Home » Business, Featured, Island News

Local bank enters into consent order with regulators

Submitted by on 1, November 2, 2010 – 12:03 amNo Comment

The Bank of Alameda has entered into a consent order with federal and state regulators, one of dozens issued to banks across the country in an effort to keep them from getting into financial trouble.

Both the bank’s president and a spokesperson with the Federal Deposit Insurance Corporation, which announced 30 fresh consent orders with banks including the Bank of Alameda on Friday, said the order is no cause for alarm and that customers can be assured their money is safe.

“It’s going to be business as usual for us,” Bank of Alameda President and Chief Executive Officer Stephen G. Andrews said. “We’ve got a lot of capital. We’re safe and sound.”

An FDIC spokesperson said the orders are typically drawn up following bank examinations that are conducted by federal regulators. Regulators look to see that the bank has adequate capital and assets, good management, earnings, liquidity and sensitivity to market conditions.

The examination results aren’t publicly disclosed. But the bank has suffered quarterly losses since mid-2009 due to faltering commercial real estate and construction loans, which had been a major service area. Andrews said the bank once had $80 million in construction loans; he said the amount now stands at $18 million.

“We’ve pretty much gotten away from that portfolio,” Andrews said. “That’s where most of the pain was felt.”

The bank also had to restate its 2008 earnings to account for loan losses following an examination by regulators. The bank’s non-performing loans and bank-owned properties were 8.77 percent of the bank’s total assets in the third quarter of this year, down from 10.14 percent on June 30, the bank announced.

The bank’s assets were $250.4 million as of September 30, down from $267.1 million a year earlier, the bank announced Friday. Year over year, total loans and leases had dropped by 21 percent, to $172 million from $218.9 million, the bank announced, while deposits were stable at $225.7 million.

In addition to reducing its concentration of commercial and real estate loans and improving lending policies and practices, the bank is also in the process of raising capital through a private placement stock offering in an effort to comply with the order, bank officials announced Friday. Andrews said he expects the offering to close by the fourth quarter of this year.

The FDIC spokesperson, who wouldn’t talk specifically about the Bank of Alameda but offered general background on the orders, said they are typically drawn up to prevent the kind of trouble that can lead a bank to fail. The FDIC and state regulators with the Department of Financial Institutions entered into consent orders with 30 California banks in 2009 and 2010, and three of those banks have since been closed by state regulators due to a lack of adequate capital.

Federal regulators have issued 288 of the orders this year, up from 54 in 2009. The FDIC didn’t issue any consent orders in 2006, 2007 and 2008, a records search conducted on the agency’s website showed.

So far, regulators across the country have shuttered 140 banks this year, and 140 in 2009, a failed bank list on the FDIC’s website shows. Regulators closed just 52 banks in the U.S. from October 2000 to the end of 2008, the list shows. The closures follow the collapse of major banks and investment houses that began in the fall of 2008 and the massive federal bailout that followed.

Most of the banks that have failed are either purchased by other banks, or their accounts are transferred to other banks, the FDIC’s list and press releases on California’s Department of Financial Institutions website show. The FDIC spokesperson also said her agency insures the banks to prevent customer losses.

Comments are closed.