Last Friday, Wauwatosa-based Waterstone Bank and Kenosha-based Southport Bank announced that they had agreed to consent orders issued jointly by the Wisconsin Department of Financial Institutions (DFI) and the Federal Deposit Insurance Corp. (FDIC).

Like many banks, both Waterstone and Southport have significant portions of their loan portfolios in real estate loans. With the collapse of the residential real estate market that began in 2007, both banks have taken significant losses.

Both banks have been ordered to maintain higher levels of cash reserves to offset loan losses and to develop action plans to reduce the number of underperforming assets on their books. They are also required to assess their management teams to ensure that each bank is operating with qualified management.

In addition, Southport Bank has also been ordered to raise additional capital to help it offset its losses, said Jerry Schwallier, president and chief executive officer.

“We have completed many of the actions in the formal, voluntary agreement and are in the process of raising additional capital to make the bank stronger during this turbulent economy,” he said. “We have been working since early in the year with our regulators to strengthen processes they found to be weak in a routine examination in March 2009. Our board has worked diligently with our regulators to change our strategic direction to position us well for the future.”

Earlier this year, Karl Ostby, founder of Southport Bank, retired. Schwallier was named his successor in June and has since helped develop the bank’s leadership team and deal with its troubled assets.

“We’re way ahead (of the regulators’ orders). We started this process a year ago,” Schwallier said. “We’ve established a loss workout team and have added to the staff here.”

Alan Schaefer, chairman of the Southport’s board of directors, agreed.

“We are pleased about the progress made to date and are excited about the future possibilities of Southport Bank,” he said.

While it only received formal orders from state and federal regulators late last week, Waterstone has significantly raised its loan loss provisions and improved its liquidity since the start of the year.

As of Sept. 30, Waterstone Bank had about $165 million in capital reserves, giving it higher levels than the FDIC and DFI’s consent order. The bank also lowered its delinquent loan levels from about $145 million in December 2008 to less than $110 million by Sept. 30, 2009.

“With our capital strength, strong liquidity, and deposits insured to the maximum level provided by the FDIC, we will continue to offer a full array of competitively priced deposit products, loans to all qualified applicants and the high level of customer service the communities we serve are accustomed to,” said Doug Gordon, CEO of Waterstone Bank.

The number of distressed banks in the United States rose to 552 at the end of September, its highest level since the savings and loan crisis 16 years ago, according to a report released by the Federal Deposit Insurance Corp. last week.

The FDIC said the number of troubled banks rose from 416 at the end of June and 305 at the end of March. This is the largest number of banks on the FDIC’s "problem list" since 1993.

Despite the national troubles, most Wisconsin banks made a profit, total deposits grew and lending again outpaced the national average, said Kurt Bauer, president and CEO of the Wisconsin Bankers Association (WBA).

“These numbers clearly reflect the stressed financial conditions of bank customers throughout the state,” he said.  “Consolidated bank performance numbers are a snapshot of bank activity between July and September 2009. They are not necessarily a prediction of the future.  Nevertheless, bank performance numbers typically lag other economic trends, which means banks could see challenging earnings in the 4th quarter and into 2010.”

The FDIC has closed 124 banks across the United States so far. The only Wisconsin bank to be closed was Racine-based Bank of Elmwood. The Wisconsin Department of Financial Institutions ordered the Bank of Elmwood to close in October and asked the FDIC to act as receiver, leading Oak Creek-based Tri City National Bank to purchase all of Bank of Elmwood’s deposits and most of its assets.

Madison-based AnchorBank recently named Patricia Carlin to the newly created position of first vice president of banking operations. Carlin now oversees all banking operations and customer service, and works closely with the bank’s commercial banking and cash management groups.

She has worked previously with US Bank, Fifth Third Bank and Banner Bank.

AnchorBank has also established a business banking group focused on small to mid sized businesses and cash management sales. Linda Zimdars has been promoted to first vice president with the business banking group and will oversee the bank’s clients in small to mid size businesses.

“We have mined our internal pool of candidates as well as launched a broad-range search to find the top quality talent to bring their expertise to the commercial segment of the bank,” said Chris Bauer, CEO of AnchorBank. “As we continue to make strides in addressing the challenges we’re facing, these are the people that will be working to help ensure we are operating with our vision for the future of AnchorBank in mind.”

The bank also recently hired Martha Hayes as chief credit risk officer, Kurt Reindl as first vice president of credit administration and promoted Scott Ciano to head of the special assets group.

