LITTLE ROCK — Chambers Bank of Danville, which lost almost $18 million in 2010, has been sanctioned by the Federal Deposit Insurance Corp., the regulator said Friday.
The order was issued against the bank Dec. 21, but not released until Friday.
The bank, which has about $720 million in assets, has experienced lending problems with the real estate market in Northwest Arkansas, said John Chambers, the bank’s chief executive officer.
“Without question, the real estate market in Northwest Arkansas has been in a downward spiral since sometime in 2007,” Chambers said. “We have been cleaning those wounds since.”
Chambers Bank’s loss in 2010 was the most in the state that year. Though the bank earned $460,000 in the first nine months last year, Chambers said it will report a total loss of about $5.5 million for the year.
“We took an aggressive approach to clean this up,” Chambers said in a telephone interview Friday. “That did turn those earnings into a negative.”
Chambers said the real estate market is “showing signs of life” and that the bank would address what is required by the FDIC to try to make a profit for 2012.
With the losses Chambers Bank has had, it’s not surprising that it would be reprimanded, said David Kern, chairman of bank management at Arkansas State University.
“That will raise the awareness of regulators,” Kern said. “But that doesn’t mean they are going to fail. It means they have some problems and need to work on them.”
Chambers Bank, which did not admit or deny any charges of unsafe or unsound banking practices, was ordered by regulators to:
Hire a bank consultant, who will develop an analysis of the bank’s management needs.
Charge off all assets that the FDIC or the state Bank Department considers a loss.
Maintain its capital ratio at 9 percent or higher of its total assets.
There are 17 banks in Arkansas that have been reprimanded by federal regulators and another 21 sanctioned by the state Bank Department.
But only two banks in Arkansas have failed since the beginning of the recession in 2007.
Arkansas’ banking structure is tied to real estate, Kern said.
“You’re going to have some impact from that,” Kern said. “But with the history of this financial crisis, Arkansas has done well to have no more failures than it has.”
Only six states in the country have seen one failure and five have had two, Kern said.
Georgia has had 74 bank failures, Florida has had 58 and Illinois has had 46, Kern said.
Chambers Bank has never been under a consent order, Chambers said.
“We know why we’re there,” Chambers said. “We’ve addressed most, if not all, of the issues and see this year as a positive.”
Business, Pages 31 on 01/28/2012