Little Rock-based Metropolitan National Bank ekked out a $537,000 profit in the fourth quarter of 2011, but came up $4.8 million short for the full year, according to call reports filed with Federal Deposit Insurance Corp. Friday.
Bank management did sock away $6 million in loan loss provisions during 2011 to help offset credit losses totaling $10.3 million. Metropolitan management has pared down annual losses from $12 million in 2010 and $80 million in 2009. These systemic losses continue to erode the bank’s operating capital — the buffer required by regulators to absorb major financial shocks.
The bank in 2007 began operating under a regulatory consent order and remains on the FDIC watch list as it continues to be out of compliance with the capital ratios it agreed to keep.
Metropolitan reported equity capital of $66 million at the end of 2011, this included $25 million in TARP proceeds the bank received in 2009.
Analysts estimate the bank remains more than $30 million short of the capital it needs to regain compliance with the consent order. Bridging the capital gap is problematic in this sluggish economy, according to John Dominick, banking professor at the University of Arkansas and director at Signature Bank. He said the biggest hurdle is finding people who want to invest in a bank with multiple-year losses.
Dominick said there are several ways banks can address capital concerns. Directors can add money, assets can be sold like Signature Bank did in 2011, or banks can find a buyer to take a majority interest in the company, like First Federal Bank did last year.
CEO Lundsford Bridges, noted in a release, "2011 was a much better year for Metropolitan. We understood the road to recovery would be difficult and require meticulous attention to detail and although we still have challenges to face, we are encouraged by our progress. The recovery of the economy continues at a very slow pace.”
Metropolitan gambled $30 million building its Northwest Arkansas expansion in 2005. Between 2005 and 2008 the bank increased it loans in the exuberant real estate market from $150 million to $600 million. While it’s unclear how many of those loans went sour, the bank does still wrestle with $108 million in foreclosed real estate on its books.In the past year the bank trimmed its real estate holdings from $131 million.
“Gradual recovery in commercial real-estate values, particularly in northwest Arkansas, has allowed Metropolitan to strengthen our balance sheet by reducing our non-performing assets by more than $63 million,” Bridges noted.
Looking ahead, banking analysts say Metropolitan still has a great deal of risk on its books. At the end of 2011 the bank reported $84 million in non-performing loans, with just $26 million set aside in loss reserves.
Florida-based Bauer Financial rates Metropolitan National with zero stars out of a possible five on its financial stability. The bank’s financial rating is weak according to MyBankTracker, a public website operated by MBT Media.