Citizens Union Bank cleared by regulators

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Consent order lifted because of bank’s financial recovery

By Lisa King

Citizens Union Bank, which since 2010 has been under the scrutiny of state and federal banking regulators because of problem loans, has been cleared to move forward.

On Thursday, the Federal Deposit Insurance Corporation in Washington D.C., and the Department of Financial Institutions in Frankfort issued a termination of the consent order that it imposed on CUB in January 2010 that was designed to help prevent banks from getting into serious financial difficulty.

That order ends a 3.5-year period of significant change at the bank that included an acrimonious separation with longtime CEO Billie Wade, resignations on its board of directors and other changes at the top of its management structure.

“We set a goal to have it [the consent order] lifted by the end of the year, so we are ahead of schedule on that,”  CUB Bank President David Bowling said.

Charles Vice, commissioner of the Department of Financial Institutions, said that the consent order regarding CUB was terminated Aug. 8.

“When a bank improves their financial conditions and meets the requirements of that order, it is removed,” he said. “What that means is that their financial situation has improved enough so that that public action can be terminated.”

CUB CEO Darryl Traylor said that there is no certain time set by bank regulators for a bank to remain under a consent order.

“It’s on until they feel comfortable,” he said, adding that there are still 612 banks on the FDIC’s problem bank list.

Bowling said that the loans about which regulators were concerned were mostly made to real- estate developers who were struggling to keep their loans current when the housing market plummeted.

He said that regulatory capitol, a measure of a bank’s financial health, dipped to a low of 6.9 percent in December 2009, and the bank incurred losses from past-due loans that reached a high of 13 percent of its total loans in 2010.

Now, he said, past-due loans are at  3 percent, and regulatory capitol is standing at 9.28 percent, and the bank has been profitable in each month of 2013, earning a net income of $859,000, Bowling said.

Bowling said with guidance from regulators bank officials have been working hard to address those issues and that the bank emerged healthier and stronger.

“I don’t think there is any question but that we are a better bank today than when we went into this order,” he said. “We’ve made numerous changes in the way we operate in terms of policies and procedures and added some additional staff.

“Half of our senior management team has joined the bank since we went under the order, and we’ve added a treasury management department to help us better able to serve local businesses.”

The bank also revamped its lending policies and procedures and enhanced credit monitoring and control processes, as well as having lending and management staff work aggressively to resolve problem loans.

Traylor said CUB’s recovery is the result of a team effort.

“It has taken everyone one involved for the bank to recover in such a short period of time,” he said.

Bowling said not only the fact that the bank has persevered but also the manner in which it had done so is a source of pride to him.

“The thing that we are proudest of is that we were able to get through this without having massive layoffs of employees and without having to turn our backs on our customers,” he said. “We’ve had several people comment that we never stopped trying to meet the needs of the community, and our customers have been very loyal through this process. And we were also able to do this without taking any government bailout money.”

Traylor agreed.

“We have continued to be that community bank, and we have raised capitol from our own internal sources.”

Bowling said that he is very satisfied and pleased that the bank will be able to celebrate its 125th anniversary in October without being under the shadow of regulators.

“I think it’s great,” he said. “I think we’ve got as good a management team as this bank has ever had. We think we’re be better able to serve all types of customers today and that’s going to help us continue to grow and be prosperous.”