American Gateway Bank President and CEO Don Ayres says the 107-year-old bank is taking steps to address about $35 million in problem loans—accounting for roughly 11% of the bank’s total portfolio—that led federal and state regulators to issue a consent order on Dec. 21.
The Port Allen-based bank has agreed to the consent order from the Louisiana Office of Financial Institutions and the Federal Deposit Insurance Corporation, which effectively requires it to outline a plan to improve the quality of the loans, implement the plan according to a timeline and maintain a minimum capital-to-asset ratio.
Ayres says the bank is in good financial health and that he does not anticipate any branch closures or employee layoffs as a result. While the bank posted a $120,000 loss in 2011, Ayres notes, it profited $400,000 in the fourth quarter and expects to make a profit in 2012.
Ayres says 74% of the problem loans are currently less than 30 days past due and are being paid upon as agreed. Past due and nonaccrual loans as a percentage of all loans have been reduced by roughly 31% since the middle of 2011, he adds.
“We’ve been working on this for the past two or three years, and we’ll continue cooperating with (the LOFI and FDIC) to work through this,” Ayres says. “We feel good about our earnings expectations for 2012, and I’m confident that every month is getting better.”
The consent order calls for Gateway to maintain an 8% capital-to-asset ratio. Ayres says the bank is currently at 8.6% and expects to improve that number over the coming year.
Ayres cites the economic downturn as the primary factor leading to the consent order, noting 98% of the bank’s loans are made in the Baton Rouge area.
“As a result, the bank has seen increases in its loan losses, which were fueled by rising local unemployment, depressed real estate values, and the impact of the economic slowdown, all of which have made it difficult for some of the borrowers to repay their loans,” he says.
American Gateway Bank was one of nine throughout the country issued a consent order from the FDIC for problem loans in December.
