ARLINGTON — North County Bank is the latest Snohomish County financial institution to be reprimanded by state and federal regulatory agencies for excessive loan losses, according to documents filed by the Federal Deposit Insurance Corp.
The four-branch bank received a cease-and-desist order from the FDIC and the Washington state Department of Financial Institutions in August. The order, announced Monday by the FDIC, spells out several steps the bank must take to restore profitability, including increasing the amount of money set aside to compensate for unexpected losses.
In a boilerplate document dated Aug. 14, the bank was ordered — along with many other stipulations — to stop operating with “excessive commercial real estate and acquisition, development or construction concentrations.”
North County President John Myles said much of the bank’s problems were related to its loans to builders. “Like a lot of banks we had a few too many real estate loans,” he said. “They were spec houses.”
The order requires an independent study of whether North County Bank’s management and personnel structure is sufficient for a return to profitability. Going forward, the bank will have to inform the FDIC’s regional office in San Francisco of changes in executive staffing.
Myles said the bank has been running pretty lean on employees and doesn’t plan on making any changes. He said he will offer more stock in the bank to investors to boost its capital.
“The bank seems to be well capitalized by standard regulations,” he said. “As soon as the state approves that (stock) offering we’ll raise more capital that way.”
The order places lending restrictions on the bank. No additional credit can be extended to any borrower with a substandard loan in excess of $50,000 — unless regulatory officials approve the bank’s board or loan committee.
Even then, all past-due interest must be paid before additional credit is granted.
Myles said he doesn’t expect the bank to make money this year and expects it to continue to work through its bad loans next year.
“I’m fairly optimistic for the bank,” he added. “I think we’ve got a good handle on it.”
North County Bank was one of a few Washington-based banks to receive a federal order last month. Others included Bank of Tacoma, Anchor Mutual Savings Bank in Aberdeen and Twin City Bank in Longview.
Cease-and-desist orders have become increasingly common in the last year; Snohomish County-based Frontier Bank, City Bank and Mountain Pacific Bank are also operating under the federal order.
Contact Amy Rolph at 425-339-3029 or arolph@heraldnet.com.
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