For the third time in five years, federal regulators have cited Intercontinental Bank for not lending enough money in the area it serves.
The small West Miami-based community bank received a grade of “needs to improve” on its record of making loans in Miami-Dade County, according to a report released this month by the Federal Deposit Insurance Corporation.
It’s more common to think of banks getting in trouble for making too many risky loans. But under-lending can stifle economic growth if small businesses can’t get loans to expand and home buyers are rejected for mortgages.
The Community Reinvestment Act requires banks to make loans to local businesses and individuals, rather than hoard money in safe investments
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Regulators noted that Intercontinental had increased its ratio of loans-to-deposits to 21 percent, up from 15 percent during the last evaluation in 2013. But peer banks had an average ratio of 75 percent, the FDIC found.
“The bank is reinvesting an unreasonably low volume of deposits as loans . . .Therefore, the bank is not satisfactorily meeting the credit needs” of its community, the FDIC wrote.
The bank has about $155 million in total assets.
Ken Thomas, a local banking analyst, said Intercontinental should have made more progress after its first two citations.
“They’re not taking normal, healthy risks,” Thomas said. “They’re putting their money in low-risk investments on Wall Street instead of higher rate and somewhat riskier loans on Eighth Street. But Eighth Street is where we need loans. That’s where the small businesses are.”
The FDIC grades banks on their compliance, with “outstanding” and “satisfactory” considered passing grades and “needs to improve” and “substantial noncompliance” considered failing.
About two percent of banks received failing grades so far this year, Thomas said.
Regulators can take a bank’s community lending record into account when deciding whether to approve a request to open new branches or merge with a competitor. But Thomas said that Intercontinental, a small bank with just one branch at 5722 SW 8th St, likely has no plans to expand and wouldn’t be affected by any sanctions.
“They’re really operating like more of an investment bank than a commercial one,” he said.
Although Intercontinental has failed to meet community lending requirements, it is well capitalized and financially sound. The banks holds a five-star rating —the highest possible — from Bauer Financial, a firm that analyzes financial institutions.
Officials at Intercontinental did not respond to a request for comment. The bank also received grades of “needs to improve” in 2010 and 2013.