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Last Friday, 4/24/09, the FDIC announced that we had voluntarily entered into a Cease and Desist agreement with them. That isn't as bad as it sounds, though. A Cease and Desist is a tool that the FDIC uses to give a bank instructions on how to improve their finances, along with deadlines and follow-up guidelines.
That's not to say that we didn't see this coming. But by the time that we could see it, there was very little we could do about it. There are a few things, though, that bother me about how management and the board of directors has handled the situation. The main thing is that they announced cutbacks recently: No raises, bonuses, or retirement plan contributions this year. Along with assorted other tiny things. I think the majority of it is petty. They cut out birthday gifts, which will save them a whopping $120 per year. They cancelled the Christmas party, which will save them about $600. In the grand scheme of things, they're not really saving any money by, for example, cutting the $25 given to each employee to spend during the 4th of July celebration.
But the worst part of this is, they could put all this back if they didn't do any dividends last year. They took out $110,000 in dividends last year, even though the board knew the bank was losing money. I even overheard the bank president convincing the board members it was ok, since dividends were based on the prior year-end financials, which showed a profit. If the board hadn't taken those dividends, or if they put them back, the bank would easily be able to afford to pay the employees' bonuses, raises, and retirement contributions. (BTW, part of the Cease and Desist says that the Board is not allowed to take out dividends until further notice.)
With only 12 employees and 4 board members, we're a really small bank. That means that any negative things that happen are spread out over only 16 people, so we each see a bigger percentage of the tough times than an average employee would at a larger bank.
The announcement was made last Friday. It says a lot about how sucky the local newspaper is that the Duluth News Tribune and the Minneapolis Star Tribune had articles that weekend about the enforcement action, yet the local newspaper still hasn't mentioned it a week later.
Naturally, many of our customers were concerned by this announcement. We had many calls, starting Friday afternoon, from worried customers (as well as calls from Channel 10 News and the newspapers). Some employees even received calls at home from customers, since these are people that they go to church with, are in clubs with, etc. We were able to reassure most of them that we weren't closing, that their deposits were still FDIC insured, etc. The head teller told us about one customer, though, that repeatedly asked her, "how can I trust the FDIC? How can I trust the government?" How do you answer questions like that?
Luckily, there hasn't been a "run on the bank." No customers have come in saying they were taking their money out because of the announcement. We've had plenty of customers ask about the order, or ask about FDIC insurance, but most people have been ok with it once we've explained.
However, I did receive the following today in the bank's generic email (the only one listed on our website):
Since it was signed only with initials, and I don't recognize the email address, I don't know if the person who sent the email is even a customer. So I sent this response:
Is there somebody in particular to whom you would like me to forward this email? I'm sure that whoever I forward this to would appreciate knowing who is addressing them. Additionally, an explanation of what you are suggesting by saying "what goes around comes around" might be in order.
If you have any specific questions, I would be happy to answer them. We do not feel that we are "on the short end of the stick". The consent action that we voluntarily entered into with the FDIC was a result of the downturn in the real estate market and the decline of economic conditions in general. The bank's Board of Directors and management are working in cooperation with the FDIC to address the economic issues with which we are faced.
<Bank> has endured tough times in the past and plans to emerge from this challenge of tough economic times as a much stronger bank.
<signed with my full name and contact information>
Part of this is pulled from the press release that the vp (my boss) prepared before the announcement was made (and which she faxed to the newspapers that inquired about it). I suppose I got a little snarky, but I have no respect for people who make anonymous complaints with no apparent reason other than to irritate us. My boss said that I did a good job responding to the email. <whew>
That's not to say that we didn't see this coming. But by the time that we could see it, there was very little we could do about it. There are a few things, though, that bother me about how management and the board of directors has handled the situation. The main thing is that they announced cutbacks recently: No raises, bonuses, or retirement plan contributions this year. Along with assorted other tiny things. I think the majority of it is petty. They cut out birthday gifts, which will save them a whopping $120 per year. They cancelled the Christmas party, which will save them about $600. In the grand scheme of things, they're not really saving any money by, for example, cutting the $25 given to each employee to spend during the 4th of July celebration.
But the worst part of this is, they could put all this back if they didn't do any dividends last year. They took out $110,000 in dividends last year, even though the board knew the bank was losing money. I even overheard the bank president convincing the board members it was ok, since dividends were based on the prior year-end financials, which showed a profit. If the board hadn't taken those dividends, or if they put them back, the bank would easily be able to afford to pay the employees' bonuses, raises, and retirement contributions. (BTW, part of the Cease and Desist says that the Board is not allowed to take out dividends until further notice.)
With only 12 employees and 4 board members, we're a really small bank. That means that any negative things that happen are spread out over only 16 people, so we each see a bigger percentage of the tough times than an average employee would at a larger bank.
The announcement was made last Friday. It says a lot about how sucky the local newspaper is that the Duluth News Tribune and the Minneapolis Star Tribune had articles that weekend about the enforcement action, yet the local newspaper still hasn't mentioned it a week later.
Naturally, many of our customers were concerned by this announcement. We had many calls, starting Friday afternoon, from worried customers (as well as calls from Channel 10 News and the newspapers). Some employees even received calls at home from customers, since these are people that they go to church with, are in clubs with, etc. We were able to reassure most of them that we weren't closing, that their deposits were still FDIC insured, etc. The head teller told us about one customer, though, that repeatedly asked her, "how can I trust the FDIC? How can I trust the government?" How do you answer questions like that?
Luckily, there hasn't been a "run on the bank." No customers have come in saying they were taking their money out because of the announcement. We've had plenty of customers ask about the order, or ask about FDIC insurance, but most people have been ok with it once we've explained.
However, I did receive the following today in the bank's generic email (the only one listed on our website):
Dear President and Board of Directors,
Congratulations on receiving a reprimand from the FDIC.
How does it feel to be on the short end of the stick?
Seeing as how you hide your names & email addresses from the website I cannot send this email to you all personally.
I am happy to know that what goes around comes around.
REN
Congratulations on receiving a reprimand from the FDIC.
How does it feel to be on the short end of the stick?
Seeing as how you hide your names & email addresses from the website I cannot send this email to you all personally.
I am happy to know that what goes around comes around.
REN
Since it was signed only with initials, and I don't recognize the email address, I don't know if the person who sent the email is even a customer. So I sent this response:
Is there somebody in particular to whom you would like me to forward this email? I'm sure that whoever I forward this to would appreciate knowing who is addressing them. Additionally, an explanation of what you are suggesting by saying "what goes around comes around" might be in order.
If you have any specific questions, I would be happy to answer them. We do not feel that we are "on the short end of the stick". The consent action that we voluntarily entered into with the FDIC was a result of the downturn in the real estate market and the decline of economic conditions in general. The bank's Board of Directors and management are working in cooperation with the FDIC to address the economic issues with which we are faced.
<Bank> has endured tough times in the past and plans to emerge from this challenge of tough economic times as a much stronger bank.
<signed with my full name and contact information>
Part of this is pulled from the press release that the vp (my boss) prepared before the announcement was made (and which she faxed to the newspapers that inquired about it). I suppose I got a little snarky, but I have no respect for people who make anonymous complaints with no apparent reason other than to irritate us. My boss said that I did a good job responding to the email. <whew>
I AM the evil bastard!
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