10:44 PM PST on Wednesday, February 2, 2011
By TIFFANY RAY
Premier Service Bank is under closer scrutiny by the U.S. Treasury Department after missing six dividend payments through the Troubled Asset Relief Program, and by regulators, who have ordered the bank to raise capital ratios by the end of the month.
According to a recent report by business research firm SNL Financial, the Riverside-based bank had paid about $54,500 in dividends on the government’s $4 million investment in the bank, but it owed about $324,000 more. It is one of four banks in the Riverside-San Bernardino-Ontario metro area that received TARP funding in 2008 and 2009, but the only one that has missed payments. Nationally, 135 banks had missed at least one dividend payment under TARP, according to the December SNL report. Twenty banks had missed six or more.
As of Nov. 30, Premier Service Bank has agreed to include observers from the Treasury Department in its board meetings.
On Dec. 1, the Federal Deposit Insurance Corp. issued a consent order requiring Premier Service Bank to boost its capital ratios by the end of February.
The order also requires the bank to develop a three-year strategic plan as well as written plans for reducing its concentration of commercial real estate loans, for reducing its reliance on non-core funding sources and improving liquidity, and for correcting weaknesses in loan underwriting, credit administration and information technology systems, among other things.
The bank announced this week it would comply by raising up to $5 million in a common stock offering sometime in February.
Kerry Pendergast, president and CEO of Premier Service Bank, said consent orders are “more commonplace than they are foreign to our industry, particularly in this marketplace.” The bank is focused on complying with the order, he said, and he believes it will be in full compliance in a “fairly reasonable amount of time.”
Michael Natzic, senior vice president and community banking specialist with Stone & Youngberg in Big Bear Lake, said needing to raise new capital is “very much the norm” in the current banking environment. “We’re very much now at the point in the cycle where banks are starting to get through the worst of problems,” he said.
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