Plumas Bancorp, the parent company of Plumas Bank, has been given a Consent Order issued by the Federal Deposit Insurance Corporation and the California Department of Financial Institutions.
The bank’s interim president and CEO, Andrew J. Ryback, said this Order was the result of a regulatory examination covering the 12-month period ending June 30, 2010.
This was the time, he said, bank officials were making difficult strategic moves that were highlighted in last year’s shareholder letter.
“The regulators focused on the first six months of 2010 and the last six months of 2009 and, as a result of losses in 2009, the bank was not profitable during this 12-month period.”
He added that the regulators were not focused on the changes the bank was making at the time of their examination and did not have the benefit of seeing the positive results achieved during the second half of 2010. “As a result of our business decisions, as well as some stabilization in the economy, we’ve seen continued steady progress,” he said.
“We were successful in achieving all of these goals and made over a $10 million turnaround in earnings in 2010, going from a loss of over $9 million to a profit of over a $1 million. Of course we have to make further progress, but most of the difficult work has already been done,” Ryback said.
As part of its ongoing plans, he reinforced that the bank is already meeting many of the requirements of the agreement, which is typically in effect for a year from the date of the Order. “Appropriate steps to comply with them are under way and we are on track to meet its conditions within the required time period,” Ryback said.
In accepting the Order, the bank has agreed to a number of conditions that include continuing to reduce certain classified asset balances, continuing to maintain strong capital ratios and improving lending policies and practices.
“The Order serves to formalize and reinforce the efforts already in place to strengthen the company and continue to implement the bank’s strategic plan,” Ryback said.
“Currently, the bank exceeds the Order’s total risk-based capital ratio goal of 13 percent. I can also report that we expect to achieve the leverage ratio target of 10 percent by year-end without the injection of any new capital. Reducing problem assets (generally identified as bad loans and real estate foreclosures) has been and will continue to be one of the top priorities of the company. We remain dedicated to returning Plumas Bank to a position of strength,” he said.
When asked about the Order’s requirement to improve the bank’s lending practices and policies moving forward, Ryback explained that it has become very common to see that particular language included in most consent agreements, especially during these turbulent economic times. However, with that said, Ryback said the bank has reviewed and improved loan administration policies to ensure best practices are implemented.
He said the bank’s real estate construction and land development loans took a huge hit when real estate values dropped significantly over the past couple of years, but went on to say that during the past six months real estate values have stabilized and the bank has significantly decreased its exposure to these types of loans.
It should also be noted that the FDIC and other regulatory oversight agencies were heavily — and perhaps justifiably — criticized for having been too lenient on financial institutions in the past. In Plumas Bank’s region alone, which governs the nine western states including California, Hawaii and Alaska, five years ago only about 10 percent of the financial institutions were under some sort of regulatory orders. This year, some 60 percent of the institutions are under some type of regulatory order.
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