FDIC ousts Coast Bank chief
The Bradenton bank is issued a "cease-and-desist" order to fend off a financial crisis.
By James Thorner, Times Staff Writer
Published May 26, 2007
For months, as Coast Bank's stock plunged below $3 and hundreds of homes loans veered toward default, federal regulators held their tongues.
They broke their vow of silence dramatically Friday by forcing the resignation of president Brian F. Grimes and accusing the Bradenton bank of "unsafe and unsound banking practices and violations of law and regulations."
The Federal Deposit Insurance Corp. issued the bank a formal cease-and-desist order that outlined corrective action to fend off a financial crisis that began four months ago.
In January, Coast revealed 482 problem loans tied to St. Petersburg builder Construction Compliance Inc. CCI promised to build no-money-down investment homes in Sarasota County but walked off the job last fall as the housing market slumped.
"It's one of the worst things a bank goes through, " Miami-area banking expert Ken Thomas said of the FDIC order. "It's a nightmare for a bank."
You wouldn't know it after hearing from bank officials on Friday. The bank replaced Grimes with Anne V. Lee, its outgoing chief operating officer and a Coast employee since 2003.
Lee, 49, reassured customers that their deposits are insured and that Coast will operate normally under the watch of regulators. Lee is the bank's fourth president in slightly more than three years.
Coast also retained Grimes as a board member but declined to discuss what his severance package might be. His predecessor as president, Brian Peters, walked away with $743, 000 last year.
"We believe this order provides a good road map for the bank for working through these problems, " spokesman Tramm Hudson said.
In issuing the order, the work of several months, the FDIC raked over much of Coast's operations.
Aside from singling out "hazardous lending practices, " regulators slammed the bank for "inadequate management, " "ineffective audit programs" and "operating with a board of directors that has failed to provide adequate supervision."
As part of a long list of demands, the regulators ordered Coast to establish a "compliance committee" that would contain at least 3 members independent of the bank. It told the bank to collect on or write off some of its problem loans and boost its capital by selling more stock or hitting up board members for more cash.
"This is the FDIC, " said Thomas, who predicts Coast will merge with an out-of-state bank eager for Florida territory. "They can do whatever they want. They control the bank."
James Thorner can be reached at email@example.com or (813) 226-3313.