Cooter, who would not disclose exact figures, said Independence needs less than half of the $16 million Gaithersburg-based HarVest Bank of Maryland required to stay in business. The D.C. bank’s assets shrunk nearly 17 percent to $89.3 million in the first quarter compared to a year earlier, meaning Independence no longer needs as much capital as before.
Time ran out on HarVest in April when regulators seized its assets and deposits, turning them over to McLean-based Sonabank. The bank’s days were numbered once its capital reserves fell below 2 percent of its total assets. Independence is not in that danger zone.
Cooter said he is “confident the situation at Independence will be successfully resolved without government intervention.”
Independence is still operating in the red. The bank posted a loss of $350,000 in the first quarter, following four consecutive quarterly losses. Yet it has whittled down the number of problem loans on its books. Nonperforming assets made up roughly 10 percent of total assets, down from 12.3 percent the same quarter a year earlier.
“The efforts to work out of these problems have in large part been successful, so I just don’t see the bank suffering the same fate as HarVest,” Cooter said.
In six years, regulators have slapped Independence with three cease-and-desist orders for operating with insufficient capital, inadequate earnings to fund growth and excessive trouble loans.
Banks must maintain a core capital ratio of at least 8 percent and a total risk-based capital ratio of at least 12 percent to be considered adequately capitalized. Independence’s current ratios are 4.17 percent and 7.93 percent. Officials at the bank deferred all questions to Cooter.
In 2007, Independence was taken over by its largest shareholder, Morton A. Bender, after a series of lawsuits and shareholder dust-ups. Bender, who could not be reached for comment, tried in 2009 to merge the bank with Rockville-based Colombo Bank, which he also controls. Regulators killed the deal.
Similar to Independence, Colombo is contending with its share of problem loans rattling its balance sheet. The bank is also under regulatory orders, but has higher capital ratios than its cousin — at 5.08 percent and 12 percent.
Colombo has narrowed its losses from $336,000 in the first quarter of 2011 to $130,000 for the three months ending March. Its nonperforming assets now stand at 7.9 percent of its total $149.1 million in assets.
Cooter said Colombo is nearing a point of resolving its capital woes.