BSA-AML School Quiz

1. $94 million bank

$4.5 million penalty*

What current capital to asset ratio does the bank need in order to survive after paying the penalty?

* One of three penalties assessed. Some of the penalties are "concurrent." That is explained at the bottom of page 11, but I barely understand it. I will accept any friendly amendment of the amount shown, but don't think a million dollars either way is going to detract from the point I'm trying to make.

When you are training your management on 2014 - A007 use the Bank of Mingo assessment linked above as your second handout.

It was about paying employees in cash and not reporting it,

http://www.wkyt.com/wymt/home/headlines/...-307558671.html

The forfeiture and the two CMPs are concurrent, so the total that Mingo will pay is $4.5 million. The bank has become the official poster child for irresponsible board and senior management BSA/AML oversight. The machinations attempting to structure and cover up the cash transactions at the bottom of this mess are incredible.

A $4.5 million CMP for a Bank with $94 million in assets? I'm not sure what Mingo's capital levels are, but is this another death sentence?

It wouldn't surprise me if, now that the deferred prosecution agreement is in place and the CMPs have been levied, the bank will put itself on the market. Damaged goods won't command a big premium, though.

Total capital from their call report was $6.5 million as of 3/31/15. I'd say that is a pretty hefty penalty.

Based upon purchases (some forced)and cmps to follow by JPM, Wells and BAC you would need to be crazy to buy them.

I think the FDIC normally announces P & A's on Fridays. However, as noted, acquiring the charter would be acquiring the problem.

Similar situation

My point was that once there is a CMP imposed and a delayed prosecution agreement in place, there is some reason to believe that regulators and law enforcement have taken their pound of flesh, provided that between now and any purchase of the bank there is no evidence of recidivism. Given the hit to its capital, I'm guessing the bank's directors will be pursuing an injection of capital or a sale, probably at a discount, since the alternative would likely be failure based on capital inadequacy and liquidation.

"I'm guessing the bank's directors will be pursuing an injection of capital or a sale.............."

It is probably more like the FDIC has already made those calls for management and is just going to hand the bank to someone in one of those "FDIC assisted mergers"

Who in their right mind would give this management and board more capital???

An investor equally as misguided as the current board?

I agree, Randy. Whatever the route, I'd bet on the surrender of the bank's charter and FDIC certificate in the foreseeable future.

Their capital was over $13 million March 2014. What would make their capital drop like that? Already pay the penalty?

There was a $3 million accrual for the penalty in the year ending 12/31/14.

It also looks like they charged off a bunch of non-accrual loans. It doesn't look like this is the only problem this bank may have had. Actually, stuff like this is just one symptom of a badly run bank.