Priority Bank of Ozark Nearing End of Dispute with Fed

by George Waldon  on Monday, Dec. 3, 2012 12:00 am  

The dispute between the Office of the Comptroller of the Currency and Priority Bank of Ozark is nearing private resolution after a partial public airing. The Office of Financial Institution Adjudication entered an order of indefinite continuation that postponed a Dec. 10 appeal hearing on the matter.

Instead of resolving the disagreement at the Sebastian County Courthouse in Fort Smith, the parties are said to have reached an agreement in principle that will soon produce a formal settlement.

Unlike the OCC’s May 9 charges for an order to cease and desist, the settlement won’t be public.

That filing came after Trevor Lavy, owner, chairman and chief executive officer of Priority Bank, declined to accept the cease-and-desist order from the OCC.

As part of the appeal process launched by Lavy, the OCC findings were reviewed by its Office of the Ombudsman. The Ombudsman’s rulings produced mixed results for the $94.8 million-asset thrift.

The Ombudsman ruled in favor of modifying, for the better, Priority’s CAMELS examination ratings in four of the five areas previously downgraded by the OCC.

The ratings system, ranging from 1 (strongest) to 5 (weakest), is an acronym for six areas of a lender’s operations graded by regulators to determine its overall condition: Capital, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk.

Capital was downgraded to 3 after the OCC’s 2011 full-scope examination, but the revised notice of charges doesn’t specify the new and improved score.

Priority’s equity capital totaled $7.2 million at year’s end. The number now stands at $7.8 million.

Asset quality and Management, which were given 4s previously, were both bumped up to 3.

Earnings, which had “deteriorated” to 2 by OCC reckoning, returned to 1, although the revised notice of charges didn’t detail that.

Priority produced earnings of $2 million during 2011 when the OCC conducted its examination that produced its cease-and-desist findings.



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