Federal Deposit Insurance Corp. examiners knew as early as 1997 of problems at Pacific Thrift and Loan and had requested that the bank fix them by mid-1998, more than a year before California regulators closed the bank, according to information obtained by American Banker.

State regulators closed the $118 million-asset bank on Nov. 19. FDIC liquidation experts blamed much of the projected $50 million cleanup cost on the bank's interest-only residuals, which are assets retained after the sale of securitized mortgages. Regulators contend these assets were overvalued and have little if any resale value.

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