horribilis” for the financial industry, and I expect that many of you share that view.
2009 will bring further challenges for us all. With those challenges in mind, I offer up 10 items on my
personal “watch list” for the next 12 to 24 months. Note that these are UNOTU predictions, but a few
things to think about as we enter the New Year. Take them in the spirit in which they are intended — to
provoke thought and improve risk awareness in these uncertain times.
1. The economy deteriorates further in the first half of 2009 and does not begin to show significant
improvement until 2010.
2. Home prices in the hardest hit parts of the state bottom out early in 2009, but slide at a sharper
pace in more affluent areas through year-end.
3. Residential mortgage delinquencies and foreclosures continue to rise with significant upticks in
the conforming and prime jumbo segments.
4. The bulk of the remaining $350 billion in TARP funding is used to subsidize mortgage relief for
homeowners, but the program does not scale up significantly until the second half of 2009.
2 Monthly Bulletin December 2008
5. Increased bankruptcy filings and downsizing of the services and manufacturing sectors take a
rising toll on C&I and commercial real estate loan portfolios, but losses remain below the peak
of the prior credit cycle in the late 1980s/early 1990s.
6. Early in 2010, the Federal Reserve begins to shrink its balance sheet and unwind the substantial
monetary stimulus it provided in the final months of 2008. This has a significant impact on net
interest margins for those institutions with maturity or re-pricing mismatches.
7. The U.S. Congress initiates an important series of hearing on regulatory reform, ultimately
culminating in legislation in 2010. Some regulatory consolidation results, but the dual chartering
system survives intact.
8. The temporary deposit insurance limit of $250 thousand per account is made permanent.
9. Community banks and credit unions emerge from the current crisis stronger than ever as “back to
basics” financial services providers regain momentum that had been lost to the so-called shadow
banking system in recent years.
10. DFI continues to offer the “charter of choice” in California as a result of its thoughtful and
measured approach to supervision.
On behalf of all of us at the Department of Financial Institutions, I wish all of you good health and
happiness in 2009. We will all have much work to do this year, so be sure to find the time to count
your blessings, and embrace and be thankful for your family, friends, and colleagues.
William S. Haraf
Department of Financial Institutions
45 Fremont St., Suite 1700, San Francisco, CA 94105-2219
(415) 263-8507
Residential Mortgage Special Report
The deepening recession continues to negatively affect the residential real estate market in California
and has resulted in expanding delinquencies and foreclosures in not only non-traditional mortgage
products, but Alt-A and prime mortgage products. Policymakers continue to look for ways to mitigate
the effects of the deteriorating real estate market on borrowers who are at risk of foreclosures.

It is important that the DFI maintain complete, accurate, and up-to-date information on the real estate
loan portfolios of licensees to determine current risk and assess the potential effect of any proposed
regulatory or statutory changes at the federal and/or state level on our licensees. We apologize for the
3 Monthly Bulletin December 2008
timing of this report; however, hearings on proposed legislation that may affect licensees could begin as
early as January 2009.

To that end, the Commissioner directs licensees to submit a special report, pursuant to California
Financial Code sections 1934 and 14255. The special report has been emailed to all credit union and
bank licensees and is to be completed and submitted on or before UJanuary 23, 2009 at 5:00 PMU. Please
note that the California Financial Code section 216.3 provides the Department of Financial Institutions
with the authority to fine licensees not in compliance with an order issued by the Commissioner.

General Instructions
Complete the form. If there are questions where the institution has no amount to report, then leave the
field blank, rather than enter zero. Regardless of your institution having nothing to report, you are
required to submit a blank form on or before the due date. Save the form to a familiar location on your
computer and name the file SR 09 followed by your institution’s name. Reply to the email from
HUsurvey@dfi.ca.govUH and attach the completed form. If you would like to send your completed special
report with encryption you may wish to do so using ZixMail. Follow this link if you would like to learn
more about ZixMail HUhttp://www.zixcorp.com/solutions/emailencryption.phpUH.

If you have any questions or issues with this special report, please contact Kristine De Young by phone
at (916) 324-7488 or email at HUkdeyoung@dfi.ca.govUH.

The efforts of you and your staff in providing this information in a timely manner are greatly
Assembly Bill 1301 Becomes Law
HUAB 1301 (Gaines)UH was signed by Gov. Schwarzenegger on July 16, 2008 and became law on January 1,
2009. Among other things, the bill eliminated unnecessary applications that consume time and
resources of bank licensees and which in many cases are now perfunctory.
All of current Article 5 – “Locations of Head Office” of Chapter 3, and all of Chapter 4 – “Branch
Offices, Other Places of Business and Automated Teller Machines” were repealed.
