A community bank in Little Saigon, already on the brinks in its finances, received what’s considered a most serious notice from the FDIC, short of a takeover and shutdown.
The “prompt corrective action” notice was served by the FDIC to the First Vietnamese-American Bank on September 29, and was made public by the FDIC today, reports the OC Register here.
In its story, that paper says, “The Register is seeking comment from the bank.”
So did Nguoi Viet Daily News today, to no avail. The bank was having a staff meeting, said the receptionist.
The “prompt corrective action” notice is only served by the FDIC on the banks in biggest trouble. All banks recently shut down by the FDIC had previously gotten one of those. It’s something of a last-ditch opportunity for the bank to fix its own house before the FDIC takes over.
The notice served on First Vietnamese (read it on the FDIC web site here) declares that the bank is “critically undercapilalized,” the same buzzwords that would send a bank into receivership.
It is, on the other hand, nobody’s surprise that First Vietnamese is “critically undercapitalized.” The bank was under negotiations to be sold to two Filipino brothers for precisely that reason. Read here. When that potential sale was disclosed, a high-ranking employee of the bank had told Nguoi Viet that the bank was being battered because of one or two huge bad loans.
The FDIC’s notice may be revealing something about that sale. The FDIC disclosed that it first notified the bank of its “undercapitalized capital category” in February 2010. In March, the bank submitted a capital restoration plan. However, the notice says, the bank “has been unable to fulfill its terms.”
The FDIC’s notice forces the bank to find a buyer, either by selling enough shares to recapitalize itself, or by agreeing to be acquired by another bank.
Meanwhile, First Vietnamese is not allowed to “accept, renew or rollover any brokered deposits” – high interest jumbo CDs that intermediaries (the brokers) buy from the bank in exchange for a commission. In the last few years, the FDIC has seized upon brokered deposits as some sort of evil instruments that kill off weak banks.
The bank is also prohibited from paying bonuses or raises to its employees, officers and directors without FDIC prior written approval.
First Vietnamese-American Bank, located at the corner of Magnolia and Westminster, has a diverse group of shareholders that come from a variety of ethnic background, most prominently Korean.
The bank was founded in 2005 and went through three CEOs within the first 15 months.