By Dan Shaw, Evansville Courier & Press
Federal regulators are taking formal action to ensure Integra Bank Corp. deals with the bad loans on its books.
Integra announced today it had entered into an agreement with the Office of the Comptroller of the Currency, listing steps the bank must take to overcome its troubles. The measures are meant in general to reduce the number of problem loans on the bank's books and improve its bottom line. Integra must submit reports every quarter to keep regulators abreast of its progress.
Mike Alley, interim Integra chairman and chief executive officer, said the bank had begun to take the mandated steps even before reaching the agreement.
"It's a formalization of something we have been working on for the last several months," Alley said. "We concur with all the recommendations of the OCC."
Like many banks, Integra has suffered from loans made for residential real-estate. Those troubles led in part to its loss of $28.5 million in the first quarter of the year.
H. Ray Hoops, a member of the Integra board, said the economy has made formal agreements between banks and regulators far more common in recent times.
"This is not an unusual happening in this day and age," he said.
Alley said Integra has already made progress on a number of fronts. One example is the senior officer hired for the bank's "loan workout" department and assigned to the Chicago area, where many of the bank's worst loans are concentrated. That step was taken before March 31, the end of the first quarter.
The government's action stops short of being a "cease and desist" order, which could be enforced by a federal court. Still, the bank is at risk of incurring penalties.
Those could include fines imposed on managers or members of Integra's board of directors. In particular, board members are responsible for making sure the reforms move forward according to a set schedule.
One mandate gives the Integra board 45 days to develop a staffing plan for the loan workout department. Once the plan is approved, it must be put into practice within 30 days.
Alley said some Integra departments have had less work to do as the bank lowers its rate of making various types of loans. Workers have been culled from those places and reassigned to the loan workout department. The bank has also hired people with the needed abilities and experience.
Alley said he is confident the board can meet the deadlines. Still, bank officials don't expect to be free from the formal agreement until Integra's account books show better results.
"That's going to take probably a few quarters to illustrate that these things we are implementing are having the desired effects and are improving our credit quality," Alley said.
Integra is now trying to hire a permanent CEO and chairman. Alley took over those positions after the former holder, Mike Vea, resigned in May. Vea remains president of the bank.
Integra has hired the firm Crist/Kolder Associates, based in Hinsdale, Ill., to help in the search for a successor. Hoops said the board expects to hear a report on the firm's progress after the first week of June.
"In my conversations with them, they feel good about the people who are interested in this," he said.
Shares of Integra were being traded at $1.70 this afternoon, down 15 cents from the previous close of the market.