Inter National Bank signs agreement with regulators
This story has been corrected. Inter National Bank is based in McAllen.
McALLEN — Inter National Bank signed a formal written agreement with bank regulators earlier this fall after the U.S. Comptroller of the Currency found “unsafe and unsound banking practices relating to increasing credit risk at the bank.”
With the written plan, the McAllen-based bank promised to eliminate “criticized assets” including some real estate holdings, improve the management of the loan portfolio, review the bank’s allowance for loan and lease losses and to implement a plan to diversify its asset holdings.
The bank must also improve its procedures to review existing loans for credit risk and develop a strategic plan to improve its risk profile. The bank must also obtain the approval of regulators before accepting a brokered deposit.
Carlos Garza, president of Inter National, said the bank has been proactive in responding to the agreement ahead of schedule. He added that the bank’s holding company, Banorte Financial Group, Mexico’s fourth largest bank, injected $30 million in capital in September even though regulators were not concerned about how well the bank is capitalized.
“We’ve had the support of our parent company and we’ve had the support of outside consultants as well,” Garza said. “We continue to be a profitable bank, which will allow us as we go forward to continue to build our reserves.”
Garza said that the criticized assets are concentrated among residential developments and commercial real estate. While Inter National did not make subprime loans, it did finance construction of residential developments with homes that were later purchased with subprime loans, he added.
“This is something that’s systemic, it’s not just isolated to Inter National Bank,” Garza said. “The housing market really collapsed because much of the Valley was dependent on subprime mortgages.”
Despite the relative resilience of Rio Grande Valley economy, most Valley banks endured rising numbers of customers unable to make loan payments. As of late June, local banks had repossessed a total of close to $138 million in homes, empty lots, unfinished developments and commercial properties – a 40 percent increase from the end of 2008.
Inter National Bank saw its portfolio of foreclosed properties, called other “real estate owned” in the industry, rise to $33.2 million in June 2009, from $30 million the year before. A year earlier in June 2007, the bank had $1.3 million.
The number of commercial properties owned by the bank also grew. In June 2008 the bank owned $256,000 in commercial properties. By June 2009, that number had grown to $2.2 million, which includes a $1 million, 6,933 square foot office building at 800 W. Sam Houston in McAllen.
Inter National’s net income fell during the first half of the year to $3.1 million, from $12.8 million in June of 2008. Garza said that through the October, net income had climbed to close to $8 million.
Still, the number of loans that were past due at the bank rose from $9.4 million in June 2008 to $29.3 million through the same period in 2009.
On Tuesday, Inter National’s holding company, Banorte, announced that net profit had fallen 29 percent in the third quarter of 2009 from the same time period the year before. But, the bank’s top officials said the Banorte has weather the worst of the recession.
“Everything suggests that the most difficult period is behind us,” said Banorte Chief Executive Alejandro Valenzuela, according to Reuters, a news wire service.
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Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.
