Troubled California Bank Sued By FDIC for Doling Out Risky Loans

Redlands, California-based First Centennial Bank is under scrutiny as some of the bank’s former officers and directors are being sued by the FDIC for negligence.

The FDIC alleges that the bank has to pay a whopping $163 million to depositors after the bank went under two years ago. The lawsuit stems from First Centennial’s proclivity to handing out “risky” development, acquisition and construction loans in commercial real estate that left the bank open to utter demise.

In the January 14 complaint, the FDIC stated: “During calendar year 2007, when the real estate market was obviously cooling nationwide, and particularly in the Inland Empire area of California, defendants, in reckless abandon of their duty to engage in safe and sound bank practices, increased” the loans from 292 to 383 percent of their total capital. That number ballooned to 1,264 percent of their total capital by 2008.

The bank claims that the accusations are unfounded, unfair and “based solely on hindsight.” The bank had $803.3 million in assets and $676.9 million in deposits when it was shuttered, with the FDIC subsequently taking control in January of 2009.