NEWS - Banking & Finance

By Lou Phelps, SBJ Staff

Nov 28, 2011 – In October, CoastalStates Bank, founded and headquartered on Hilton Head Island, agreed to a strongly worded FDIC Consent Order, made public last week.  The order is being managed by the FDIC’s Atlanta Regional Office.

The order calls for numerous changes to current bank methodologies, and has a number of short timelines with which the bank’s board of directors must comply.   

With the FDIC ‘Stipulation,’ the Bank has consented, without admitting or denying any

charges of unsafe or unsound banking practices relating to weaknesses in capital, asset quality,

management, and earnings, to the issuance of the Consent Order by the FDIC and South Carolina State Board that oversees banks.

The bank’s board of directors has agreed to increase its participation in the affairs of the bank that is led by Randy K, Dolyniuk and James S. MacLeod.

The bank is owned by CoastalSouth Bancshares, Inc , with Dolyniuk serving as Chairman and CEO of both entities.  Other bank board members include Ernst W. Bruderer, J. Simon Fraser, James H. Hodges, W. Lee McCollum, Larry W. Page, James N. Richardson, Jr. and Scott H. Richardson.

Dolyniuk has been a Hilton Head Island resident for more than 25 years and is one of the bank’s founders, and has served as the bank’s chief executive officer since 2004. In 2007, the bank acquired Homeowners Mortgage.  He is the former Chairman of the Beaufort County Development Board.

James S. MacLeod is CoastalState’s president and is also one of the bank’s founders.  He currently serves as the president and CEO of the bank, and as the Senior Managing Director and CE) of Homeowners Mortgage since its acquisition in 2007.  Mr. MacLeod previously served as Executive Vice President of Mortgage Guaranty Insurance Corporation (MGIC) in Milwaukee, Wisconsin.

The FDIC order includes language that appears to question the current management team, seeks an organizational chart, and asks for review of the number of bank officers and their role in the banking company.  The order gives the board 60 days to analyze management’s performance, and make recommendations.

“Within 60 days from the effective date of this ORDER, the Bank shall have and retain qualified management with the qualifications and experience commensurate with assigned duties and responsibilities at the Bank,” including at CEO “with proven ability in managing a bank of comparable size and in effectively implementing lending, investment and operating policies in accordance with safe and sound banking practices; a chief credit officer/senior lending officer with a significant amount of appropriate lending, collection, and loan supervision experience, and experience in upgrading a low quality loan portfolio; and a chief operating officer with a significant amount of appropriate experience in managing the operations of a bank of similar size and complexity in accordance with sound banking practices,” it states.

And the FDIC only gives CoastalStates Bank 90 days to improve its Tier 1 Capital to equal or exceed 8 percent of its total assets, and shall have Total Risk-Based Capital in such an amount as to equal or exceed 10 percent of the Bank's total riskweighted assets. 

Within 30 days, the Bank has agreed to develop an internal loan review and grading system to provide for the periodic review of the Bank's loan portfolio in order to identify and categorize the Bank's loans; and within 60 days to implement a written, comprehensive budget in order to improve the bank’s profit.

Dolyniuk is also a founder and director of Nexity Financial Corporation and Nexity Bank, a private company, where he serves as chairman of the Directors’ Loan Committee and as a member of the Executive Compensation Committee and Corporate Governance and Nominating Committee and has served on the Audit Committee. 

He served as director of First National Bank for several years, and has thirty years of banking experience.