Guaranty Bank is on the hot seat with federal regulators again.
The order, issued April 1 and disclosed by the OCC last Friday, said Guaranty is “significantly undercapitalized” and will have to take immediate actions:
• Set up a compliance committee that will submit quarterly progress reports to the board of directors.
• Hire a full-time chief financial officer, who must receive OCC approval.
• Create a two-year strategic plan by May 30, subject to OCC approval.
• Get a written assessment within 60 days of the capabilities of the bank’s executive officers “with particular emphasis on their proposed responsibilities to execute the strategic plan and correct the concerns raised in the most recent report of examination.” That report has not been made public.
• No contracts can be made with a third party to sell, merge or recapitalize the bank without OCC approval.
• No sale or transfer of any bank assets worth more than $250,000 can be made without OCC approval.
The regulations are harsh, said Jon Bruss, chief executive of Fortress Partners Capital Management, Hartland. But he said the bank’s finances, as indicated in its Dec. 31, 2013, report to regulators, do raise concerns.
While Guaranty reported net income of $17.1 million for 2013 — the third-largest profit among Wisconsin banks — it came about when Guaranty sold its Shelter Mortgage division in the first quarter of 2013 for an undisclosed amount. For the other three quarters of 2013, the bank had a net loss. At the same time, Guaranty reported that as of Dec. 31, 2013, 15.3 percent of its loans were behind on payments — compared to 11.9 percent a year earlier — and 4 percent were charged off, or taken off the books. Total risk-based capital was 5.6 percent, up from 2.9 percent the year before, but regulators normally consider 8 percent to be adequate, under normal conditions.
The capital ratio is a measure of a bank’s strength and its financial reserves.
The figures show that Guaranty “has limited capital resources to absorb losses,” Bruss said.
Guaranty already was under a “cease and desist” order issued by regulators in 2009, requiring the bank to shore up its finances. A capital restoration plan the bank submitted in 2012 was rejected by regulators, the new order said.
Guaranty is a four-generation, family-owned bank with 161 branches in five states. Efforts to reach president and chief executive Doug Levy were unsuccessful.