Home Savings Bank ordered to boost capital and liquidity

Home Savings Bank ordered to boost capital and liquidity
Regulators order it to increase its capital

By Lois M. Collins
Deseret News
Published: Friday, Jan. 29, 2010 9:18 p.m. MST

SALT LAKE CITY — Home Savings Bank's board of directors has entered into an agreement with federal and state regulators to boost the bank's capital and liquidity.

The "stipulation to issuance of a consent order" does not admit or deny any unsound banking practices, according to the consent order released Friday by the Federal Deposit Insurance Corp.

John Sorensen, president of Home Savings, said the agreement is a response to existing trying economic conditions and the FDIC's stated resolve that all financial institutions increase their capital and cut back losses.

"I think our bank took action and, as a result, our bank's capital has increased." He said the bank's nonperforming loans and concentration of real estate loans have both decreased, and the bank has been "very successful" at raising capital.

The consent order says the bank will make sure its managers are qualified for their duties and any plans to hire senior executives or add new board members will be done only after getting approval from the FDIC's regional director.

The FDIC also told the bank's board to "increase its participation in the affairs of the bank, assuming full responsibility for the approval of sound policies and objectives and for the supervision of all the bank's activities." The board is to meet at least monthly.

On the money side, Home Savings was ordered to increase its capital to at least 11 percent of the bank's total assets. That capital is in addition to the fully funded allowance for loan and lease losses. The bank can do so, the FDIC said, by selling various types of stock; gathering cash contributions from the bank's board, shareholders or parent company; or other means that are approved by the regional director.

The bank also has to either charge off or collect various assets considered a "loss" as of June 15, 2009, and in phases reduce the percentage of its assets that are classified as "substandard."

Home Savings Bank has one branch each in Salt Lake City, Draper and Park City. Next year, it will be 50 years old.

e-mail: lois@desnews.com
© 2010 Deseret News Publishing Company | All rights reserved