Smithtown CEO plagued by the lax regulatory structure he championed

February 19, 2010 02:05PM

In retrospect, perhaps betting so heavily on construction loans during the boom years wasn’t such a great idea for Smithtown Bancorp, CEO Bradley Rock told the Wall Street Journal. The Long Island-based bank, which recently posted its first quarterly loss since Rock took the helm in 1990, had $130 million in nonperforming loans at the end of 2009, more than 6 percent of its total loan portfolio. Among them is a $7 million loan on two adjacent Manhattan office buildings and a $7.9 million adjustable-rate mortgage for South African hedge fund manager Grant Grieve, who purchased a six-floor townhouse on the Upper East Side in 2008 before the Securities and Exchange Commission launched an investigation into Grieve’s alleged $80 million Ponzi scheme. Last month, regulators issued a “consent order” on Smithtown, which means it must strengthen its capital and needs permission from the government to expand its balance sheet. Rock, who had been one of the most prominent opponents of government limits on commercial real estate loans prior to Smithtown’s plunge, still contends that the new regulatory order just is par for the course, given the economic environment. [WSJ]