A new Chapter 4 – “Bank Offices,” was added. The new Chapter 4 requires notice to the Department of
the establishment of offices, rather than the current application process. Many of the current branch
applications are perfunctory in nature and/or provide for a waiver of application.
Banks, on an exception basis, may be subject to more stringent requirements as deemed necessary. As
an example, new banks, banks undergoing a change in ownership and banks in less than satisfactory
condition may be required to obtain prior approval from the Department before establishing offices if
such activity is deemed to create an issue of safety and soundness.
The bill eliminated unnecessary provisions in the Banking Law that are either outdated or have become
undue restrictions to bank licensees. Chapter 6 – “Powers and Miscellaneous Provisions” was repealed.
4 Monthly Bulletin December 2008
A new Chapter 6 – “Restrictions and Prohibited Practices” was added. This chapter brings together
restrictions in bank activities as formerly found in Chapter 18 – “Prohibited Practices and Penalties.”
However, in bringing the restrictions into the new chapter, various provisions were updated to remove
the need for prior approval by the Commissioner.
The bill renumbered current Banking Law sections to align like sections to provide clarity to the
Banking Law. Chapter 4.5 – “Authorizations for Banks” was added. The purpose of the chapter is to
provide exceptions to certain activities that would otherwise be prohibited by other laws outside of the
Financial Code.
The bill added Article 1.5 – “Loan and Investment Limitations” to Chapter 10 – “Commercial Banks.”
This article is new in concept and acknowledges that investment decisions are business decisions – so
long as there is a diversification of the investments to spread any risk. The risk is diversified in this
article by placing a limitation on the loans and investments that can be made to any one entity. This
section is a trade-off for elimination of applications to the Department for approval of investments in
securities, which were repealed.
Other changes AB 1301 made to the Banking Law:
• Authorized a bank or trust acting in any capacity under a court or private trust to arrange for the
deposit of securities in a securities depository or federal reserve bank, and provided how they
may be held by the securities depository;
• Reduced from 5% to 1% the amount of eligible assets to be maintained at an approved
depository by an office of a foreign (other nation) bank for the protection of the interests of
creditors of the bank’s business in this state or for the protection of the public interest;
• Facilitated the scheduling of bank examinations with the Federal Deposit insurance Corporation
and the Federal Reserve Board to avoid overlap of examinations;
• Enabled the Department to issue an order against a bank licensee parent or subsidiary;
• Provided that the examinations may be conducted in alternate examination periods if the
Department concludes that an examination of the state bank by the appropriate federal regulator
carries out the purpose of this section, but the Department may not accept two consecutive
examination reports made by federal regulators;
• Provided that the Department may examine subsidiaries of every California state bank, state trust
company, and foreign (other nation) bank to the extent and whenever and as often as the
Department shall deem advisable;
• Enabled the Department to issue an order or a final order to now include any bank holding
company or subsidiary of the bank, trust company, or foreign banking corporation that is
violating or failing to comply with any applicable law, or is conducting activities in an unsafe or
injurious manner;
• Enabled the Department to take action against a person who has engaged in or participated in
any unsafe or unsound act with regard to a bank, including a former employee who has left the
• Allowed the Department to accept electronic applications and provided that a verification
method chosen by the Department has the same force and effect as the use of manual signatures.
5 Monthly Bulletin December 2008
If you have comments or questions regarding AB 1301, please contact Assistant General Counsel
Kenneth Sayre-Peterson at (916) 322-1570 or by e-mail at HUksayre-peterson@dfi.ca.govUH.
Schedule S Discontinued
Each year at December 31, banks were required to complete Schedule S (Form 507) which captured the
dollar amount of investments pursuant to Chapter 6 of the California Financial Code, Powers and
Miscellaneous Provisions. On July 16, 2008 Governor Schwarzenegger signed into law Assembly Bill
1301, which, among other things repealed Division 6 effective January 1, 2009. Consequently,
Schedule S has been discontinued starting with the December 31, 2008 call report period.
Commissioner Appoints NCUA to Receivership of
Valley Credit Union
NCUA Sells Valley Credit Union to Illinois Credit Union

On December 31, 2008, Commissioner William S. Haraf issued an Order Rescinding the Order for
Conservation and Tender of Appointment as Conservator in the matter of the conservatorship of Valley
Credit Union (which was placed into conservatorship on September 2, 2008). The Commissioner
thereafter issued an Order for Receivership and a Tender of Appointment as Receiver to the National
Credit Union Administration (“NCUA”), and the NCUA accepted tender. The NCUA immediately
entered into a Purchase and Assumption Agreement with Citizens Equity First Credit Union of Peoria,
Illinois (“CEFCU”), whereby substantially all Valley Credit Union assets, liabilities and shares were
transferred to CEFCU.
