Pacific Inland Bancorp has shuttered its mortgage subsidiary, PIB Mortgage, and has sold the unit's $1 billion portfolio of servicing rights.
C.M. "Corky" Watts, president of PIB Mortgage and a well-known figure in mortgage banking, is out on his own, as are the about 100 former employees of the lender.
A combination of factors led to the demise of PIB Mortgage. Poor market conditions cut down on profitability, while regulatory problems at the holding company led to soured relations between Mr. Watts and Pacific Inland Bank.
'For Now, That's It'
"The directors have decided to get out of the business," said Mr. Watts. "They may elect at a later time to get back into it, but for now, that's it."
Pacific Inland, a Anaheim, Calif.-based bank with $166 million of total assets, has been under some form of regulatory supervision since 1988. In April, the bank entered into a consent cease-and-desist order with the Federal Reserve Bank of San Francisco.
Part of that agreement mandates that the bank increase its capital position, a factor that led it to consider selling PIB Mortgage, according to a Securities and Exchange Commission document.
PIB Mortgage was offered for sale, according to industry sources, but that effort was made complicated by the fact that Mr. Watts owned the right to purchase a significant amount of the equity of-the mortgage company. That meant that he was effectively part of any transaction.
Meanwhile, relations between Mr. Watts and the bank were becoming strained.
With mortgage volume at record levels last year, Mr. Watts earned $1,216,000.
That drew the attention of the Federal Reserve Bank, whose examiners indicated that, "it believes that Mr. Watts' compensation is excessive, particularly for an officer of a subsidiary of a bank with the problems that the Bank has encountered," according to the SEC document.
Explaining the contract to the Fed took a "considerable amount of time," and led to strained relations between Mr. Watts and members of the board. according to the filing.
Certainly it made the task of finding a buyer no easier.
While this issue was clouding matters last Spring, PIB Mortgage was also finding the business environment less and less hospitable.
As a wholesaler that buys most of its loans from brokers in the state of California, PIB Mortgage was in as poor a position in the industry in recent months as possible, as shrinking volumes have led to intense price competition for the available loans.