“These personnel changes bring AnchorBank an experienced team of senior management covering all key areas of commercial banking,” Bauer said. “A complete rearranging of the entire commercial loan and credit processes is underway with their guidance and as a result we expect to see substantial cost savings over time.”

A.O. Smith completes acquisition of Hong Kong company
A.O. Smith Corp. has announced that its A. O. Smith (Shanghai) Water Treatment Products Co. Ltd. subsidiary has concluded its purchase of the water treatment business of Tianlong Holding Co. Ltd. of Hong Kong.
Founded in 1999, Tianlong, employs more than 900 people in two facilities totaling approximately 40,000 square meters (431,000 square feet) in Shanghai. The company, China's leading manufacturer of residential and commercial water purification equipment, supplies reverse osmosis appliances, reverse osmosis elements, water softeners, industrial and commercial water treatment equipment, filters, and components.
A. O. Smith holds 80 percent of the newly formed company, which is considered a wholly owned foreign enterprise under Chinese law. A. O. Smith (Shanghai) Water Treatment Products Co. Ltd., will supply reverse osmosis water purification products to the China residential and commercial markets as well as export markets throughout the world.
“This is an important strategic action that we believe will benefit A. O. Smith and its shareholders," said Paul Jones, chairman and chief executive officer of A.O. Smith. "This puts A. O. Smith squarely in the rapidly growing global water treatment industry."
A.O. Smith expects the rapidly growing Hong Kong business to generate sales of more than $75 million in 2010. In 2010, A. O. Smith will introduce a line of water purification products in China to be sold under the A. O. Smith brand name through the company's current water heater distribution channels.
Tianlong markets its products under multiple brand names in China, including Chanitex, Pucakon, Datangweiyi, Lingtangniao, Zhichenghe, and Yongxianglai in the residential market and the FS and SunMoonLake brands in the commercial channel. The company exports to more than 30 countries around the world.

Brookfield-based Spring Bank has named Ken Madison as senior commercial credit analyst. Madison worked previously at First Wisconsin Bank & Trust and has also worked at Citizens Bank of Mukwonago and Wauwatosa Savings Bank.

RedPrairie Holding to launch IPO

RedPrairie Holding Inc. announced last week that it has filed a registration statement with the U.S. Securities and Exchange Commission to initiate a proposed initial public offering of its common stock.

RedPrairie, which is based in the Town of Brookfield, provides a platform of productivity solutions designed to enable manufacturers, distributors and retailers to synchronize and optimize the management of workforce, inventory and transportation.

The proposed public offering is expected to consist of common stock to be offered by RedPrairie and certain of its stockholders. The portion of the shares to be offered by RedPrairie has yet to be determined. The underwriters will have an option to purchase additional shares of common

stock to cover overallotments.

BofA Merrill Lynch and Credit Suisse Securities (USA) LLC will act as joint bookrunning managers of the offering. Oppenheimer & Co. and Needham & Company will be acting as co-managers.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective.

The Wisconsin Bankers Association (WBA) will host a “Business Credit Availability Forum” on Thursday, Jan. 14 at the Monona Terrace, Madison. The event will be held in conjunction with the 2010 Wisconsin Economic Forecast Luncheon, also held at Monona Terrace.

The forum will outline the factors impacting credit availability to businesses in Wisconsin. UW-Madison Professor Jim Johannes will provide a background briefing on current lending trends. A panel discussion, including representatives from the banking industry, government and other sectors will follow. This year’s speakers are UW-Madison Business School Dean Michael Knetter and Federal Reserve Bank of Chicago Senior Economist Sam Kahan.

Banking

• Wisconsin Department of Financial Institutions 
• Federal Deposit Insurance Corp.
• Wisconsin Bankers Association 
• Community Bankers of Wisconsin
• Wisconsin Mortgage Bankers Association
• American Bankers Association
• Bankers Association for Finance and Trade
• Commercial Finance Association 
• Risk Management Association

Mergers & Acquisitions

• Association for Corporate Growth 
• International Business Brokers Association 
• Mergers.com

Wealth Management/Financial/Retirement Planning

• Financial Planning Association
• Financial Planning Association of Southern Wisconsin
• Investment Management Consultants Association
• National Association of Personal Financial Advisors (NAPFA)

Other 

• Society of Financial Service Providers
• Small Business Administration
• State public awareness campaign
• Wisconsin Credit Union League
• CFA Institute
• CFA Society of Milwaukee
• Wisconsin Angel Network