Add the Federal Reserve Bank of Boston to the list of regulators concerned about the state of Admirals Bank.
The Federal Reserve Bank of Boston on July 28 entered into a consent agreement with Federal One Holdings LLC, the holding company of Admirals Bancorp, which is in turn the holding company of Admirals Bank in Boston.
The consent order marks the second such order placed on Admirals – the first was from the U.S. Office of the Comptroller of the Currency. The OCC regulates nationally chartered banks and the Fed regulates bank holding companies.
According to the Fed’s consent order, the purpose of the action is to help Admirals comply with the cease-and-desist order the OCC placed on the bank on March 30.
It was signed by Susan Dufresne, manager of Federal One Holdings and director of Admirals Bancorp, and Ronald Adams, assistant vice president at the Federal Reserve Bank of Boston.
Among many other actions, the 38-page OCC order required Admirals to establish objectives for the bank’s overall risk profile, liquidity, earnings performance, growth, balance sheet mix, off-balance sheet activities, liability structure and capital adequacy.
It also required Admirals to take risk management steps and create a conflict of interest policy.
It additionally said that total capital must be at least equal to 13 percent of risk-weighted assets, and that Tier 1 capital must be at least equal to 9 percent of adjusted total assets.
But after the second quarter, Admirals appears to be in breach of the OCC’s capital ratio requirements.
The bank’s tier 1 leverage ratio, the relationship between a bank’s core capital and core assets, was at 8.9 percent, according to a recent Admirals regulatory filing, slightly below the 9 percent requirement.
The total capital ratio was 13.2 percent, just above and in compliance with the 13 percent requirement.
The revelation comes as Admirals reported negative earnings in the second quarter during a time when most community banks in Massachusetts are experiencing growth.
Earlier this month Admirals reported losing more than $15 million through the first six months of 2017, more than $11 million of losses which came in the second quarter.
Total assets, which were roughly $425 million as of March 31, shrunk to $328 million at the end of the second quarter. And the company laid off 36 employees.
The tough quarter came after a group of banking investors that were planning to purchase assets from Admirals and spin off into a new bank called Bank & Trust Co. of Boston walked away from the deal.
The Federal Reserve’s six-page consent order says the companies shall not declare or pay – or directly or indirectly take – any dividends without the prior written approval of the Reserve Bank and the director of the Division of Supervision and Regulation of the Board of Governors.
It also states the Admirals companies and trust shall not, directly or indirectly, incur, increase or guarantee any debt without the prior written approval of the Reserve Bank.
The companies shall not, directly or indirectly, purchase or redeem any shares of their stock without the prior written approval of the Reserve Bank, according to the consent order.