Susie Smith Testimony Recounts Trials, Tribulations at Metropolitan National Bank

by George Waldon  on Monday, Aug. 19, 2013 12:00 am  

A  bankruptcy sale next month will separate Metropolitan National Bank from its insolvent parent company and bring the bank much- needed capital.  (Photo by Mauren Kennedy)

“And that’s with luck. We have a $100 million in nonperforming assets; $70 million of that is real estate and about $55 million of that $70 million is raw land.

“We have not factored in those provisions, the three-year forecast, a significant decline in that land value. If there is a significant decline in that land value, we will go from a small profitability or near break-even to another large loss situation.

“The bank, with capital of $65 million, cannot earn out of it or doesn’t have the capital to get out of that $100 million in nonperforming assets.”

During her testimony, Smith recounted the trials and tribulations of fighting to work through a mountain of loan problems while trying in vain to find new capital through investors, lenders or buyers for months on end.

2009 was an especially trying year with huge losses rocking the bank despite the reassurances of continued profitability by CEO Lunsford Bridges in June 2008 shortly after the Office of the Comptroller of the Currency put the bank under a supervisory agreement.

The loan losses were so bad in 2009 that $25 million in TARP capital provided by the U.S. Treasury in January did little to stanch the hemorrhaging.

“We really thought that with the TARP money and with the work we had done on managing the risk of the bank, that we were in good shape to move forward,” Smith testified.

“What we did not realize was the critical underlying credit quality and deteriorating collateral and the distressed borrower situation which rapidly declined at the end of 2008 and the first part of 2009 ...”

“We posted unheard-of loss numbers. We lost $80 million over the course of 2009. And the headlines, every quarter, were stunning. And it took a huge amount of staff work and teamwork to keep our customers engaged.”

During 2009, bank consultants with Alvarez & Marsal were brought in to help cure the operating deficiencies outlined in the OCC order. The firm also helped organize the bank’s financials, so prospective investors could easily inspect the loan portfolio, balance sheet, debt structure and other important data that was updated quarterly.

Investment bankers at Keefe Bruyette & Woods also were hired to help find sources of capital. Months of constant trolling for investors ensued.

“It was very clear to us the gravity of the situation and that we were going to need help to raise capital,” Smith testified.



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