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Censorship Not Bank's Business

March 16, 1993

Your article concerning Charter Pacific Bank (Valley Business, Feb. 22) implied something very negative about a bank that accepts deposits from merchants who sell a service over the telephone.

Merchants of all types have accounts with us to deposit their customer's credit card charges. The newsstand that sells adult newspapers may also sell the L. A. Times. When that newsstand makes a deposit, the bank does not know what was purchased. Neither Visa nor MasterCard prohibit or censor this activity nor who issued the card to the newsstand's customer. Audio-text merchants offer a variety of information in such other areas as sports, finance and religion.

Yes, a number of our merchants provide "adult entertainment," as do liquor stores, video shops, movie theaters and casinos. These are all perfectly legal, and I am surprised that a publication protected under the First Amendment would question the rights of other information or entertainment providers.

You also imply that credit card processing has become a drain on earnings. Nothing could be further from the truth. Our credit card operations continue to grow, with bank card earnings in 1992 exceeding those in 1991. And today, after diversification, the retail and mail-order merchants we do business with account for more than three times the volume of our audio-text merchants.

Finally, the FDIC actions do not stem from our credit card activities. Like most banks in Southern California, our loan portfolio has been affected by the real estate downturn.

This exposure is the focus of the FDIC actions, and this is hardly what I would characterize as unusual. We have been very proactive and conservative in responding to the increase in troubled real estate loans, providing reserves in excess of $2.8 million during 1992--about 3.15% of total loans. Our capital remains strong, as our 9.69% year-end capital ratio is nearly 2.5 times the 4% level required by banking regulators. And unlike many competitors, we have never had to raise additional capital and have more than quadrupled our original capital through profitable operations.

ALLEN R. BLUM

Blum is president / CEO of Charter Pacific Bank, Agoura Hills

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