The Coastal Bank announced Thursday that it has entered into a formal agreement with federal and state banking regulators to improve asset quality and to maintain capital above agreed upon levels.

The formal agreement between the bank, the Federal Deposit Insurance Corporation and the Georgia Department of Banking and Finance, commonly referred to as a consent order will be published by the FDIC in late July. The bank has been operating under similar informal agreements with the regulators for the past three years.

“Local community banks are a reflection of the communities they serve,” said Tom Wiley, chairman, president and CEO of the bank. “Unfortunately, our community has experienced significant economic stress and real estate value depreciation over the past several years. We have been working diligently to address the primary issues outlined in the consent order since April 2007 when our management team joined the company.”

As of March 31, the bank had Tier 1 Capital of 8.79 percent of total assets and total risk-based capital of 12.55, both of which are well in excess of the consent order minimum levels and the “well-capitalized” minimum levels as defined by the regulators.

During the past three years, approximately $13 million of new capital has been raised and injected into the bank.  Ten million dollars of this new capital came from increased investment by members of the board of directors and from company officers. The bank also has developed initiatives to reduce overhead expenses.

“We appreciate the confidence shown by our directors and officers in making additional capital investments in our bank which have allowed us to maintain our strong capital levels,” Wiley said. “In addition, we made the decision to take the necessary overhead reduction steps in a way to preserve capital. Each of our directors and employees has shared in the sacrifice needed to return our bank to healthy financial standing. Their dedication and commitment is a key to our success.”

While problem asset levels remain elevated, the bank’s non-performing assets, consisting of non-accruing loans and other real estate, have declined in each month since January. Since early 2008, the bank’s management team has focused on the collection or improvement of problem assets. The bank’s largest problem assets, which were concentrated in South Carolina and in Effingham County, have been resolved or written down to realizable value.

“Since the examination last October, national data and local trends suggest that economic conditions are improving and that real estate values are stabilizing,” noted Wiley. “While we expect economic recovery to be a slow process, based upon detailed review and analysis of our loan portfolio, we believe that the larger exposure issues are behind us. Should there be additional deterioration in specific relationships, those exposures will be smaller and more manageable than many with which we have previously dealt.”

The bank’s parent holding company, Coastal Bankshares, Inc., will be entering into a similar agreement with the Federal Reserve Bank of Atlanta

The Consent Order does not affect FDIC deposit insurance coverage. Customer deposits remain protected and insured by the FDIC up to $250,000 per depositor. Additionally, as part of the Dodd-Frank Act, unlimited FDIC insurance coverage applies to non interest-bearing deposit accounts and Lawyer’s Trust accounts through Dec. 31, 2012. No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.

“We take this consent order seriously and have committed the necessary resources to achieve full compliance as quickly as possible,” Wiley said. “Our board of directors, management team and staff are making every effort to meet the objectives outlined in the order.

We will continue to work with the FDIC, the banking department and the Federal Reserve to further improve the bank’s financial performance. We are especially grateful for the confidence and support of our customers.”

ABOUT THE COASTAL BANK:

Locally owned and operated, The Coastal Bank provides a full range of financial services, specializing in small business, consumer banking and real estate lending. Headquartered on Johnson Square in Savannah, this successful community bank has been serving the greater Savannah area since 1954. The Coastal Bank has an operations center in Pooler and branches throughout coastal Georgia.

For more information about The Coastal Bank, please visit www.thecoastalbank.com online.