Western Family National Bank is hardly the family it used to be.
First, after a protracted battle with regulators, its owner liquidated the bank in August and turned it into a finance company.
Three months later the owners - Richard A. McMahan and two family members who helped run the institution - were booted from banking, the Office of the Comptroller of the Currency disclosed last week.
Western Family "finally decided that it wasn't worth the cost of business being a bank," said one source familiar with the bank.
Mr. McMahan, who was the chief executive of the $63-million-asset bank, declined to comment.
The McMahans' bank was founded in 1982 in Carlsbad, Calif., a small town on the Pacific Coast midway between Los Angeles and San Diego. Mr. McMahan, a businessman and owner about 95 furniture stores, capitalized the bank with his own money.
His plan was to make Western Family a consumer bank. But part of the plan involved making the bank available to finance purchases for his furniture customers.
That part of the plan never made it to fruition, according to several sources, because the OCC was concerned about linking the bank with Mr. McMahan's furniture business.
"The OCC got it in mind that the McMahans wanted the bank for their personal use," said a source.
Relations with the OCC were worsened by a number of scrapes in recent years, including inaccurate call reports being filed and the bank's offering above-market rates on certificates of deposit.
Then, in 1991 and 1992, the OCC criticized Western Family for having as much as 50% of its assets invested in two mutual funds.
"The mutual funds in and of themselves weren't bad investments," said Dean DeBuck, a spokesman for the OCC. "The concentration of assets was the problem."
Mr. DeBuck said that despite the warning from the OCC, the bank continued to invest in the mutual funds without board approval.
Mr. DeBuck said Western Family ended up losing more than $1 million in 1993 from the investments in the mutual funds. Early in 1994, the OCC informed Mr. McMahan that it would pursue administrative action against him and the two members of his family on the board, R. Roderick McMahan and Joanne S. McMahan.
Then, Mr. McMahan made the decision to liquidate the bank, relinquish its charter, and turn it into a privately funded consumer finance company. It ceased operating as a bank in August, and a source said it liquidated without taking a loss.
But that didn't stop the OCC from making sure the McMahans never had control of another depositary institution again. It fined Richard McMahan $20,000, Joanne McMahan $2,000, and Roderick McMahan $3,000.
On Nov. 1, each of the family members consented to the enforcement action without admitting or denying they did anything wrong.