Doral Financial Corporation, parent company of Doral Bank, lost $1.6 million during the second quarter ended June 30, and announced it entered into a Consent Order with the Federal Deposit Insurance Corporation and the Office of the Puerto Rico Commissioner of Financial Institutions Wednesday.
The consent order requires Doral Bank to maintain minimum capital levels: Tier 1 leverage (8 percent), Tier 1 risk-based (10 percent), and total risk-based capital ratios (12 percent) and require Doral Bank to obtain a waiver from the FDIC before accepting, renewing or rolling over brokered deposits.
The consent order also requires Doral Bank to undertake an assessment of its board and management.
As of the signing of the Consent Order, Doral Bank’s capital ratios exceeded the required levels. In addition, Doral Financial maintained capital levels in excess of the noted levels and the holding company serves as a source of capital strength to Doral Bank.
The most recent losses compare sharply with the net income of $2.6 million for the quarter ended March 31, 2012 and a net income of $4.5 million for the quarter ended June 30, 2011. Furthermore, the net loss attributable to common shareholders was $4 million for the second quarter, compared to net income of $189,000 during the first quarter of 2012, and net income of $2.1 million for the quarter ended June 30, 2011.
For the six months ended June 30, 2012, Doral reported a net income of $1 million compared to a net income of $7.8 million for the same period of 2011.
“Over the past several quarters Doral took prudent actions that increased regulatory capital, strengthened asset coverage ratios and grew revenue. Our successful U.S. expansion continues to offset elevated credit and compliance costs,” said Doral Financial Corp. President Glen R. Wakeman in a written release.
But not all is negative for the bank. During the second quarter Doral reported an increase of $2 million in net interest income, to $54.1 million from $52.1 million in the first quarter of 2012 resulting from a 6 basis points increase in net interest margin to 2.91 percent. It also reported an increase in total net loans receivable by $119 million from the first quarter of 2012 to the second quarter of 2012.
Doral also grew retail deposits by $115.6 million from the first quarter of 2012 to the second quarter of 2012, while reducing total deposit rates by 15 basis points during the quarter.
Consent order breakdown
Aside from the aforementioned requirements, the consent order also compels Doral Bank to eliminate from its books, by charge-off or collection, all assets or portions of assets classified “loss” by the FDIC and the OCIF, as the local regulator is known by its initials in Spanish.
Doral Bank is also required to establish and provide to the FDIC and the OCIF for review a “Delinquent and Classified Asset Plan” to reduce its risk position in each loan in excess of $1 million which is more than 90 days delinquent or classified “substandard” or “doubtful” in a report of examination by both regulators.
The Consent Order requires Doral Bank to establish plans, policies or procedures acceptable to the FDIC and OCFI relating to its capital, profit and budget plan, loan policy, loan review program, loan modification program, appraisal compliance program and its strategic plan that comply with the requirements set forth in the consent order.
Finally, Doral Bank will be required to obtain a waiver from the FDIC before it may accept, renew or rollover brokered deposits or extends credit to certain delinquent borrowers.
Doral Bank will not be able to pay a dividend without the approval of the Regional Director of the FDIC and the Commissioner.