| HeraldNet - Snohomish County's online news source |
 THURSDAY, SEPTEMBER 9, 2010 7:04 am |
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Business 
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Lynnwood bank reprimanded by government For the third time this year, a Snohomish County-based community bank has been reprimanded by the federal government.On Thursday, Lynnwood's City Bank said it had received a cease-and-desist order from the Federal Deposit Insurance Corp. and the state Department of Financial Institutions. The bank had said in late March that it expected federal orders after posting a $60.8 million loss in 2008. At that time, 62 percent of City Bank's loans were tied to residential construction and development. Federal and state regulators called for a reduction in the bank's non-performing loans and an increase in the amount of cash on hand. The authorities also required the bank obtain an independent study of its management and personnel structure within 90 days of the agreement signed June 22. City Bank's board was also instructed to assume "full responsibility for the approval of sound policies and objectives and for the supervision of all the bank's activities," according to its agreement. City Bank customer deposits of up to $250,000 remain insured with the FDIC. "The agreement does not reflect any new developments impacting our business," Conrad Hanson, City Bank president and CEO, said in a statement. "We recognize that these changes are necessary and we have made significant progress on these issues throughout 2009." Frontier Bank and Mountain Pacific Bank, both based in Everett, also have received cease-and-desist orders from the FDIC this year. Both Frontier and Mountain Pacific also have been hit hard by the difficult housing and construction markets. After auditing the bank's filings for 2008, an independent accounting firm issued a "going concern" warning about City Bank's ability to survive. The accountants expressed concern over the bank's liquidity, or its ability to come up with cash, because of the significant amount of brokered deposits that mature with the bank this year. On Thursday, City Bank said the agreement it made with state and federal regulators addresses the bank's efforts to deal with a high level of non-performing residential construction loans. The bank agreed to put a plan for the orderly reduction of non-performing loans and foreclosed real estate. City Bank said Thursday that the agreed-upon strategy has been working successfully so far this year. Through June 30, City Bank and builders have sold or have pending sales of 775 homes, or $233 million worth of its portfolio of loans and foreclosed real estate. City Bank's Hanson said he believes the sale of homes at a rate of $30 million to $40 million monthly will continue for the remainder of the year, improving the bank's cash position. Regulators also instructed City Bank to reduce its brokered deposits. Brokered deposits are amounts sold by a bank to a brokerage, which sells it off into smaller pieces. Through June 30, City Bank has repaid $162 million in brokered deposits. As part of this plan, the bank has increased retail deposits by more than $45 million this year. "We are encouraged by the progress we have made in selling homes, increasing liquidity, repaying brokered deposits and working with the FDIC and DFI," Hanson said. |
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