o Previously: First Independent Bank suffered loan losses that lowered its capital ratios and earned it “problematic” ratings from independent analysts.
o What’s new: First Independent received a $19.2 million capital infusion from its holding company in January.
o What’s next: The Federal Deposit Insurance Corp. will release the bank’s first quarter 2010 results in May.
First Independent Bank has received a $44 million capital infusion from its holding company, First Independent Investment Group, over the past nine months, according to the bank and federal regulatory filings.
Mounting loan losses from the bank’s commercial real estate portfolio, paired with increased capital requirements from the Federal Deposit Insurance Corp. prompted the additions, said Stacey Graham, chief strategy officer at First Independent.
Some $19.2 million came in January, marking the third time in the past year the holding company has stepped in to bolster the balance sheet of the Vancouver bank, Clark County’s second-largest by market share.
In 2009, the bank received a total of $24.8 million in equity from the Firstenburg family, the holding company’s only shareholders.
The cash boost puts First Independent on firmer financial footing, pushing it higher into the ranks of banks considered “well-capitalized” by FDIC standards.
First Independent’s finances were recently called into question by one of its largest depositors, Clyde Holland, who filed a lawsuit against the bank earlier this month after his company defaulted on a $14 million commercial real estate loan. Holland, a Vancouver real estate developer with projects throughout the West Coast, alleges First Independent failed to uphold a commitment to extend the loan, in part, because the bank wasn’t adequately capitalized.
The bank, which has also sued Holland to collect his debt, maintains its financial health is sound and wasn’t a consideration in the bank’s decision to sue Holland.
With total assets of $917 million on Dec. 31, First Independent’s total risk-based capital ratio reached 12.4 percent, up from 11.7 percent in the quarter ending Sept. 30. A bank must maintain a ratio higher than 10 percent to be considered well-capitalized.
With January’s cash infusion, capital levels have since risen further to bring the leverage ratio to about 13.5 percent as of Feb. 28, 2010, Graham said.
“We’re not anticipating any additional capital infusions,” she said.
The fourth quarter cash infusion wasn’t enough to boost the bank’s rating with Bauer Financial, however. The independent rating firm, which rates banks based on quarterly call report data from the FDIC, gave First Independent two out of five stars in the quarter ending in December — “a problematic” rating.
“Looking at the year end, they’re very well capitalized; the challenges come in on the delinquent loan side,” said Karen Dorway, president and director of research at Bauer Financial in Coral Gables, Fla., a frequently cited source of bank ratings.
The bank held nearly $73 million in delinquent loans in December, up from $37 million a year earlier. As a result, the bank must continue to set aside loan-loss reserves, which suppresses its overall capital levels, Graham said.
Bankrate.com, another independent rating firm, gave the bank one star in its latest rating as of Sept. 30, marking the bank’s third consecutive quarter with one star, rating it significantly below the average health of its peers. The company wouldn’t speculate on whether the bank’s fourth quarter capital infusion would be enough to boost its star rating to be released in April.
“The factors that are working against them are their level of non-performing assets and below-normal loss reserve coverage,” said Greg McBride, a senior financial analyst at Bankrate.com, based in North Palm Beach, Fla.
The FDIC also produces its own bank ratings, based on the bank’s call reports and internal investigations. But those ratings aren’t released to the public, leaving no definitive source of information on whether a bank is likely to survive or fail.
