California bank warns of large fraud-related charge-off

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Private Bancorp of America in La Jolla, Calif., warned that its quarterly earnings will take a hit from a borrower that was the victim of alleged fraud.

The $940 million-asset company said in a press release Monday that it will record a $9.5 million specific loan-loss provision and related charge-off tied to a loan participation. Private said the line of credit was initially extended in September 2015 to a borrower engaged in the financing California liquor licenses.

Private said the after-tax impact of the provision will be $6.7 million, or $1.29 a share, in the third quarter. The charge-off is equal to about 1.19% of Private’s loan portfolio at June 30.

Private estimated that its total risk-based capital ratio will decrease by 77 basis points, to 13.33%.

The line of credit is guaranteed by ANI Development and its principal, Gina Champion-Cain, as well as by certain other parties tied to the borrower, Private said. The Securities and Exchange Commission on Aug. 29 filed a complaint and obtained consent to asset freeze accounts tied to ANI and Champion-Cain.

The SEC alleged in its complaint that ANI and Champion-Cain misrepresented and forged escrow account agreements and statements, presented fraudulent liquor license applications and misappropriated the funds.

Private said another, unnamed bank holds the remaining $3 million share of the credit.

Banc of California disclosed last week that it has more than $35 million in exposure to a borrower that was allegedly defrauded by ANI.

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