OGDEN -- Centennial Bank, which state regulators closed March 5, loaned at least $3 million to a California-based company for property purchases in the Ogden River Project area.
In November, Ogden Riverfront Development Co. borrowed money from Centennial to buy at least 31 river project properties, according to a search of deeds filed with the Weber County Recorder's Office.
The properties are on Kiesel Avenue, Childs Avenue and 18th Street.
A spokesman for Ogden Riverfront Development said the bank's failure will have no impact on the project.
Each property deed lists a $3 million loan note.
The deeds have a cross-collateralization clause, which means collateral pledged by Ogden Riverfront Development for one loan can be used to secure other loans.
There is no indication in the deeds as to what Ogden Riverfront Development pledged as collateral.
Alexander Auerbach is a spokesman for businessman Gadi Leshem, who is listed on the deeds as the secretary of Ogden Riverfront Development, based in Chatsworth, Calif.
Auerbach said cross-collateralization means the company obtained a $3 million blanket loan from Centennial for all of its river project holdings.
He said Leshem isn't worried that Centennial's closure by the Utah Department of Financial Institutions puts the loan in the hands of the Federal Deposit Insurance Corporation.
"The situation with the bank will have no effect on the river project development," he said.
The river project, which has been on the drawing board since 2002, is slated to encompass 60 acres straddling the Ogden River from 18th to 20th streets and Washington Boulevard to Wall Avenue.
Tentative plans call for the mixed-use development to include about 250,000 square feet of retail space and about 850 owner-occupied dwellings, including condominiums and single-family homes.
John Patterson, Ogden's chief administrative officer, said he regrets that Centennial has closed but is confident the FDIC will succeed in finding lending institutions to take over loans for Ogden Riverfront Development.
Richard A. Schmalzer, regional ombudsman for the FDIC, said in an e-mail to the Standard-Examiner he could not comment specifically on the status of the Ogden Riverfront Development loans.
However, he explained the FDIC's process for disposing of loans issued by Centennial.
"The FDIC will package and sell the loans," he said.
"Borrowers should continue to make their payments as previously called for by the terms of their loan. They will be advised in writing when their loan is sold and provided new instructions for making payments.
"It will take several months before any sales occur."
Centennial's closure came after months of uncertainty and statements of confidence by bank officials.
Because Centennial specialized in construction loans, it was hit hard by the economic slowdown, which was centered on the housing industry.
Last June, the FDIC and Centennial entered into an agreement in which the bank was ordered to improve its financial position.
At the end of 2009, Centennial Bank had about $215.2 million in total assets and $205.1 million in total deposits, according to the FDIC.
At the time of closing, the bank held an estimated $1.8 million in uninsured funds.
In January, Centennial announced it was close to a joint venture with Orem-based Vision Bankcard, a financial services company.
Centennial officials had hoped the joint venture would help the bank recapitalize and expand its services.
Centennial was taken over by the state just as it was preparing to finalize its agreement with Vision Bankcard, said Bruce Jones, a member of Centennial's board of directors.
"If we had two more days, it would have went through," said Jones, adding he was unaware of the bank's loans to Ogden Riverfront Development.
Vision Bankcard had filed an application with the Division of Financial Institutions to take a controlling ownership of Centennial, said Paul Allred, deputy commissioner for the State Department of Financial Institutions,
"They just needed to come in with the last part of the transaction, to demonstrate that they had completed it, and they hadn't completed it," Allred said.
Officials with Vision Bankcard could not be reached for comment.
Related link: This article is a topic of discussion at Weber County Forum.
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