Letters to the Editor

Blaming regulators is irresponsible | Letters | March 19

My answer to the question – “AMB: Could it have been saved?” – in last Friday’s Review is an emphatic “no.” Let me tell you why.

The article starts with an attribution by a former director, David Barry, that “AMB was a victim of the Federal Deposit Insurance Corporation’s (FDIC) recent trend to target small banks that are struggling because of the real estate market downturn.”

And, the article goes on to say that AMB has “been on the FDIC’s hit list since it was examined by the Washington Department of Financial Institutions in May 2008.” The reason was that the bank had “inadequate capital and severe loan losses.”

My question is, “Why would the FDIC want to do that?” Their mission is to help banks which are having problems, not the opposite. They didn’t need another failed bank to have to deal with.

For quite some time the FDIC was after AMB to increase its loan loss reserve and replenish its capital due to having an inordinate amount of non-performing loans.

When it failed to get the needed additional equity or a badly needed merger partner, the FDIC had no alternative but to finally take over the bank, which they did on Jan. 29 in order to stop the bleeding.

Mr. Barry is qipted as saying that the FDIC policy has been less patient during the last two years to give such banks time to solve their problems. I have to ask the question: Where did he get that knowledge of the FDIC policy?

My guess is that the FDIC had a difference of opinion as to the quality of the bank’s loan portfolio, and as a result had to force its huge write-down last June and the need to replenish the depleted loan loss reserve via a significant capital infusion to support a still under-reserved portfolio of non-performing loans.

The bottom line is that AMB hasn’t had a quality credit department for quite some time. How else would they have accumulated the miserable commercial real estate portfolio that eventually brought them to their knees?

The only answers I can come up with are the lack of an experienced and effective loan credit department, and that the board of directors didn’t put a stop to the concentration of large commercial real estate loans, many of which were made to “friends” with projects which didn’t pan out.

Laying the blame on the regulators just doesn’t cut it for me. The economy, maybe, but the quality of the loan portfolio should have been on the top of the agenda of every meeting of the board of directors, and what was needed to rectify the problem. Yes, it finally gets down to leadership.

Dick Daniel, retired banker

Bainbridge Island

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