Banking Woes

If I told you that a bank was short $20 million in equity capital and also seriously short of the needed reserves to cover  its growing delinquent loan portfolio I could be describing the financial situation facing dozens of banks across America. But the bank I am describing is Metropolitan National – Little Rock-based – with a large presence in Northwest Arkansas.

If you ask bank CEO Lunsford Bridges, Metropolitan’s financial woes are actually improving – a statement he made Friday in a press release. However, banking expert John Dominick said he could see no evidence of improvement after reviewing the bank’s third quarter call reports on file with FDIC.

“This is a very serious situation for the bank. Regulators are likely to tighten their grip, not loosen up given the deterioration in the bank’s financial health,” Dominick said.

In the third quarter the bank lost $13.7 million. It has bled losses of $54 million since January. Its equity capital has eroded by some $40 million in the past year despite a $25 million capital infusion from TARP  in January.

The bank has been out of compliance with its OCC enforcement action since June. This prompted a second enforcement action by the Federal Reserve Bank in August.  The bank’s capital shortfall has worsened from $10 million to $20 million since the third quarter filing.

The FDIC has closed some 106 banks this year, some were healthier than Metropolitan National.

Bridges said the bank has sufficient time to regain compliance with its regulators. Dan Dykema of the failed ANB said the same thing.

The FDIC does have its plate full, but they are also about cutting the losses sooner, rather than later.

I am not saying Metropolitan National won’t work out of this dire situation, but when I asked the bank to share how they plan to return to profitability in 2010, they declined to comment.

The bank charged off $55 million in bad debt in the third quarter and recovered only $134,000. The bank still faces $140 million in nonaccrual loans with only $41 million set aside to cover those losses should be charged off too. The bank’s problem loan-to-asset ratio is 116 percent.  The benchmark for failed banks is roughly 100 percent. is a great site that details the importance of tracking  a bank’s troubled asset ratio. While the site has not been updated to include the recent third quarter data, second quarter data is accessible.

Why should we care?

This bank took $25 million in TARP money that it may not be able to repay taxpayers if the troubles worsen.

The bank spent $30 million expanding its footprint in Northwest Arkansas between 2005 and 2006. They built 13 branches in Benton and Washington counties. Local consumers have $100 million in those banks, and dozens of other local consumers borrowed more than $600 million from the bank between 2005 and 2007.

Keep an eye on the Metropolitan National. I plan to.


2 Responses to “Banking Woes”

  1. jim penick Says:

    thank you for your honest assessment of an institution to which our government is exposing serious potential harm to the public

  2. T Says:

    Kim nice work. Keep the truth coming!!

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