FDIC takes enforcement action against TARP recipients

Two banks that received TARP money were among those hit with enforcement actions by the Federal Deposit Insurance Corp. last month, the agency announced Friday.

S&T Bancorp Inc., based in Indiana, Pa., received $108.7 million in government aid through the Troubled Asset Relief Program in January 2009. It has not repaid any of that money.

Its subsidiary S&T Bank, which has 56 branches in Pennsylvania, was slapped with a civil penalty of $32,640 on Feb. 22, for violating the Flood Act.

According to legal documents from the FDIC, the bank made 82 loans secured by buildings in a special flood hazard area, without ensuring that the borrowers had flood insurance. It also failed to notify owners of some of those buildings that insurance was available.

Under federal law, the purchase of flood insurance is mandatory for properties within special flood hazard areas, or SFHAs. Banks are not allowed to make loans secured by buildings in SFHAs unless they are insured, so they are required to notify customers if they need it.

Treaty Oak Bancorp Inc. in Austin, Tex., got $3.27 million in TARP money in January 2009 and has yet to pay it back. Its subsidiary, four-branch Treaty Oak Bank, entered a consent order with the FDIC Feb. 17. Among other things, the plan stipulates that it must:

·        Have further participation by its board

·        Conduct an assessment of its staff

·        Hire qualified management

·        Develop a strategic plan that addresses goals for reducing problem loans and strategies for capital growth, among other things

·        Boost its Tier 1 Capital ratio to at least 10 percent of its total assets

·        Submit a plan to reduce its commercial real estate  concentrations

The Federal Reserve also announced that it took enforcement action against Royal Bancshares of Pennsylvania Inc. on March 17. The company took $30.4 million in February 2009 and has returned none. It is the holding company for six-branch Royal Asian Bank in Philadelphia and 14-branch Royal Bank America in Narbeth, Pa.

Royal Asian Bank has lost money for four years in a row, including $396,000 in losses last year. Royal Bank America has lost money for three years in a row, including $21.4 million in losses last year.

According to its agreement with the Fed, it must - among other things - make no principal or interest payments on certain debts without regulatory approval, stop issuing new debt and develop a capital plan.