Notice to Credit Unions Regarding CU HARP and
The Department of Financial Institutions has received a number of inquiries regarding state-licensed
credit unions participation in two lending programs recently initiated by the National Credit Union
Administration (“NCUA”). The two initiatives are: the Credit Union System Investment Program
(commonly referred to as “CU SIP); and, the Credit Union Homeowners Affordability Relief Program
(commonly referred to as “CU HARP”). The CU SIP program is designed to provide liquidity for the
corporate credit union system. The CU HARP is a two-year, $2 billion program intended to assist
homeowners who are facing delinquency, default, or foreclosure on their mortgages, especially in the
face of diminished home prices. In implementing the CU HARP, both the NCUA and the CLF require
assistance from the relevant state credit union regulator in verifying that state-chartered credit unions
participating in the CU HARP are complying with the terms and conditions of CU HARP. To that end,
the Department of Financial Institutions will execute an agreement with the NCUA assuring its
6 Monthly Bulletin December 2008
cooperation in monitoring the compliance of California state-chartered credit unions that participate in
CU HARP with the requirements of that program.
While California state-chartered credit unions do not need to obtain approval from the
Department to participate in either CU SIP or CU HARP, the credit unions must notify the
Commissioner if they participate in one or both of the programs. We appreciate your cooperation in
this matter.
If you have any questions for the DFI regarding the application process, please contact RaAnn Wood,
Deputy Commissioner, Credit Union Division, at (213) 897-2155, or at HUrwood@dfi.ca.govUH.
Governor Schwarzenegger Launches “Bank on
Program Will Help Unbanked Californians Open Bank Accounts
On December 12, 2008, Commissioner William Haraf participated in a press conference held
by Governor Arnold Schwarzenegger that launched “Bank on California”. California is the first state in
the nation to implement a program designed to help citizens without checking or savings accounts open
starter accounts. With the goal of opening 100,000 bank accounts over the next two years, the Governor
has partnered with city mayors, community groups, financial institutions, the FDIC, and federal and
state regulatory agencies to put this innovative plan into action – bringing California’s unbanked the
opportunity to gain access to lower-cost sources of credit and financial services, establish savings, build
credit history and invest for the future.
Commissioner Haraf would like to thank and acknowledge those licensees that have chosen to help the
unbanked members of their communities take the first steps in achieving financial freedom and to
encourage others to do likewise. He would particularly like to recognize the participation of incoming
Conference of State Bank Supervisors chair Joe Smith and New York Superintendent of Banks Richard
Neiman, Pennsylvania Secretary Steve Kaplan, and Washington Director of Financial Institutions Brad
Williamson for their willingness to come to Sacramento to participate in the state-wide launch of “Bank
on California” and other meetings with government officials and bankers over the course of the day. It
was a remarkable show of the cohesiveness and vitality of the state banking system.
For more information please visit: HUwww.bankoncalifornia.ca.govUH.
7 Monthly Bulletin December 2008
DFI Supports U.S. Treasury’s Go Direct Campaign
Urges Banks and Credit Unions to Stand Up and Be Recognized for
Promoting Direct Deposit
Whether your bank or credit union serves a small town, a large city or an entire region, customers in
your community look to you for sound advice about their money. The U.S. Department of the
Treasury’s Go Direct campaign is announcing a new recognition program for financial institutions that
go the extra mile in promoting direct deposit to senior citizens, people with disabilities, veterans and
other members who receive federal benefits. The six-month HUGo Direct Community Ambassadors
ProgramUH launches in January and is aimed at community- and medium-sized financial institutions. The
program is simple to implement and provides banks and credit unions with a flexible way to
demonstrate their commitment to the community’s financial health while gaining recognition from
Treasury’s Go Direct campaign. All banks and credit unions are invited to register online at
HUwww.GoDirect.orgUH by January 31, 2009.
Banks and credit unions that successfully participate in the Community Ambassadors program will
receive a letter of recognition and certificate from Go Direct. Participating banks and credit unions will
be offered a variety of options for sharing information about the benefits of direct deposit with their
customers, including ordering free Go Direct materials.
The simple act of switching to direct deposit can have a meaningful, positive impact on the lives of your
customers and on your community. Consider the following:
• Direct deposit is safer and easier than paper checks – in fact, when there is a problem with a Social
Security payment, nine times out of ten it is with a paper check, not a direct deposit payment.
• Direct deposit also provides “green” benefits by reducing the paper and energy required to distribute
• And direct deposit saves taxpayers money. Since it was launched in 2005, the Go Direct campaign
has generated more than two million enrollments in direct deposit representing significant savings to
taxpayers in printing, mailing and other costs.
