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Federal Agency Closes Charter Bank

By Winthrop Quigley
Copyright © 2010 Albuquerque Journal
Journal Staff Writer

          Federal authorities on Friday closed Charter Bank, a closely held, family-run financial institution known for its financing of low-income housing in New Mexico and for the philanthropy of its owners.
        The Federal Deposit Insurance Corp., which insured deposits at Charter, announced that Beal Financial Corp. of Plano, Texas, would take over the bank and operate it as Charter Bank of Albuquerque. All branches will reopen on Monday under Beal's ownership, and borrowers and depositors should experience no interruption in services, the FDIC said. ATMs will function as usual, checks will continue to be processed and loan commitments will continue to be honored.
        The FDIC said terms of loans issued by the original Charter Bank would not change but that the new bank's owners are allowed to change terms of deposits, including interest rates paid on savings accounts and certificates of deposit.
        Charter has branches in Albuquerque, Rio Rancho and Santa Fe.
        Charter's mortgage origination and servicing business is part of the bank and will be assumed by Beal. Charter sold its insurance business earlier this year.
        Last fall, Office of Thrift Supervision examiners, responding to the national collapse of real estate development, ordered Charter to increase its allowance for loan losses from $10.8 million to $55.4 million, even though Charter had no delinquent commercial construction loans and only .34 percent of the loans in its commercial real estate portfolio were behind on their payments. That order reduced the level of capital Charter had on its books.
        Last Wednesday, OTS ordered Charter to find new capital as a buffer against insolvency or face closure.
        Charter had hoped to find a buyer, but none appeared. The owners' stake in the company was wiped out by the forced closure.
        A person familiar with the takeover said Beal intends to keep as many of the bank's 250 employees as possible. The employment status of Charter's management could not be learned late Friday.
        This was the first closure of a New Mexico bank ordered by federal regulators since 1999, when Zia Bank in Tucumcari was closed, according to the New Mexico Bankers Association. First National Bank of Clayton took over Zia's assets and liabilities.
        State Regulation and Licensing Secretary Kelly O'Donnell said Friday that Charter depositors are at no risk of losing their money.
        "This was not indicative of any instability on the part of the bank or that anybody's money is at risk. People's money is more than safe at Charter." O'Donnell called New Mexico's banking system "very healthy, and considerably more healthy than other states."
        O'Donnell's department regulates state-chartered banks. Charter is federally chartered and regulated by the Office of Thrift Supervision, which ordered the bank closed. However, O'Donnell said her department had been briefed about the bank.
        Charter became a major real estate lender and was especially active in underwriting and servicing mortgages for low-income housing. It worked closely with the Mortgage Finance Authority, which was established by the State Legislature to help finance low-income housing construction. According to MFA executive director Jay Czar, Charter services about 95 percent of the mortgages issued through the agency.
        "They are just class bankers," Czar said. "These are guys who quite frankly really look out for the state of New Mexico. They do business larger banks wouldn't even consider."
        "These guys have done nothing wrong," Czar said. "They have the highest level of integrity."
        Charter Bank's background
        Charter Bank was established in Santa Fe in 1986, when Robert Wertheim, owner of Southwest Mortgage Co., and other investors bought Charter Bank for Savings. At the time the bank had $20 million in assets. Charter opened its first Albuquerque banking location in 1990. Today it has about $1.2 billion in assets.
        In 1989, Southwest Mortgage and Charter Bank merged to form Charter Companies, which Wertheim chaired. Wertheim's son, Glenn, became the bank's president and chief executive officer in 2001.
        Charter Bank at a glance
        • Established 1986 with $20 million in assets
        • Assets as of Sept. 30: $1.25 billion
        • Employees: 250
        • Deposits: $850 million
        • Locations: Three in Albuquerque, two in Santa Fe, one in Rio Rancho

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