FIVE years ago, the Federal Deposit Insurance Corp. rejected Bank of Saipan’s membership application, saying that the financial institution was in “poor overall financial condition.”
The bank’s board of directors was made aware of the FDIC’s findings, yet there was no action initiated either by the management of the bank or the board of directors, acting Commerce Secretary Fermin M. Atalig told Variety.
Some five years later, the bank’s chairman of the board and chief executive officer, Tomas B. Aldan, was indicted—together with three other individuals—for multi-million wire fraud.
“The FDIC application findings revealed the bank’s problematic situation, but they did not act on the recommendation of FDIC’s investigators—otherwise, the bank would not be in this mess,” Atalig said.
Oscar C. Camacho, who was the banking commissioner in 1997, said the bank’s board of directors withdrew the bank’s FDIC application after receiving the findings of the federal agency.
He declined to further comment.
Attorney David J. Lujan said he was not yet with the bank’s board when the FDIC released its findings in 1997.
He said the current board of directors was not informed about the FDIC’s recommendation.
“How (are we) supposed to follow a recommendation that (we) have not seen?” Lujan said.
He said Camacho and Atalig “do not know what they are talking about.”
The FDIC’s findings were largely based on the financial status of the bank as of March 31, 1997.
The FDIC’s examiners recommended the rejection of the bank’s application, but allowed the bank to withdraw it.
The FDIC said the bank’s asset quality as of March 31, 1997 was unsatisfactory.
Almost half of the bank’s loan portfolio was “past due.”
The FDIC also noted $2 million in losses in the loan portfolio and other uncovered assets.
The FDIC findings said the “overwhelming cause” of the unsatisfactory asset quality was the absence of “prudent lending policies, procedures, and underwriting standards,” leaving the management without any control over the administration credit of the bank’s credit function.
The FDIC also found the following:
• The bank’s loan documents were poor, making it impossible to accurately assess collateral protection or repayment capacity.
• The bank’s collection effort had been nonexistent or ineffective, while the credit card lending program had suffered a “disastrous consequence due to the lack of basic controls.”
• The bank was “structurally unprofitable.” Its earnings had been “overstated” and there was failure to recognize operational losses in a timely manner.
• The bank lost $3 million during a six-month period ending March 31, 1997.
• There were “high overhead expense” that increasingly exceeded net interest income as well as “exorbitant salary and personnel expenses.”
• The bank had no “formal planning process” or an approved budget to guide and monitor its operating performance.
• The supervision of the bank was inadequate, and its senior management team needed to be strengthened.
• The bank’s compliance with existing banks laws and regulations was also “unsatisfactory.”
• The bank’s CEO, Tomas Aldan, lacked “banking experience. Qualified individuals with “requisite banking expertise and experience,” should be hired for the positions of president, senior lending officer and cashier.
