A contractual dispute regarding interbank loans has resulted in American Bank of St. Paul suing Fidelity Bank for $3.1 million, BizJournals reports.
The two banks entered into an intercreditor agreement in 2006, whereby they extended warehouse lines of credit to Bloomington, Minn.-based Centennial Mortgage and Funding Inc. American Bank claims that Fidelity Bank, headquartered in Edina, Minn., knew Centennial had been involved in fraudulent activity but failed to notify American Bank. Centennial allegedly used the lines of credit to cover operating losses rather than to fund mortgage loans.
"We strongly deny any implication that we were sitting on this information and used that information to our advantage," Fidelity Bank's attorney, Paul Ratelle, told BizJournals.
BizJournals reports that American Bank posted a $7 million loss in the first quarter of 2008 related to the Centennial loan.