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Bank told to resolve bad loans

In Uncategorized on November 4, 2008 at 1:13 pm

Tuesday, November 4, 2008

Last updated: Tuesday November 4, 2008, EST 7:44 AM BY RICHARD NEWMANSTAFF
WRITER

http://www.northjersey.com/business/news/33809724.html

Citizens Community Bank in Ridgewood has received a cease-and-desist order from the Federal Deposit Insurance Corp., alleging “hazardous” lending practices and “unsatisfactory” capital. A cease-and-desist order is one of the harshest of regulatory enforcement actions and is rarely used. The single-office bank, which remains open for business, is the first Bergen County-based depository institution to receive such an order in four years.

The bank is operating with “an excessive level of adversely classified loans and/or delinquent loans,” and “inadequate earnings to cover losses, support operations and augment capital,” the regulator said in the order issued last month.

The state-chartered commercial bank also is accused of operating a mortgage division “without proper oversight and risk analysis,” the agency said.

The FDIC has ordered the bank to get problem loans resolved, to bring capital ratios up to acceptable levels and to submit to increased oversight from the FDIC and state regulators.

The bank also was ordered to hire an independent third party to evaluate the performance of executives and directors and to come up with a plan “to terminate, rotate or reassign officers and staff.” Banks can be fined by the FDIC for not complying with cease-and-desist orders and in extreme cases they can be shut down, said LaJuan Williams-Dickerson, a spokeswoman for the agency. She declined to comment on Citizens Community Bank’s situation.

The last FDIC cease-and-desist order issued against a Bergen County-based bank was in 2004, when the agency forced Mahwah–based regional bank Hudson United Bancorp to improve its money-laundering controls. Hudson United had failed to monitor the money-laundering risks in accounts held by black-market currency dealers and offshore money dispatchers. Criminal investigators in New York City found that more than $1 billion flowed through suspicious Hudson United accounts over a six-month period in 2003 from customers from South America and the Caribbean.

Hudson United paid a $5 million settlement in early 2004 to New York City authorities, and the FDIC order that followed required the bank to review its procedures for identifying suspicious transactions and establish an internal committee to monitor compliance with anti-money-laundering laws. The order was lifted in 2005, a few months after the bank agreed to be acquired by TD Banknorth.

The order against Citizens Community — with which the bank has agreed to comply without admitting or denying wrongdoing — followed a state action on Sept. 10 against the bank by the Department of Banking and Insurance.

Details on that order were not immediately available. The FDIC order was released Friday night and has been in effect since it was issued Sept. 15.

James J. Bovino, one of the bank’s founders who has served as chairman of the board, could not be reached for comment.

Bovino is head of four real estate companies that own apartment buildings in Westwood and River Vale and that filed last month for Bankruptcy Court protection from creditors, who are owed up to $40 million.

Michael Rehill, Bovino’s bankruptcy attorney, said Monday “there is no connection” between any of the bankrupt entities and Citizens Community Bank.

The four-year-old bank said on its Web site that it specializes in serving doctors, lawyers and accountants in the Ridgewood area. James Atieh, who was promoted from chief financial officer to president and chief executive officer in April, did not respond to a request for comment.

E-mail: newman@northjersey.com
Citizens Community Bank in Ridgewood has received a cease-and-desist order from the Federal Deposit Insurance Corp., alleging “hazardous” lending practices and “unsatisfactory” capital. A cease-and-desist order is one of the harshest of regulatory enforcement actions and is rarely used. The single-office bank, which remains open for business, is the first Bergen County-based depository institution to receive such an order in four years.

The bank is operating with “an excessive level of adversely classified loans and/or delinquent loans,” and “inadequate earnings to cover losses, support operations and augment capital,” the regulator said in the order issued last month.

The state-chartered commercial bank also is accused of operating a mortgage division “without proper oversight and risk analysis,” the agency said.

The FDIC has ordered the bank to get problem loans resolved, to bring capital ratios up to acceptable levels and to submit to increased oversight from the FDIC and state regulators.

The bank also was ordered to hire an independent third party to evaluate the performance of executives and directors and to come up with a plan “to terminate, rotate or reassign officers and staff.” Banks can be fined by the FDIC for not complying with cease-and-desist orders and in extreme cases they can be shut down, said LaJuan Williams-Dickerson, a spokeswoman for the agency. She declined to comment on Citizens Community Bank’s situation.

The last FDIC cease-and-desist order issued against a Bergen County-based bank was in 2004, when the agency forced Mahwah–based regional bank Hudson United Bancorp to improve its money-laundering controls. Hudson United had failed to monitor the money-laundering risks in accounts held by black-market currency dealers and offshore money dispatchers. Criminal investigators in New York City found that more than $1 billion flowed through suspicious Hudson United accounts over a six-month period in 2003 from customers from South America and the Caribbean.

Hudson United paid a $5 million settlement in early 2004 to New York City authorities, and the FDIC order that followed required the bank to review its procedures for identifying suspicious transactions and establish an internal committee to monitor compliance with anti-money-laundering laws. The order was lifted in 2005, a few months after the bank agreed to be acquired by TD Banknorth.

The order against Citizens Community — with which the bank has agreed to comply without admitting or denying wrongdoing — followed a state action on Sept. 10 against the bank by the Department of Banking and Insurance.

Details on that order were not immediately available. The FDIC order was released Friday night and has been in effect since it was issued Sept. 15.

James J. Bovino, one of the bank’s founders who has served as chairman of the board, could not be reached for comment.

Bovino is head of four real estate companies that own apartment buildings in Westwood and River Vale and that filed last month for Bankruptcy Court protection from creditors, who are owed up to $40 million.

Michael Rehill, Bovino’s bankruptcy attorney, said Monday “there is no connection” between any of the bankrupt entities and Citizens Community Bank.

The four-year-old bank said on its Web site that it specializes in serving doctors, lawyers and accountants in the Ridgewood area. James Atieh, who was promoted from chief financial officer to president and chief executive officer in April, did not respond to a request for comment.

E-mail: newman@northjersey.com

http://www.northjersey.com/business/news/33809724.html

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