By Don Mecoy, The Oklahoman, Oklahoma City
May 25--TULSA -- Strapped with bad loans and losses, Tulsa-based SpiritBank has struck an agreement with state and federal regulators to cut the size of the bank more than 20 percent to improve its capital position.
SpiritBank board member Tom Kimball said the company would reduce the bank's size by $300 million to boost its capital position and increase the bank's provision for troubled assets. On March 31, SpiritBank controlled assets of $1.25 billion.
"We want a right-sized SpiritBank for today and for the future," Kimball said in a statement. "We have supported our local communities and businesses for nearly 100 years, and these actions will ensure the strength and resiliency to continue for another 100."
Kimball said such voluntary agreements with regulators are more routine during times of broader economic distress.
"They are there to redouble efforts around safety and soundness," he said. "We want to be transparent with our stakeholders -- customers, communities and employees -- concerning the voluntary agreement, and the fact that a number of these changes have already been incorporated into the bank's operations."
State Banking Commissioner Mick Thompson said the agreement takes effect on Friday.
"The bank is already taking corrective action on the agreement with the FDIC and the state Banking Department," Thompson said.
Joyce Madewell, SpiritBank executive vice president of marketing, said the bank would sell some mortgage assets.
"We have the good fortune of having a large wholesale mortgage operation composed of loans (assets) that stay on our books for 30 days or so at a time," Madewell said. "We are able to move portions of this as needed to other financial institutions for a period of time that allows us the capital room to rid ourselves of problem assets."
Under the agreement, the bank is seeking to boost its capital ratio to 8.5 percent from the current 8.43 percent, she said. The capital ratio is the percentage of a bank's capital to its risk-weighted assets, which can be increased by selling some of those assets.
The bank is projecting a profitable 2013 as the economy continues to strengthen, although "2012 is looking like a year of recovery," Madewell said.
SpiritBank lost $5 million in the first three months of 2012, after posting losses of $6.4 million last year and $4.5 million in 2010, according to regulatory filings. The bank had $15 million in charge offs last year, and $21 million in charge offs in 2010, the filings show.
The bank opted to forego dividend payments last year to boost its loan loss reserves, which produced a $6.5 million revenue loss at the end of 2011, Kimball said.
Earlier, a regulator directed SpiritBank to delay repaying $30 million in federal funds it received as part of the government's Capital Purchase Program. Madewell said the bank's holding company "will fully redeem" the government's investment.
"The CPP (Capital Purchase Program), remember, is not a loan but rather an investment in stock of our holding company," Madewell said. "SpiritBank has exercised the provision for delay of payment at the direction of our regulator. However, we have a proposal at Treasury today to fully redeem the CPP amount."
SpiritBank in March 2009 was approved for participation in the program, and issued preferred stock to the government in exchange for $30 million. The funds must be repaid to the government at an interest rate of 5 percent per year for the first five years and 9 percent thereafter, according to the agreement with the Treasury Department.
Among the actions SpiritBank agreed to perform are increasing its capital ratios, changing its allowances for loan and lease losses, developing a plan to improve earnings and charging off more potentially troubled loans, the bank said.
SpiritBank employs 458 people and operates in 11 Oklahoma cities.
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