The Federal Deposit Insurance Corp. is suing four former officers and directors of a failed Baltimore bank for more than $7.4 million in damages.
The former officials of Bradford Bank allegedly approved a number of risky real estate loans that contributed to the bank's collapse, according to the lawsuit filed last week in U.S. District Court in Baltimore. The defendants are Bradford's former president and director, Dallas Arthur; Mary Beth Taylor, the bank's former senior executive vice president of commercial lending; and two former directors and members of the loan committee, Gilbert Marsiglia and John Mitchell.
Between July 2006 and October 2007, the defendants allegedly increased Bradford's concentration in commercial real estate and acquisition, development and construction loans in violation of the bank's lending policy, according to the lawsuit. Spurred by an aggressive growth strategy that called for the $452 million-asset bank to reach $1 billion in assets by 2008, the defendants allegedly recommended and approved loans to borrowers who were not creditworthy and failed to exercise caution despite clear signs of the economic downturn. As the real estate market deteriorated in 2007, Bradford's delinquencies and loan losses swelled.
"In 2009, the bank's classified assets reached a total of $41.6 million a 52.9% increase since December 2007," the lawsuit says.
The FDIC is charging the defendants with negligence and gross negligence.
The agency has been suing failed-bank officers and directors at a steady clip in 2014, with six lawsuits filed in the first six weeks of the year. "We have hit the peak or are hitting it right now. The numbers will start coming down," the FDIC's acting general counsel, Richard J. Osterman Jr., told American Banker last week.