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Bank agrees to tighter regulations

FDIC places Bank of Granite under cease and desist order.

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Bank of Granite

By John Dayberry | Hickory Daily Record

Published: September 4, 2009

GRANITE FALLS - Regulators have placed Bank of Granite under a "cease and desist" order, tightening regulations on the troubled financial institution.

Parent company Bank of Granite Corp. announced Friday that the bank has agreed to the order with the Federal Deposit Insurance Corp. and North Carolina's banking commissioner.

A cease and desist order is considered one of the most serious regulatory steps the FDIC can take in its oversight of banks.

Bank of Granite's agreement requires the bank to cease and desist from practices that include operating with inadequate capital and operating with a large volume of poor quality loans.

The order instructs the bank to change certain operating practices to improve its earnings performance and capital levels.

Bank of Granite also must report to the FDIC and the N.C. commissioner of banks at least quarterly to address the management and oversight of the bank, an increase in its capital levels and other issues such as reducing concentrations of loans and classified assets.

Bank of Granite said the order does not affect its customer deposits or loans.

"We are committed to working with the FDIC and the commissioner to implement the actions required by the order," said Scott Anderson, chief executive officer.

"We will do so while continuing to meet the needs of our customers in the communities we serve."

Bank of Granite lost $4.5 million, or 29 cents per diluted share, in the latest quarter, down from a net loss of $3.4 million, or 22 cents per diluted share, a year earlier.

For the six months ended June 30, the company reported a net loss of $8.7 million, or 57 cents per share, compared to a net loss of $1.6 million, or 11 cents per share, for the comparable period of 2008.

Anderson said deposits in Bank of Granite will continue to be covered by FDIC insurance up to $250,000 and that non-interest-bearing transaction accounts are fully covered by FDIC insurance.

For years considered one of the strongest community banks in the country, Bank of Granite has lost millions of dollars during the last two years, suspended its shareholder payout and cut back on lending.

For the past year, the bank has been under a less-formal sanction called a "memorandum of understanding," or MOU. Friday's cease and desist order indicates the bank has not sufficiently met the orders issued in the MOU.

Bank of Granite shares closed Friday at $1.49, down 21.6 percent from Thursday's closing price of $1.90 per share.

Anderson said the bank is making progress, and is confident in its future.

"We're going to get through this," he said.