Time is running short for Waterfield Bank 

Posted: 7:13 pm Thu, February 18, 2010
By Danielle Ulman
Daily Record Business Writer

Germantown-based Waterfield Bank could face failure if it cannot find a merger partner or sell its assets.

On Feb. 3, the Office of Thrift Supervision gave the bank two weeks to merge or sell after it determined that Waterfield could not come up with a good plan to recapitalize. OTS was delayed in posting the order to its Web site after the area’s massive snow storms kept regulators out of work for a week.

The two-week deadline could mean time is up for the bank, which has a single branch in Germantown.

“If they’ve gotten to this point in time and still haven’t been able to find a buyer or raise capital, it’s highly unlikely that they would do so now,” said Virginia-based bank analyst Bert Ely.

“The worse off [banks] are, the shorter the time [regulators] give them,” to sell or merge, he said.

OTS could offer the bank an extension, but spokesman William Rubery said the regulator does not comment on specific orders.

Bank officials did not respond to a request for comment.

Paul Joegriner, who was CEO of American Partners Bank before it was purchased by the Waterfield Group and renamed  Waterfield Bank, said he does not think the bank will find a merger partner, but its parent company could help out.

“We know historically the Waterfield family is wealthy, so they could put the capital up and then everything goes away,” he said. “If they don’t have the capital to put up, then OTS is saying, ‘You’re going to sell the bank or we’re going to.’”

If the bank cannot find a merger partner or sell its assets, the Federal Deposit Insurance Corp. could be forced to place the bank under receivership and find a home for its assets. The FDIC placed two Maryland banks, Suburban Federal Savings Bank and Bradford Bank, under receivership in 2009 and sold their assets to other banks.

OTS warned Waterfield with a cease and desist order in October that its capital levels were insufficient, and gave the bank time to come up with a plan to recapitalize. On Jan. 26, the OTS rejected Waterfield’s recapitalization plan.

Regulators examine basic capital levels, like Tier 1 capital, and risk-based capital ratios to determine a bank’s strength. According to OTS data, Waterfield’s liabilities exceeded its assets at the end of the fourth quarter of 2009. The bank lost $10.5 million in the quarter and had $155.6 million in assets, down from assets of $196.5 million in the third quarter.

Its Tier 1 capital — the value of the bank’s earnings and purchase price of the common stock — was negative $7.7 million. Negative capital levels also brought the bank’s capital ratios below zero.

Banks with total risk-based capital ratios above 8 percent are considered adequately capitalized. Waterfield, considered by the OTS as critically undercapitalized, had a total risk-based capital ratio of negative 7.73 percent at the end of the fourth quarter.

Waterfield Bank started out as American Partners Bank in 2000, as an institution created to work with the insurance industry. It merged with Federal City Bancorp Inc. in 2005 and began serving the general population.

In 2008, the bank was acquired by California-based Affinity Financial, which is part of The Waterfield Group. An Indiana branch acts as the Waterfield Bank’s headquarters and holds most of its deposits.