SAN RAFAEL -- Tamalpais Bank consented to a cease and desist order with the Federal Deposit Insurance Corp. and the California Department of Financial Institutions that requires it to reduce its commercial real estate loan exposure and improve liquidity.
Among the requirements of the order, which stems from the bank’s regular FDIC examination in May of this year, are to develop a plan to reduce the number of commercial real estate loans, develop and implement a written liquidity funds management policy and for the bank to not pay cash dividends without the prior written consent of the FDIC and the DFI. (To see the full order, see below.)
“We intend to fully comply with the order, and we have made progress,” said Senior Vice President and Chief Marketing Officer Mark Chapman.
The cease and desist order does not impact deposits held in the bank. Customers are insured to FDIC limits. Nor does the order mean the bank will stop any of its normal banking operations.
Mark Garwood, the bank's chairman and chief executive officer said, "Today's current economic conditions and the resulting regulatory scrutiny are creating challenges for financial institutions of all sizes, and Tamalpais Bank is no exception. We continue to stand by our borrowers and our depositors as they have been impacted by declining retail sales, declining real estate values and this current economic storm. We are committed to working with the FDIC and the DFI to implement the actions required by the order."
The corrective actions started in February of 2008 when then-Executive Vice President Jamie Williams came to the bank and helped put together a strategic plan.
“Our order does reflect strategic initiatives that are already in place,” said Mr. Chapman.
Since that time, the bank has focused only on the Marin and San Francisco area. Previously, the bank had been making loans statewide.
“That model had been in place for a number of years,” Mr. Chapman said. “We changed it in early 2008 because we knew that would be a more profitable decision in the long run.”
The bank recently switched to a California charter. The shift, Mr. Williams said, reflected its commitment to community.
In the first quarter of 2009 the bank eliminated its wholesale loan program, closed a loan production office in Santa Rosa and stopped making SBA loans out of the area.
Following the resignation of its chief financial officer last week, the bank appointed Karry Bryan as the acting CFO effective Sept. 17.
Ms. Bryan, 43, joined the bank in August 2005 as vice president of finance and controller. She was promoted to first vice president and controller in January 2006, and to the position of senior vice president, chief accounting officer and controller in January 2007.
The bank’s stock is trading at $1.43. Its 52-week range is $0.94 to $12.98.
Tamalpais Bancorp, the holding company for Tamalpais Bank and Tamalpais Wealth Advisors, reported a net loss of $42,000 for the first quarter and a net loss of $4.3 million for the second quarter.
Mr. Chapman said the bank is committed to executing the terms set by the regulators. “We are working with customers to help them with their current loans, trying to work with them and at the same time keep up the health of the institution.”
The filing with the Security and Exchange Commission reads as follows:
Present a written capital plan to the FDIC and the Department within 60 days of the Order by which the Bank would achieve and thereafter maintain a Tier I Capital Ratio of not less than 9 percent and a Total Risk-Based Capital Ratio of not less than 12 percent by December 31, 2009. The capital plan must include a contingency plan in the event that the Bank has not adequately complied with the capital requirements. The contingency plan must include provisions for the sale or merger of the Bank;
The Bank must eliminate from its books, by charge-off or collection, all assets classified as "loss";
Formulate and implement a plan to reduce the Bank's risk exposure in classified assets and to reduce assets classified "substandard" in relation to Tier I Capital plus the allowance for loan losses to not more than 100 percent by March 14, 2010, to not more than 50 percent by June 12, 2010 and to continue to reduce the volume of such assets after that date. The Bank must develop, within 60 days of the Order, written asset disposition plans for each classified asset greater than $1,000,000;
Have and retain qualified management of the Bank, and assess management and staffing needs, qualifications and performance. The Bank's board must obtain, within 90 days of the Order, an independent study of the management and personnel structure of the Bank to determine whether additional personnel are needed for the size and profitable operation of the Bank. The Bank must formulate a plan to implement the recommendations of the study;
Assure the on-going participation of the Bank's Board of Directors in the affairs of the Bank;
Maintain a fully funded allowance for loan losses;
The Bank's Board of Directors shall review the adequacy of the allowance for loan losses at least once each calendar quarter;
Cease to extend additional credit to any borrower who has a loan or extension of credit with the Bank (1) that has been charged off or classified, in whole or part, as "loss," or (2) that is otherwise classified, in whole or part, and exceeds a certain amount without the prior approval of the Bank's Board of Directors or loan committee;
Revise and implement written lending and collection policies;
Develop a plan to systematically reduce the number of commercial real estate loans;
Develop and implement a written liquidity funds management policy;
Not pay cash dividends without the prior written consent of the FDIC and the Department;
Not accept, renew or roll-over any brokered deposits without obtaining a waiver from the FDIC. Adopt and implement a written plan for reducing the Bank's reliance on brokered deposits;
Not engage in any expansionary activities without the prior written consent of the FDIC and the Department;
Notify the FDIC and the Department at least 30 days prior to adding any individual to the Bank's Board of Directors or employing any individual as a senior executive officer of the Bank; and
Provide quarterly progress reports to the FDIC and the Department on the Bank's compliance with the Order.
The Order will remain in effect until modified or terminated by the FDIC and the Department. Copies of the Consent Agreement and Order are included as Exhibits 10.1 and 10.2 and are incorporated herein by reference. The description of the Order set forth above does not purport to be complete and is qualified by reference to the full text of the Order.
