What Happened At La Jolla Bank?

“Fraudulent activity was recently discovered” at La Jolla Bank, FDIC spokesman Greg Hernandez tells City News Service in a story today.

On Friday, the Office of Thrift Supervision shut the bank down and noted “deficient corporate oversight by the Board and management.”

Frank R. Warren established the bank in 1985. He remained chairman of La Jolla Bancorp, the parent holding company, which was controlled by Warren family trusts. The bank’s president and chief executive was Rick F. Hall.

La Jolla Bank grew incredibly fast in recent years. Assets (loans) had doubled in three years, rising from $1.6 billion in 2004 to $3.3 billion in 2007. This growth was concentrated in commercial and residential construction, land developing, and multi-family and commercial real estate lending, according to federal regulators.

The bank’s fall was even faster. Non-performing assets (90 days past due) increased from $71 million at year-end 2008, to $777 million at year-end 2009.

The Rancho Santa Fe-based bank had 124 employees, nine branches in Southern California and one in Dallas, Texas.

The bank was closed on Feb. 19 and deposits were transferred to OneWest Bank of Pasadena (formerly IndyMac). OneWorld investors include J. Christopher Flowers, George Soros and John Paulson.

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