A Glen Cove-based bank has agreed to reduce its lending and raise capital while making restitution to some borrowers it overcharged, according to an order released Friday by the Federal Deposit Insurance Corp.
The problems largely are the result of the recession, which has affected many banks across the country, said Joseph Pistilli, president, chairman and chief executive of First Central Savings Bank, founded in 1999. It has assets of $683 million and nine branches, all of which are in Queens except for the one at its Glen Cove headquarters.
FDIC officials declined to comment on the bank specifically, but spokesman David Barr noted that such orders are "probably one of our most commonly used enforcement actions, particularly in a down economic cycle."
The First Central order was one of 36 issued nationwide last month and made public Friday.
In the order, the bank agreed to write off bad loans that can't be collected and take steps to reduce other bad loans. First Central has more than $63 million in past-due loans. It also agreed to reduce the percentage of its business based on commercial real estate loans.
Pistilli said about 72 percent of the bank's $566 million in net loans are in commercial real estate. In addition, the bank must solidify its capital level, which Pistilli said it has already done.
The order also found fault with the bank's home equity lines of credit. The loans carried an adjustable interest rate, but the bank did not disclose to borrowers that the rate had a "floor," meaning the rate would not sink below a certain point.
The bank agreed to make restitution to borrowers affected by the nondisclosure and pay a $100,000 civil penalty. It is still calculating the restitution.
"While we are not pleased to be the subject of this examination, we understand the regulators' point of view," Pistilli said.
Separately, the FDIC announced Friday that Westbury-based New York Community Bank will assume the deposits of Desert Hills Bank in Phoenix, which was closed Friday by the Arizona Department of Financial Institutions. As of Dec. 31, 2009, Desert Hills had approximately $496.6 million in assets and $426.5 million in deposits.
New York Community Bank also agreed to purchase all of the failed bank's assets.