Regulators have terminated a consent order with Magyar Bancorp Inc.'s banking unit after the New Brunswick, N.J., company reduced its nonperforming assets and increased its capital levels.
The $526 million-asset Magyar Bank said late on Wednesday that the order from April 2010 was lifted after it increased capital levels, retained qualified management and reduced classified asset balances. Under the agreement with the Federal Deposit Insurance Corp. and the New Jersey Department of Banking, the company had to take several steps, including developing a plan to reduce delinquent and nonaccrual loans, determine whether its allowance for loan and lease losses was sufficient and implement a profit plan. The profit plan had to include goals to maintain appropriate provisions to the allowance for loan and lease losses, comprehensive budgets for all categories of income and expenses and an executive compensation plan. The company also had to maintain a leverage ratio of at least 8% and a total risk-based capital ratio of at least 12%. At Dec. 31, the company had a core capital ratio of 8.04%, up 16 basis points from a year earlier, and a total risk-based capital ratio of 13.16%, up 20 basis points.
In January, Magyar Bancorp reported profits for its fiscal year first quarter of $31,000, down roughly 75% from a year earlier. After selling $3.2 million in other real estate owned during the quarter that ended Dec. 31, the company said that its nonperforming assets decreased 11.4% on a linked-quarter basis.
"The removal of the Order is a reflection of the hard work of the entire Magyar Bank team in addressing the requirements of the Order," said John Fitzgerald, Magyar's president and chief executive in a news. release "We have exceeded the capital requirements outlined by the order, and continue to make significant progress on the resolution of credit issues. We expect this positive momentum to continue in 2012."
Fitzgerald was named as president and CEO of the bank and holding company in June 2010. He had been serving in those roles on an acting basis since December 2009 after Elizabeth E. Hance was dismissed.
Hance recently filed a lawsuit against Magyar severance pay as well as compensatory and punitive damages for allegedly violating terms of their separation agreement.
Magyar has argued that the failure to pay Hance was "the result of applicable regulatory prohibitions" and said it "intends to defend the suit vigorously."