La Jolla, Calif.-based CalPrivate Bank will record a $9.5 million loan loss provision in the third quarter under a line of credit extended to a financier of California liquor licenses.
The principal on the line of credit was $12.5 million, with another bank lending a further $3 million, and it was extended by the Private Bancorp of America Inc. unit to the borrower in September 2015. The borrowings were guaranteed by ANI Development LLC and Gina Champion-Cain, who controls the company.
The Securities and Exchange Commission in August charged ANI Development and Champion-Cain with operating a $300 million fraud scheme affecting about 50 investors. The scheme allegedly involves presenting fraudulent liquor license applications, forging escrow statements and misappropriating funds. The SEC in September obtained a court order to freeze the assets of the defendants and subsequently appointed a receiver to control ANI Development.
Private Bancorp of America expects to record an after-tax impact of $6.7 million, or $1.29 per share, in the third quarter. At $9.5 million, it expects the charge-off to be equal to roughly 1.19% of its gross loan portfolio as of June 30. The company and CalPrivate Bank expect the loan loss provision to reduce their respective capital ratios.
