Fed raps Peoples Bank with shape-up order
The Federal Reserve is ordering Peoples Bank and Trust Co. to add capital and sort out its troubled commercial real estate loans.
In a written agreement with the bank, revealed Monday, the Fed also told the bank not to pay dividends without Fed permission or interest on its trust preferred securities, a form of long-term debt that allows temporary lapses in interest payments.
Peoples Bank and Trust is based in Troy, Mo., and has seven branches in Lincoln, St. Charles and Pike counties. It has $415 million in assets and lost $2.3 million in the first three months of the year. It holds less than half of one percent of the St. Louis region’s bank deposits. Peoples deposits are protected by the Federal Deposit Insurance Corp.
In the March quarter, the bank dropped slightly below the level that regulators consider "well capitalized," a red flag in banking. The bank still meets the "adequately capitalized" standard.
Peoples Bank ran into problems with commercial real estate lending. About 4 percent of all the bank’s loans were "non-performing," generally meaning that payments are far past due.
A written agreement with the Fed is considered a serious enforcement action indicating problems at the bank. The Fed told the bank to reduce concentrations in commercial real estate lending and write off loans that federal bank examiners believe can’t be rescued.
"The economic conditions have caused a challenge for many and we are no exception," the bank said in a written statement. "Loan defaults and past due loans have mounted and the bank is moving forward to meet those challenges. The bank believes that it is well on its way to correcting regulatory concerns and returning to its usual profitable position."