Posted on Saturday, 10.16.10

http://www.miamiherald.com/2010/10/16/1876268/coral-gables-private-bank-gibraltar.html

Gibraltar Private Bank and Trust Co. on Friday was served with a cease and desist order from regulators, citing unsound banking practices related to its Bank Secrecy Act and Anti-Money Laundering policies and procedures, as well as problem loans.

The privately held Coral Gables-based bank, which caters to doctors, lawyers and other professionals and entrepreneurs, has had clients affected by the economic downturn, said Steve Hayworth, Gibraltar's founder, chairman and chief executive.

``Clearly over the last few years it's been a difficult environment for all Florida banks -- all banks really,'' Hayworth said.

Yet given its well-heeled niche, it's ``very surprising'' to be given a formal regulatory enforcement action, said Miami-based economist and independent banking consultant Ken Thomas.

``It shows how difficult this banking environment is, when private banks are being hit with enforcement actions,'' said Thomas, adding that Palm Beach-based Lydian Bank & Trust was also served this year. ``Usually they are conservative lenders and the most conservative bankers, and for them to run afoul of the regulators in any way is very unusual.''

Among Gibraltar's clients was the now defunct law firm of Scott Rothstein, who pleaded guilty in January to racketeering charges in masterminding a $1.2 billion Ponzi scheme.

Rothstein also acquired a 5 percent stake in the bank in September 2009 when Hayworth led an investor group in buying Gibraltar back from Boston Private Financial Holdings. Those shares are now in the hands of the federal government.

Hayworth said Gibraltar is taking the enforcement action, its first ever, ``very seriously.'' The bank has already taken several steps to comply with the order, including beefing up its Bank Secrecy Act staff, both in the level of experience and number of personnel, Hayworth said.

Gibraltar has also ramped up the loan workout department that it created last year, adding more staff during the first half of this year.

And the bank has hired its first in-house general counsel, who has a strong Bank Secrecy Act and compliance background, Hayworth said. And it has enhanced its training program related to the Bank Secrecy Act.

Among other requirements of the 16-page order, Gibraltar is barred from granting any dividends without regulatory approval, and it shall not change any senior executive officer or director's compensation or benefits agreement without notifying regulators.

Founded in 1994, Gibraltar had $1.6 billion in assets on June 30, 2010, and $732 million in assets under management. The bank posted a net loss of $805,000 during the second quarter, primarily due to provisions for loan losses.

Though final results for the third quarter are not yet out, Hayworth said non-performing loans dropped during the period by 28 percent, from $95 million to $68 million, or to less than 5 percent of total assets.

``This is an environment where there are obviously some challenges, asset quality being one of them,'' Hayworth said. ``There is still a huge need for quality private banking and wealth management services.''