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FDIC Accuses Franklin Thrift of Unsound Lending Practices

May 23, 2000|Edmund Sanders | Edmund Sanders covers financial institutions and fraud for The Times. He can be reached at (714) 966-5811 and at edmund.sanders@latimes.com

Federal banking regulators are cracking down on Franklin Thrift & Loan Assn. in Orange, accusing the tiny, troubled lender of unsafe and unsound practices.

In a cease-and-desist order released earlier this month, the Federal Deposit Insurance Corp. said the one-branch institution, which has about $11 million in assets, has been operating with inadequate reserves, a large volume of poor-quality loans and lax collection practices. Regulators also faulted the bank's management as "inadequate," but did not cite specific complaints.

Franklin Thrift, which makes auto loans, has been struggling for two years with rising delinquencies. As of Dec. 31, the bank's net loan charge-off rate--a key measure of the bank's bad loans--was 9%, far above other small banks'.

Last year, the bank slashed its loan volume in half, but it still reported a net loss of $540,000, according to the bank's financial statements.

Franklin Chief Executive Dawn Snuggerd did not return phone calls Monday.

The bank agreed to the FDIC order without admitting or denying the allegations.

Among other things, the FDIC order requires Franklin to maintain certain capital levels, improve its handling of problems loans, add two outside board directors and seek permission from regulators before appointing new senior executives or paying bonuses.

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