Regs to Orion Bank: "Better Get It Together"

Looks like Orion just got slapped by regulators and have been told to straighten up. From the Sarasota Herald Tribune.

By John Hielscher & Michael Braga
STAFF WRITERS

Published: Saturday, August 30, 2008 at 1:00 a.m.
Last Modified: Saturday, August 30, 2008 at 1:09 a.m.

Federal and state banking regulators slapped Orion Bank with a major enforcement action, criticizing its lending practices and oversight by the board of directors.

Naples-based Orion, a major real estate lender in Sarasota and Manatee counties, was ordered to take a number of steps to maintain its "financial soundness."

The Federal Reserve and the Florida Office of Financial Regulation made public on Friday a 15-page "written agreement" with the bank and its parent company, Orion Bancorp Inc.

Orion faces a series of deadlines -- some as soon as next week -- to tighten its loan policies, better monitor its borrowers and charge-off as uncollectible more of its soured loans.

The agreement is one of only 15 such enforcement actions taken by the Federal Reserve against a U.S. bank so far this year.

"The Fed would not have made this public unless they determined it was a serious enough situation for them to do it," said bank analyst Ken Thomas of Miami.

Orion, a nearly $3-billion-asset bank, posted a profit of $8.3 million through mid-year.

It reported $108.9 million in non-current loans and leases as of June 30, up from $5.2 million one year earlier. That represents 5.25 percent of Orion's entire loan portfolio.

A sizable chunk of those bad loans were apparently made in Manatee and Sarasota counties, where the bank operates four branches.

In the past 18 months, Orion has foreclosed on 20 loans totaling $74 million in the two counties.

Sarasota home builder Ron Mustari accounted for $11.3 million of the defaulted loans. Condo converter Warren Hickernell accounted for $11.7 million.

Manatee home builder David Lewis accounted for $1.8 million in bad loans, and Siesta Key developer Jack LeFrock accounted for $1.3 million.

Orion's financial picture could change under the Federal Reserve agreement.

Within 10 days, the bank must eliminate from its books an unidentified amount of assets it now classifies as losses but has yet to charge-off.

The privately owned Orion has long been headed by Jerry J. Williams, who acts as chairman, president and chief executive officer.

Neither he nor his public relations firm returned calls Friday seeking comment.

The 31-year-old bank has been consistently profitable, boasting of industry recognition as a top-performing Florida bank.

The agreement's first order directs the bank to improve the board's oversight of management and operations. Thomas said it is unusual for the board to be cited first thing in such an action.

"It's suggesting that the current board is not strong and needs to be strengthened," he said.

Speaking generally and not about Orion specifically, Thomas said banks whose CEOs are also board chairmen often wind up with rubber-stamp boards and too much power concentrated in one person.

The bank has 90 days to submit a plan to reduce its concentration of commercial real estate loans.

Within 60 days it must revise its loan policies on renewing credit to existing borrowers, and revise its loan-to-value limits to follow federal regulations.

Enforcement actions by federal or state banking regulators are considered serious actions.

First Priority Bank of Bradenton was hit with a "prompt corrective action directive" by the Federal Deposit Insurance Corp. just one month before it became the nation's eighth bank failure of 2008.

Venice-based Community National Bank of Sarasota County entered into a "formal agreement" with the Office of the Comptroller of the Currency in April to toughen its lending operations after the agency discovered "unsafe and unsound" banking practices. Read story here.

First Priority Shutdown Makes National News

Small Florida bank is 8th U.S. failure this year
Friday August 1, 9:51 pm ET

WASHINGTON (Reuters) - Bank regulators closed a small Florida-based bank on Friday, the eighth U.S. bank to fail this year under pressure from a weak economy and a credit crisis precipitated by falling home prices.

The Federal Deposit Insurance Corp said First Priority Bank had $259 million in assets and $227 million in deposits and its failure will cost the federal fund that insures deposits an estimated $72 million.

SunTrust Banks Inc (NYSE:STI - News) has agreed to assume the insured deposits of First Priority, whose six branches will reopen Monday as branches of SunTrust Bank.

Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.

It is the first bank to fail in Florida since Guaranty National Bank of Tallahassee failed in March 2004, according to the FDIC, which blamed the failure on exposure to the real estate market, predominantly in the construction lending area.

Florida is among several states whose housing markets have seen the sharpest declines.

The biggest bank failure by far this year is IndyMac (Other OTC:IDMC.PK - News), seized on July 11 with $32 billion in assets and $19 billion in deposits as of March, and the third-largest bank insolvency in U.S. history.

The FDIC oversees an industry-funded reserve used to insure up to $100,000 per account and $250,000 per individual retirement account at insured banks.

The agency also has running tally of problem banks that its examiners closely monitor. At the end of first quarter, 90 institutions were on that list.

The FDIC does not name the institutions on the list, which is expected to be updated this month for the second quarter.

(Reporting by John Poirier; Editing by Tim Dobbyn)

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