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InterviewPoint: Regulatory Challenges

By: Kari English

NAME: Vince Siciliano

TITLE: President and CEO of New Resource Bank, San Francisco

BACKGROUND: Siciliano has held the top spot at several California banks as CEO. Before joining New Resource Bank, he served as CEO at the former International Savings Bank and president and CEO of the Danielson Trust, a $1.5 billion trust company providing investment management services.

When New Resource Bank received a cease-and-desist order in April 2009 from the FDIC and California Department of Financial Institutions, it acted quickly. New Resource President and CEO Vince Siciliano explains the bank’s success in getting the order lifted less than a year later, and how his team used the situation as an opportunity to renew focus on their mission and significantly improve operations and financial health.

WB: Were you surprised to be handed a cease-and-desist order?
VS: We knew the exam had not gone well; the FDIC and DFI were critical of asset quality and certain management practices and board oversight. At the time of the exit exam, we felt an agreement would be forthcoming. The bank has completed all the actions called for by regulators, including effectively reducing nonperforming loans. New Resource remains very well capitalized — that was never in question — and we have excellent liquidity.

WB: Did you tell all bank employees? Or just management? Directors?
VS: It took several months to receive the exam report and proposed regulatory order. The board was involved every step of the way. I came in as the proposed CEO (awaiting regulatory approval) just before we received the proposed order. We (the board) signed the order on my second day of work as the formally approved CEO; we informed the staff the next day.

WB: Did you have a lot of customers calling/coming in with concerns? How did you handle that?
VS: We notified all of our shareholders in writing and set up calls or meetings with them as needed. We took the same approach with our clients. We had been moving our deposit clients into insured accounts or alternatives over the past six months, so there was little concern from our depositors. We were overwhelmed with support from our clients and shareholders with only a couple of exceptions. Everyone was committed to the bank’s mission and wanted us to survive and thrive.

WB: How did you fix the problems so quickly?
VS: We worked on several fronts simultaneously: loan quality, credit policies and procedures, financial accounting and reporting. The most critical piece was to get our arms around the credit portfolio and meet often (weekly at least) to strategize and move quickly to resolution. This often meant a sincere mark to market; accomplishing this would open up several paths to getting the loans off the books in relatively short time frames. The bank was well capitalized which, while painful, helped the process. Ultimately, we received significant recoveries and we feel proud of our success in complying with the regulatory action — my sense is that not many institutions can turn something like this around and as quickly as we did. I’m proud of our team and how well they responded.

WB: Has the bank culture changed now that the C&D has been lifted?
VS: The culture has changed significantly and we’re moving it forward. My whole philosophy as a leader is that the bank culture, “the way we do things,” is the bedrock for everything we do. This means thinking through the mission (purpose) of the bank and vision (what success looks like), and agreeing to and living by values (principles of behavior). Communication and team building are essential — get the right people in the right seats on the bus.

WB: Do you have any advice for other community banks that find themselves in a similar situation?
VS: Every situation will be different, but move quickly, aggressively and comprehensively. Pay attention to every little detail in the exam report and RO. Hit every deadline and over-communicate with the regulators, and your employees, board and shareholders. Stay close to your key clients. Be honest with yourself about how you got to this point and what it will take to rise up and move forward. 

Kari English is associate editor of Western Banking.

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