United Bank Gets Cease and Desist Order From Federal Regulators

by Worth Sparkman  on Monday, Nov. 29, 2010 3:43 pm  

United Bank of Springdale was ordered to raise its capital level and submit detailed plans for dealing with its problem assets by its federal regulator, the Office of Thrift Supervision.

The bank's eight directors and the regional director of the OTS signed the document, which went into effect on Nov. 19.

The 26-page document, available here, orders the thrift to cease and desist from operating with inadequate capital, earnings, loan loss allowance and "adversely classified loans." The bank also has a concentration of credit, the document states.

However, according to United Bank's third-quarter call reports on file with the Federal Deposit Insurance Corp., its Tier 1 capital ratio is 12.18 percent, above the 8 percent specified in the document. President and CEO John Scott said the thrift's loan loss allowance meets the OTS requirements.

Part of Scott's e-mailed statement follows: "The Cease and Desist order issued by the OTS clarifies that there are issues that require our focus and attention. The action asks us to do several things that will result in a stronger, more profitable institution going forward - things that we want to do anyway. We will work through the loan quality issues that resulted in this order in time. We are committed to remain a well-capitalized and profitable institution throughout this process."

The OTS order requires the thrift to submit a detailed capital plan and an "updated comprehensive business plan" for the next two years by the end of January.

The order gave United Bank until the end of December to submit detailed plans for reducing its problem loans and its loan concentration, and revising its policies for dealing with future loan loss allowance allocation.

United Bank had a net loss of $4.99 million for the first three quarters of 2010 after a minuscule loss of $14,000 for 2009. As of Sept. 30, the thrift had a loan-loss allowance of $5.28 million, or 3.74 percent of its loan portfolio. The thrift maintains a loss allowance of more than 29 percent of its noncurrent loans, which was $17.72 million on Sept. 30. Total noncurrent loans, those 90 days or more past due, were 12.5 percent of the thrift's loans.

Of the bank's $135.9 million in net loans, $123.3 million are tied to real estate.

United bank had $181.3 million in total assets and $145 million in total deposits at the end of the quarter.

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