UPDATE: Chambers Bank, Popped by FDIC, Will Report Annual Loss

Chambers Bank of Danville, which has entered into a consent order with the Federal Deposit Insurance Corp. over "unsound" banking practice, had a loss of about $5.5 million for 2011, holding company CEO John Chambers III told ArkansasBusiness.com on Friday afternoon.

The annual loss follows a much bigger loss – $17.8 million – for 2010.

"I think, hopefully, this is the end of the red-ink years," said Chambers, who blamed the continuing losses and the FDIC action on real estate loans made in northwest Arkansas more than four years ago.

"You don’t get under a consent order if everything is rosy," he said, referring to the order as "being put on probation."

Chambers Bank neither admitted nor denied any of the FDIC’s charges but agreed to the remedies outlined in the Dec. 21 order, which was made public on Friday morning.

The bank has not yet filed its final call report for 2011, but Chambers said the annual loss would be about $5.5 million. At Sept. 30, the bank showed net income for the first three quarters of $462,000, indicating that about $6 million in problem loans had to be charged off or reserved against in the fourth quarter alone.

Although the consent order includes language ordering Chambers Bank to initiate efforts to increase its capital, Chambers said that hadn’t been necessary. Even after the quarterly loss, the Tier 1 ratio will be about 10.25 percent – above the 10 percent ordered by regulators. 

The bank was given 45 days from Dec. 21 to hire a consultant approved by the FDIC to assess "management and staffing needs." Chambers couldn’t say who that would be because the bank has not yet received FDIC approval. 

He did say that stricter enforcement by the FDIC means that his bank, and banks all across the country, are no longer allowed to work with problem borrowers as long as they used to.

"You can only be a good guy for so long," he said.

Chambers Bank has not made any new commercial real estate loans or residential development loans in northwest Arkansas since 2008, Chamber said, but some of those old loans are just now being categorized as nonperforming because the borrowers continued to make payments until they ran out of resources.

The bank, which had $722 million in assets as of Sept. 30, has about $30 million worth of OREO – "other real estate owned" because of foreclosures and the like – on its books, John Chambers said.