Raising awareness about the benefits of direct deposit is a community effort. More than 1,200 Go Direct
partner organizations engage in direct deposit education efforts across the country – including financial
institutions, non-profits, and community-based groups. For more information about the Community
Ambassadors program or Go Direct, call (952) 346-6055, or visit HUwww.GoDirect.orgUH. DFI encourages
its licensees to consider becoming involved in this very worthwhile program.
8 Monthly Bulletin December 2008
SCO Issues Notice to Holders
Change in Guidelines for Paper Reporting
The State Controllers’ Office (SCO) has requested that DFI forward the following notice to licensees
and other stakeholders:
The purpose of this notice is to inform you that effective March 1, 2009, Paper Reports
will only be accepted for reporting fewer than 10 properties. Therefore, the Notice
Reports for Insurance Companies due before May 1, 2009 and Remit Reports due
between June 1 and June 15, 2009 must be reported electronically when reporting 10 or
more properties. For your convenience, a link to free reporting software is available on
the State Controller’s Office (SCO) website at HUwww.sco.ca.govUH.
The SCO encourages all holders to submit reports in electronic format, regardless of the
number of properties being reported. Electronic reports maximize the accuracy of reports
and efficiency of SCO processing, and make the overall reporting process easier for
For complete reporting instructions and forms, go to our website at HUwww.sco.ca.govUH. To
receive automatic updates related to reporting unclaimed property, the website also
features an option to subscribe to our e-mail list.
If you have any questions please call the Unclaimed Property Reporting Unit at (916)
464-6284 or email HUucpreporting@sco.ca.govUH. You may also email the Holder Outreach
Unit at HUupdholderoutreach@sco.ca.govUH.
Please take some time to read some useful information provided by the California
Unclaimed Property Division: HUHolder Outreach Winter NewsletterUH (PDF).
Also, see the additions that have recently been posted to the Holder Information page of
our website: HUNew Holder InformationUH.
Please direct further inquiries to the SCO telephone numbers and email addresses listed above and refer
to the SCO links that have been provided for your use.
9 Monthly Bulletin December 2008
Commercial Bank Activity
UNew Bank
Global Trust Bank
700 E. El Camino Real, Mountain View, Santa Clara County
(650) 810-9400
(650) 810-9452 (facsimile)
Officers: James C. Wall, President and CEO
Robert C. Navarrete, Senior Vice President and Chief Credit Officer
R. Dale McKinney, Senior Vice President and Chief Financial Officer
Capitalization: $21,000,010.00
Website: Hhttp://www.myglobaltrustbank.com
Opened: 12/3/08
UConversion to State Charter
Universal Bank, West Covina, to convert to state-chartered commercial bank
Filed: 9/30/08
Industrial Bank Activity
Change of Name
First Security Thrift Company, Orange, to change its name to First Security Business Bank
Notified: 12/18/08
Premium Finance Company Activity
New Premium Finance Company
Alpine Funding Partners, Inc.
111 Sutter Street, City and County of San Francisco
Withdrawn: 12/29/08
Premium One Funding Corporation
8530 La Mesa Boulevard, La Mesa, San Diego County
Filed: 12/8/08
Seaway Premium Finance Company
500 N. State College Boulevard, Orange, Orange County
Filed: 12/23/08
10 Monthly Bulletin December 2008
New Premium Finance Company (continued)
Tepco Premium Finance of California Inc.
500 South Kraemer Avenue, Brea, Orange County
Opened: 12/24/08
Acquisition of Control
BB&T Corporation to acquire control of Charleston Premium Finance Company of California, Inc.
Filed: 12/16/08
Credit Union Activity
Bylaw Amendment
One credit union received approval for one bylaw amendment during November 2008.
Embarcadero Federal Credit Union, San Francisco, to merge with and into 1st Pacific Credit Union,
Effected: 12/29/08
Foreign (Other State) Bank Activity
New Facility
Great Western Bank (Facility – Insured Bank)
1990 N. California Boulevard, Walnut Creek, Contra Costa County
Notified: 12/29/08
Transmitter of Money Abroad Activity
New Transmitter
Google Payment Corp.
Filed: 11/19/08
11 Monthly Bulletin December 2008
Voluntary Surrender of License
Armenian Express, Inc.
Effected: 11/1/08
Commissioner of Financial Institutions
Bulletin for Month ended
December 2008, issued pursuant
to Financial Code section 258
The Monthly Bulletin is available without charge via e-mail. To subscribe, go to HUhttp://www.dfi.ca.gov/bulletin/subscription/public.aspUH. To
unsubscribe, send a blank e-mail to HUleave-dfi_public@blizzard.sparklist.comUH. Contact the list administration team at HUbulletin@dfi.ca.govUH