Suspicious Lending at Blue Ridge Savings Bank, says FDIC
The FDIC has issued an enforcement order against Blue Ridge Savings Bank, a thrift in Brevard, North Carolina. An insured institution, the thrift had almost $270 million in deposits as of June 30th.
There is some interesting history here. Blue Ridge is largely owned by former Republican Congressman Charles Taylor. Taylor was defeated in 2006 by former football quarterback Heath Shuler. Taylor has many business interests in the area. Aside from banking, Taylor owns a lot of land in Western North Carolina. He sought $600 million in Congressional spending to fund a road around the Great Smoky National Park, a project derided as “The Road to Nowhere,” that would have sought to give access to cemeteries and other lands cut off from civilization due to TVA projects in the 1940s.
The FDIC order focuses on the safety and soundness of Blue Ridge Savings Bank. It says that the bank needs to shore up its capital reserves. It goes on, saying that Blue Ridge needs to add to loan loss reserves, and that it needs to more accurately write down loans that are not performing.
The source of the trouble could be in Russia. In 2003, Taylor purchased the Commercial Bank of Ivanovo. Blue Ridge Savings and Loan has made a series of construction loans in Ivanavo, a large city 150 miles northeast of Moscow, Russia. Although the bank’s loan-to-deposit ratio was fairly safe (less than 1.0) in 2006, it is hard to know how well the portfolio is performing now that oil prices have fallen and Russia’s economy is sputtering.
The FDIC order is cryptic, but it does specify that there should be restrictions on “out-of-territory” loans.
Many of the required changes, as outlined in the FDIC’s enforcement order, focus on creating formal procedures for underwriting. The bank is asked to cease using “alternative procedures” for making commercial real estate loans. The bank must develop a policy for addressing risks from unusual concentrations of credit among specific borrowers. The bank must develop a system for grading loans. Some language talks about a lack of oversight against money laundering. The last hardly means that money laundering is a possibility. It could mean only that there is a shortage of accounting and management controls in place.
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I have been doing business with this bank for many years…as a businessman and homeowner. They have done everything they promised to me and I have done everything I promised to them…that’s what makes the system work. Due to our floundering economy, many folks have taken the advantage of not having to repay the banks on construction loans, etc. The feds step in, investigate, and condemn the one bank that made builders and investors filthy rich while times were good here in the Asheville area. Now that these filthy rich builders and investors are not paying their bills, everyone is looking at Blue Ridge as the “bad guy”. Well, I will tell you…Blue Ridge Savings is NOT the Bad Guy. The Bad Guys are the wealthy builders and investors who are shifting assets and money to protect themselves while filing bankruptcy to screw the very bank that made them rich and wealthy in the first place!!!
Excellent points. The report is hard on Blue Ridge Savings Bank. I looked at their CRA exam, and they had a lot of good community development loans for affordable housing in Asheville.