google-site-verification: google5ae98130f18ad244.html

Monday, February 17, 2020
Text Size

Banking & Finance

First National Bank the Latest to Receive Regulatory Orders

10/20/2009 - First National Bank, chartered in Savannah, is the latest locally-operating bank to receive a cease and desist order from a bank regulatory entity.

The bank is a “national” bank, and is therefore regulated by the United States Treasury Department's Office of the Comptroller of the Currency (OCC), versus by the FDIC, even though deposits at the bank are FDIC insured.  

The order was the result of a routine examination.

Like Atlantic Southern Bank and Woodlands Bank which received similar types of cease and desist orders over the past four weeks from the FDIC and the Office of Thrift Supervision of the U.S. Treasury Department respectively, the order sets deadlines for First National Bank to raise capital, insure top management is complying with necessary good banking practices and improve its loan policies within 90 days.

A cease and desist order is not an indication that the bank will fail. In fact, 80 percent of banks that receive similar orders are able to raise sufficient capital and establish strategic and management plans to meet the OCC’s requirements.

First National has four offices in Georgia, with three in Chatham County and one in Richmond Hill, and recently moved its headquarters to its Stephenson Ave office.

At June 30, the last publicly released financial data, First National had $263 million in deposits and $203,215,000 in loans and leases, with a cash to debt ratio of 13.1 percent.  $9.8 million of its loans were in the 30 to 89 days overdue category, and only $80,000 in loans over 90 days. 

But the bank also had $23.3 million in assets that are no longer accruing interest – loans in severe trouble due to the financial difficulties of the borrower. These loans include real estate loans, installment loans, credit cards and related loans, commercial and all other loans, lease financing receivables, debt securities and other assets.

This is because, "We've been aggressively writing down our loans before they even go to foreclosure," said Heys McMath, the bank’s president and CEO, versus carrying them on their books. "We get an evaluation of any loan over one year old," he said. "This means they are sometimes coming back as severely reduced in value." 

According to  McMath, 94 percent of the bank’s loans are in real estate, with more than 11 percent now listed as non-performing and the bank’s cash to debt ratio is now at 11.4 percent. The order requires the bank to increase this to  an equity ratio of 12 percent.

As to how much money that means the bank must raise in new capital, McMath explained, "If you looked at the June numbers, not much,. But, what I think we're going to raise is $ 10 to $15 million to insure going forward that we have enough capital to cover any further impairment charges."  

The OCC order also required a number of other actions by First National including:

• Insure that the bank has competent management in place.

• Develop a strategic plan to correct the concerns raised in the Report of Examination.

• Adopt and adhere to a written credit policy to improve the bank's loan portfolio management including a description of the types of credit information required from borrowers and guarantors, including (but not limited to) annual audited statements, interim financial statements, personal financial statements, and tax returns with supporting schedules

• Establish procedures that require any extension of credit (new, maturity extension or renewal) is made only after obtaining and validating current credit information about the borrower and any guarantor sufficient to fully assess and analyze the borrower’s and guarantor’s cash flow, debt service requirements, contingent liabilities and global liquidity condition, and only after the credit officer prepares a documented credit analysis.

• Tighten procedures on construction and developing real estate loans that include obtaining and evaluating “detailed project plans; detailed project budget; time frames for project completion; detailed market analysis; and sales projections, including projected absorption rates.”

It’s the type of tightening of credit policies requirements that are being discussed daily in the national news, and which are impacting all banks and their ability to make loans.

The OCC also released its monthly list of Community Reinvestment Act (CRA) performance evaluations that became public during the period of Sept. 15, 2009 through Oct. 14, 2009. The list contains only national banks and insured federal branches of foreign banks that have received ratings. The possible ratings are outstanding, satisfactory, needs to improve and substantial noncompliance.

Comment (0) Hits: 6820

Page 345 of 356

CLICK to SUBSCRIBE and Support Great Journalism!

Follow Us!

Coastal Empire News
Headquarters: 2222 Bull Street,Savannah, GA. 31401.
Tel: 912-220-2759 | Hours: 8:30 a.m. to 5:00 p.m.