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Failure has been the most common way out of enforcement actions in the current cycle, but outcomes may be improving.
February 8 -
The embattled Capitol Bancorp Ltd. eked out a small profit in the first quarter, thanks largely to a $16.9 million gain on the conversion of trust-preferred securities to common equity.
May 17 -
Capitol Bancorp said its annual report that it was notified on March 30 that it would receive a subpoena from the SEC's Chicago office concerning its third-quarter reporting.
April 1 -
The Federal Deposit Insurance Corp. said last week it had issued prompt corrective action orders to four of Capitol's 24 banks, including its three largest, in February. The directive to each was clear: Sell stock to raise capital to adequate levels, or find a buyer.
March 29
The Federal Deposit Insurance Corp. issued prompt corrective actions against five banks in January, telling them to either raise capital or be acquired by another institution.
The prompt corrective actions, which were released on Friday, said the banks, all owned by Capitol Bancorp Ltd. of Lansing, Mich., are "significantly undercapitalized" and had so far had failed to submit satisfactory capital restoration plans to their regulators. The orders also stated that companies' management teams had not shown the ability to return the banks to a "safe and sound condition."
The banks can reach an "adequately capitalized" level by selling stock or with cash contributions from their boards or shareholders. The banks can also accept an offer to be acquired by another company.
Their parent company, the $2.5 billion-asset Capitol, has already sold off several of its subsidiary banks in an effort to bolster its capital levels. Of the Capitol's other banks have also been hit with prompt corrective actions, the most severe of all enforcement orders.
The $90 million-asset First Carolina State Bank in Rocky Mount, N.C., the largest bank to be issue a corrective action, was notified by the FDIC in February 2011 that it was undercapitalized. At Sept. 30, its Tier 1 leverage capital ratio was 2.01%, down 300 basis points from a year earlier. The bank's noncurrent loans totaled 8.96% as more than 24% of its construction and development loans were at least 90 days past due.
The $86 million-asset Sunrise Bank in Valdosta, Ga., reported a leverage ratio at Sept. 30 of 2.01%, down from 3.16% a year earlier, according to data from the FDIC. Sunrise's noncurrent loans totaled 13% at Sept. 30 as almost a quarter of its construction and development loans were noncurrent.
The FDIC notified Sunrise in November 2010 that it was undercapitalized.
Pisgah Community Bank in Asheville, N.C., 1st Commerce Bank in North Las Vegas and Sunrise Bank of Albuquerque were all notified in August 2010 that they were undercapitalized.
More than 23% of Pisgah's loans were noncurrent at Sept. 30. The $30 million-asset company's Tier 1 leverage ratio dropped 64 basis points, to 2.02%.
The $32 million-asset 1st Commerce reported a leverage ratio of 2.08% at Sept. 30 with noncurrent loans totaling 20.3%. More than 26% of its commercial and industrial loans were noncurrent.
The $61 million-asset Sunrise Bank in Albuquerque, N.M., reported a Tier 1 risk-based capital ratio of 2.07%, down 46 basis points from a year earlier. Its noncurrent loans totaled 12.34%.
