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March 26, 2010

Savings Bank of ME ordered to add capital

By The Mainebiz News Staff

Gardiner-based Savings Bank of Maine has until Sept. 30 to get its financial house in order or federal regulators say the institution will have to sell its assets or arrange to be taken over by another bank.

The Office of Thrift Supervision is requiring the bank to double its capital-to-assets ratio to 10.76% by the end of September, according to the Portland Press Herald. The bank posted $892.5 million in assets as of Dec. 31, 2009, compared with $974.6 million in assets a year earlier, according to the regulator. Savings Bank of Maine President Arthur Markos told the paper he's confident the bank can increase its capital holdings to meet the federal Office of Thrift Supervision's deadline. The bank's deposits have "stabilized," and the bank has posted a profit in recent months, Markos said, but is still struggling to cover loan losses. Office of Thrift Supervision data shows the bank recorded $82.1 million in loans that are unlikely to be repaid at the end of 2009, up from $18.5 million a year earlier.

The federal directive follows a cease-and-desist order the bank received from the Office of Thrift Supervision in August 2009, which said the bank was engaging in "unsafe or unsound practices," including approving high-risk loans and operating with insufficient capital. The order imposed tighter lending restrictions and called for internal restructuring. In a December interview, Markos told Mainebiz most of the problem assets are related to the bank's commercial loans, and that the recession made it harder for some of the bank's business customers to make their payments.

Go to the article from the Portland Press Herald >>

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