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Jay Torbert, president and chief executive officer of PAB Bankshares Inc., said the company "mutually entered into the agreement. We are a regulated industry and regulators are constantly watching what we do and responding to market conditions."
Torbert said none of PAB's 18 locations will be affected.
"There really is no impact on our banking operations. This is mostly a management issue and we are working through our problems and with our board of directors to address the issues."
According to Torbert, the bank's issues stem from the challenges facing the real estate industry, particularly in the Atlanta area.
"This is mostly due to the real estate loans around Atlanta. We have locations in Henry County -- McDonough and Stockbridge."
Torbert said the company has been in the process of correcting the issues they are facing and PAB will be reexamined in 60 days to ensure that they are making progress towards compliance.
The written agreement stipulates that PAB will submit plans to strengthen credit risk management; enhance lending and credit administration; improve asset quality; maintain an adequate allowance for loan losses; maintain sufficient capital; improve earnings; and improve liquidity.
Torbert stressed that the written agreement is not a cease and desist order or a memo of understanding, such as other financial institutions in the state have received, and said he was pleased that the regulatory agency had the confidence in PAB to allow the company to resolve its issues.
"This will not impact our customers or FDIC insurance. We are still loaning money and we are still in business. This was no criticism of management and the board, and we are pleased they have the confidence in us to allow PAB to work through the storm and weather these market conditions."
According to Torbert, PAB did a lot of affordable housing projects and starter homes for first-time homebuyers, as well as step-up buyer housing.
"We did really well for several years, but then the subprime mortgage market collapsed in 2007. We were financing the builders and developers and they were building the houses for clients looking for subprime loans. When the buyers couldn't find financing, the builders had no buyers for houses. These areas are still growing at a fast pace and those houses will get absorbed, but it will take some time," he said.
PAB is currently examining the assets it now owns and is deciding what's worth keeping and holding and what needs to be liquidated.
Torbert said, "When they are satisfied that the written agreement has been completed, they'll put out a release saying they terminated it, which may take about a year."
To see more of The Valdosta Daily Times, or to subscribe to the newspaper, go to http://www.valdostadailytimes.com/. Copyright (c) 2009, The Valdosta Daily Times, Ga. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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