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The bad news has continued for San Rafael’s Tamalpais Bank since I broke the story that the institution had lent the equivalent of almost all its capital to the highly leveraged, publicly excoriated, and increasingly bankrupt Lembi Group in the middle of the 2008 real estate crash. In January, the Federal Reserve took enforcement action against the parent company, following up on the bank’s cease and desist order from the FDIC last September. And on February 16, the bank announced total losses of $28.2 million for the last quarter and $37.6 million for 2009.
As grim as the news has been, the bank may be in even worse shape than acknowledged in media reports.
First, the bank is currently in violation of the terms of the FDIC’s cease and desist order. According to its guidelines, the bank was supposed to increase its capital to specific levels by December 31, but it has failed to do so. The bank’s capital fell to $18.8 million (down from $55.7 million the prior year), and its capital ratios are well below the standards the FDIC set.
Second, the bank’s parent company may be in default on its $6 million loan from Pacific Coast Bankers Bank. According to an agreement reached between the two banks, Tamalpais was supposed to pay down $2 million of the principal by November 30. But according to the company’s end-of-the-year SEC filing, that payment doesn’t appear to have been made. (See “long term debt” line.)
Third, some of the unsound banking practices alleged by the FDIC may yet reach the light of day. For example, on September 30, 2009, William Evans, a former underwriter at Tamalpais, sued the bank for wrongful termination, alleging age discrimination. Evans was (predictably perhaps) fired after the bank got out of wholesale lending, hired new staff, and began unwinding its troubled portfolio. But Evans’ suit made an eye-opening allegation:
Plaintiff was hired as a Loan Underwriter for BANK on March 12, 2001. Plaintiff came to this job with over 30 years’ experience in general banking centered in structuring, pricing, underwriting, approval and servicing/collection of business, commercial and consumer loans. Plaintiff received good performance evaluations each year until 2006. From that point forward BANK failed to conduct performance evaluations for many of its employees including Plaintiff. Plaintiff received pay raises and bonuses each year until 2009 when he received a bonus, but no pay raise.
Nice work, if you can get it. It should be noted, however, that Tamalpais Bank denied all of Evans’ charges in its legal response.
Why has the local media failed to report these additional pieces of information, all based on public documents, despite the importance of the Tamalpais Bank story to the ongoing troubles of the banking industry? I first knew about Tamalpais Bank’s recent losses by February 1, when it filed its call report with the FDIC. But there were no news stories until February 16, after Tamalpais issued its press release. Clearly the local media is taking its lead from the company’s own bulletins.
UPDATE: The FDIC has directed the bank (issued a “supervisory prompt corrective action directive”) to meet its regulatory capital guidelines or to sell or merge with another bank by March 21.
“Tamalpais now seems to be in the regulatory version of the 2 minute drill,” a former bank regulator commented to me via e-mail. “They’re behind 30 to zero, and 4th and 20 on their own 2 yard line.”
Will Tamalpais be the third Bay Area bank to fold in the wake of the financial downturn?
UPDATE 2: Andrew Ross at the Chronicle has kindly linked to our story. Check out the comments for an interesting conversation about the Lembis and Tam Bank.
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This entry was posted on Thursday, February 25th, 2010 at 12:14 pm and is filed under High Finance and Misdemeanors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
[...] from David Johnson at Contrarian Pundit: Tamalpais Bank Update The bad news has continued for Tamalpais Bank since I broke the story last December that the [...]
[...] from David Johnson at Contrarian Pundit: Tamalpais Bank Update The bad news has continued for Tamalpais Bank since I broke the story last December that the [...]
[...] from David Johnson at Contrarian Pundit: Tamalpais Bank Update The bad news has continued for Tamalpais Bank since I broke the story last December that the [...]
[...] from David Johnson at Contrarian Pundit: Tamalpais Bank Update The bad news has continued for Tamalpais Bank since I broke the story last December that the [...]
Great report. Looks like a NOD was filed 2/16/2010 on a ~$10 mil loan from Tamalpais up here in Healdsburg.
All the half finished homes just hit the market last week. Example:
http://www.redfin.com/CA/HEALDSBURG/627-LARKSPUR-DR-95448/home/22417834
Looks like a mess.
Thanks for the tip, HHB. I’ll check that out. And I’d love to hear more. Another birdie told me a similar story today. You’ve got mail, as they say.
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