WASHINGTON (Reuters) - The Federal Reserve said on Tuesday it ordered Weststar Financial Services Corp WFSC.OB to refrain from paying dividends or otherwise reducing the capital from its main subsidiary, The Bank of Asheville, in North Carolina.
In a written agreement between Westar and the Federal Reserve Bank of Richmond, the company needs the Richmond Fed’s written approval for any such distributions or to incur any new debt.
The Fed also ordered that Westar’s board take appropriate steps to ensure compliance with previous orders and the bank’s compliance with previous supervisory actions and submit quarterly progress reports to the Fed on compliance with the orders.
Weststar, with net assets of $195.3 million, reported a net loss of $4.66 million for the three months ended September 30, versus a year-earlier net profit of $132,000. It attributed the loss primarily to declines in the values of real estate and other assets underlying some of the bank’s non-performing loans, as the Asheville area property and development market continues to face difficulty.
Hit hard by commercial real estate woes, smaller U.S. banks in particular have struggled this year, with 151 institutions closed by regulators, according to the Federal Deposit Insurance Corp. The FDIC has said it expects bank failures to peak this year.
Reporting by David Lawder; Editing by Neil Stempleman