Bloomington bank told to clean up: State regulators have served First Commercial Bank with a cease-and-desist order.

State banking regulators ordered the bank to clean up bad loans on its books, beef up its reserves for loan losses and reduce its reliance on brokered deposits, among other things, according to a copy of the sanction released Monday by the state Department of Commerce. Brokered deposits, or "hot money" as they're known, are bulk deposits banks buy from third parties.

The bank also was instructed to reduce concentrations of loans in its portfolio. Though regulators didn't specify the type of concentration, First Commercial Bank has been active in commercial real estate -- a sector suffering big declines that have battered banks across the country.

Busy time for regulators

Since the start of 2008, regulators have shut down two Minnesota banks and hit more than a dozen others with major enforcement actions. Many of the troubles relate to souring development and construction loans and bank analysts and regulators predict more failures.

As of the first quarter, First Commercial Bank's load of commercial real estate loans was more than five times its total risk-based capital, exceeding the federal threshold of 300 percent for defining a potentially risky concentration.

Brad Meier, president and CEO of First Commercial, said that his bank has been addressing the issues for several months and that the bank remains profitable and well-capitalized.

"We continue to work collaboratively with our real-estate clients as, together, we navigate a complex market," Meier said.

As of the end of the first quarter, the bank's key capital ratios exceeded minimum standards that federal regulators require for a bank to be well-capitalized. First Commercial's Tier 1 leverage ratio, or core capital ratio -- a key measure of a bank's ability to withstand future losses -- was 8.5 percent at the end of the first quarter, according to the Federal Deposit Insurance Corp. Regulators require 5 percent. First Commercial Bank also reported profit of $726,000 in the first quarter.

The order, dated July 21, resulted from an examination the state did from mid-December to mid-February.

Jennifer Bjorhus --612-673-4683

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