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A federal banking agency has released a strongly worded enforcement action against Miami-based Executive National Bank. In a 15-page formal agreement signed by top bank executives, officials from the federal Office of the Comptroller of the Currency have taken aim at the bank’s lending policies. The OCC is now requiring the $277.8 million (assets) bank to comply with a series of procedural lending and oversight changes. Executive National must also submit progress reports for federal scrutiny. The bank is a player in South Florida’s commercial real estate market. The enforcement action was signed on Sept. 6. It was made public last week. Within days of signing the agreement, the bank says, Executive National had complied with the major stipulations. The formal written agreement is unusual, says Kenneth Thomas, a Miami-based banking consultant. He notes that the action against Executive National was only one of six enforcement actions recently announced nationwide. “The enforcement action was unusual because it was almost totally focused on lending policies and procedures at that bank,” says Thomas. The language in the OCC report is plain: “The bank shall not lend money or otherwise extend credit to any borrower in violation of the bank’s legal lending limit,” the written agreement states. “That’s relatively uncommon to see that criticism,” Thomas says. The OCC has given Executive National 90 days to reduce applicable loans to the legal lending limit. (A legal lending limit is the amount of money a bank can extend to any one borrower. Each bank has a different legal lending limit determined by a bank’s level of capital.) In 60 days, the bank must establish a plan to avoid future violations, according to the OCC document. The bank has had a spike in problem loans. In June 2000, nonperforming assets — delinquent loans and repossessed properties — made up 0.11 percent of all assets. One year later, nonperforming assets spiked to 2.944 percent, with delinquent loans totaling $2.98 million and repossessed property reaching $4.941 million, according to Karen Dorway, director of research at Bauer Financial Reports, a Coral Gables, Fla.-based bank rating firm. Bank representatives say they are complying fully with the OCC order. “We feel that anything they do helps to strengthen the bank,” said Carlos Safie, chief executive of the bank. He said that he views the regulator’s actions as positive, adding that the bank made loans to affiliated borrowers that, when combined, had violated the $3 million legal lending limit of the bank. The loans did not perform well, Safie said. The OCC determined that those borrowers shared a common enterprise and treated them as a single entity. SERIES OF DEADLINES The OCC has put the bank on a tight rein. For instance, the OCC has given the bank a series of deadlines. The timetable includes: � 30 days to appoint a compliance committee composed of at least three outside directors. � 90 days to create and implement a written program to improve the management of its loan portfolio, including procedures to strengthen credit underwriting and monitoring of loan performance. � 90 days to develop and implement a program for early detection of problem loans. � 90 days to “obtain current and satisfactory credit information on all loans in excess of $100,000 lacking such information.” The OCC has also given Executive National Bank 30 days to adopt and implement “a written program designed to eliminate the basis of criticism of assets criticized” in a March 19 banking exam. This requirement applies to loans the regulators have characterized “doubtful,” “substandard” or “special mention.” “They’re very reasonable deadlines,” Safie said. “We’re complying with every single one.” In regard to the written program to address problem loans, regulators want the bank to outline how the loans will be repaid, the appraised value of loan collateral and the time frame for eliminating the problem. Regulators also have guidelines for any future credit extensions or new loans to problem borrowers. Executive National Bank was founded in 1972. Based in Miami, the bank maintains five branch locations, all in Miami-Dade County.

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