WASHINGTON - In a move that may reflect yet another supervisory failure, a California bank with a yen for subprime loans and a long history of enforcement actions against it was shut down Friday at high cost to the Bank Insurance Fund.

Pacific Thrift and Loan, a state-chartered institution in Woodland Hills, had just $118 million of assets, but its failure is expected to cost $50 million, or 42% of its assets. The typical failure costs the agency 10% to 15% of a bank's assets.

Like First National Bank of Keystone (W.Va.), which failed Sept. 1, and Boulder, Colo.-based BestBank, which was closed July 23, 1998, Pacific combined relatively small size with a sophisticated subprime loan operation. The FDIC expects to lose up to 77% of First National's $1.1 billion of assets and 74% of Best Bank's $314 million.

The FDIC had budgeted just $32 million for bank failures in 1999. Pacific was the year's sixth failure, bringing estimated losses to $810 million to $910 million.

Like the two failed banks, Pacific had been through the regulatory wringer.

Since the end of 1993, the FDIC had imposed five cease-and-desist orders, one "prompt corrective action" order for low capital, and one set of call report penalties on the industrial loan bank. The most recent cease-and-desist order, issued in March, concerned year-2000 computer flaws. Pacific was also operating under a "net worth deficiency" order from the California Department of Financial Institutions when it was closed.

"This institution has been considered a problem institution since 1997," said Jan Lynn Owen, the department's acting commissioner.

The 11-year-old bank originated first and second residential mortgages to subprime borrowers over the Internet and via its 20 loan-production offices in 13 states. It then securitized and sold these loans on the secondary market. By the end of 1998, the institution had 541 full-time-equivalent employees, though the total shrank by more than half this year under pressure from regulators. Virtually all the bank's deposits were in certificates of deposit marketed via telephone.

"What's amazing is that they let that thing grow as long as they did," said Bert Ely, an Alexandria, Va.-based consultant who has criticized federal regulators for being too soft on First National and BestBank.

One key difference between Pacific and the two earlier failures is the absence of fraud allegations. In the high-profile First National and BestBank cases, the federal government has alleged massive frauds.

Joel Schultz, chairman of Pacific and its holding company, PanAmerica Money Center Inc., did not return phone calls seeking comment Monday.

In mid-October, upon finishing a joint examination with state regulators, the FDIC notified Pacific's directors that the institution's tangible equity capital had fallen below the 2% minimum required under federal law. On Oct. 27, FDIC staff members got permission from the agency's board to act as the bank's receiver upon its closure.

An FDIC spokesman could not explain why regulators were unable to avoid a loss of such magnitude. But he blamed the bank's $48 million of interest-only residuals for most of the loss. Residuals are the value a bank retains when it sells securitized loans. The agency's receivership division considers these assets practically worthless.

Pacific's one office was reopened Monday as a branch of $235 million-asset Affinity Bank of Ventura, Calif. Affinity paid $350,000 for the right to assume $106 million of Pacific's $108 million of deposits. It assumed only $13 million of the failed bank's assets; the FDIC will try to sell the rest.

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