A minority-owned bank in Philadelphia filed suit Monday against the Resolution Trust Corp., charging it with breach of contract relating to a soured loan sale.
The United Bank of Philadelphia is suing the S&L bailout agency for $240,900 - the difference between what the RTC paid the bank for accrued interest on the loans and what the bank believes it is owed.
The suit is the culmination of several months of wrangling over a key aspect of a program to promote minority bank purchases of the branches and deposits of failed thrifts in minority neighborhoods.
"All attempts to resolve it short of litigation have been met with consistent rejection from the RTC," said Robert A. Klein, an attorney for the bank.
United and several other minority financial institutions in the past year bought deposits from the RTC with the understanding that the banks would be able to buy performing loans from the agency at a "market price" to deploy the deposits quickly.
But the RTC's pricing of the loans quickly came into dispute.
United's lawsuit arises out of a settlement of the pricing dispute, under which it and the RTC agreed that instead of buying the loans, the bank would receive accrued interest credit on the balance of those loans. United claims it is owed full interest up to 100% of the net deposit calculation, in effect receiving all the interest on the loans as if it had actually purchased them.
United claims the accrued interest due and owing under the settlement contract totaled $544,758.33.
But the RTC - following its clearly stated policy in such loan arrangements - subtracted the federal funds rate from the total accrued interest rate, and sent United the difference: $303,857.
"We've taken the position that (the RTC) promised to pay full interest, so there should be no deduction," Mr. Klein said.
Steve Katsanos, a spokesman for the RTC, said the agency could not comment on pending litigation.
Seven minority banks that bought deposits from the RTC last year have had problems with the agency's pricing of the matching loans. "We've done other transactions with the RTC that were handled in an exemplary way," said Virgil Robinson Jr., president of Dryades Savings Bank, New Orleans. "This is not an indictment of the RTC as a whole, just a dissatisfaction with the way this transaction worked and an unwillingness on the part of some people at the RTC to be flexible."
