One of Long Island's newer banks is getting a closer look from its federal regulators after growing too quickly for their tastes.
Empire National Bank, based in Islandia and in business since 2008, signed a written agreement with the Office of the Comptroller of the Currency after regulators there "found unsafe and unsound banking practices relating to earnings and liquidity at the bank."
The agreement was signed in October but made public this month. It requires the bank to take steps to maintain adequate capital, improve profitability, avoid relying too much on commercial real estate lending, avoid seeking brokered deposits, and to take other steps to ensure the bank is stable.
Douglas Manditch, chairman and chief executive of the bank, said the agreement is the result of a bank examination in September 2009.
"We had hoped we could get by without the agreement," he said Tuesday, noting that a new examination is taking place now. "We are in compliance with the agreement at this time."
The concern about the bank's liquidity is related to its rapid growth in 2009, Manditch said. The bank saw an opportunity to lend at a time when many other banks weren't able to do so. The bank now has three branches and $319 million in assets.
"We took advantage of the market. We went out and leveraged ourselves a little bit," Manditch said. "They [regulators] took a very harsh stand."
To raise capital to support its lending, Manditch said Empire sought brokered deposits. Regulators prefer that banks use "core" deposits from customers in the community instead, because they view those as a more stable source of capital.
Since that growth spurt, Manditch said, Empire's core deposits have caught up with and surpassed its lending.
As a result of the agreement, Manditch said, Empire's growth will be restricted.
"But we are profitable, and we expect to remain profitable," he said. "We'll just sit tight and see where we are in the next few months."