Another Central Valley bank is scrutinized by the Fed
March 25, 2010
• United Security Bank told to tighten operations
• Loan portfolio is cited
The Federal Reserve Bank of San Francisco is ordering United Security Bancshares (NASDAQ: UBFO) and the bank it controls, Fresno-based United Security Bank, to tighten management.
The Fresno bank’s board of directors has agreed, among other things, to maintain effective control over the bank’s major operations and activities, including credit risk management, liquidity, and earnings.
(Download a copy of the Fed's notice at the end of this story.)
In addition, the bank has to submit to the Reserve Bank an acceptable written plan to strengthen credit risk management practices. The plan must show appropriate risk tolerance guidelines and risk limits, timely and accurate identification and quantification of credit risk within the bank’s loan portfolio, strategies to minimize credit losses and reduce the level of problem assets, procedures for on-going review of the investment portfolio to evaluate other-than temporary-impairment, stress testing of loan and portfolio segments, and measures to reduce the amount of Other Real Estate Owned (“OREO”), otherwise known as foreclosed property taken back by a bank.
United Security has also agreed to tougher lending standards, including no loans to borrowers whose previous loans have been criticized I a Fed review of the bank begun last June.
And it has to assure the Fed that it has adequate capital and it must submit to the Reserve Bank an acceptable written plan to improve management of the bank’s liquidity position and funds management practices.
United Security Bank was founded in 1987. “After nearly twenty one years, four mergers and four branch acquisitions, United Security Bank operates eleven branches in Fresno, Madera, Kern, and Santa Clara Counties, and employs over 160 people,” it says.
It says it has more than $770 million in assets, $558 million in deposits and $575 million in loans.
In February, the Fed ordered Pacific State Bank in Stockton to tighten its lending procedures. And in October 2009 it ordered San Joaquin Bank in Bakersfield to take “prompt corrective action” to fix numerous financial shortcomings. A week later, San Joaquin Bank was shut down by state regulators.