Park Avenue Bank shut down, marks second NYC bank collapse in two days

By David Jones | March 12, 2010 07:38PM

Donald Glascoff’s (left) Park Avenue Bank has been shut down with its deposits sold to Valley National Bank, headed by Gerald Lipkin (right)

Federal and state regulators have shut down the Park Avenue Bank and sold its deposits to Valley National Bank, marking the second seizure and asset sale of a New York City bank in two days.

The State Banking Department closed the bank citing ineffective management and inadequate capital as well as a high volume of non-performing loans.

“We determined that the management team’s inability to address the
problems in the consent order led to the bank being critically undercapitalized,” said Richard Neiman, supervisor of the state Banking
Department. “This issue coupled with the high volume of non-performing
loans held by Park Avenue meant that the bank could no longer operate
in a safe and sound manner.”

The FDIC entered into a loss-share transaction on $379.8 million of
Park Avenue Bank’s assets. Park Avenue Bank reported assets of $520.1
million and deposits of $494.5 million, according to the FDIC. The
bank’s four branches will reopen as branches of Valley National Bank.

Last night, state regulators shut down and sold the assets of LibertyPointe Bank, the struggling lender owned by Brooklyn-based developer Shaya Boymelgreen. That bank has been under scrutiny since last summer when regulators issued a cease and desist order after uncovering a series of risky lending in commercial real estate deals.

The FDIC contacted 300 bidders for Park Avenue Bank’s assets and received eight bids, and contacted 380 bidders for LibertyPointe’s assets and received 11 bids.

After federal regulators marketed the lenders to more than 300 banks, Wayne, N.J.-based Valley National Bank emerged as the lowest cost bidder for both institutions, according to Federal Deposit Insurance Corp. spokesperson David Barr.

Asked whether the collapse of two small New York banks was a start of a new trend, FDIC officials acknowledged that commercial real estate lending is playing a larger role in bank failures.

“Bank failures are cyclical in nature,” said Barr. “What’ you’re seeing here in these cases is Acquisition, Development and Construction] and [commercial real estate] lending. You’re starting to see commercial real estate come into the equation more and more.

Asked the same question, New York State regulators said the state was still doing better than the rest of the country, but said the agency was working closely to strengthen other banks in the state.

“There are a handful of banks that we’re working with closely to make sure they stay strong and perform,” said Glorimar Perez Gonzalez, spokesperson for the state Banking Department.

Earlier this year, the state Banking Department entered so-called consent agreements with two Long Island banks, First Central Savings Bank of Glen Cove and Bank of Smithtown in Smithtown, NY, in which the banks agree to stop risky lending practices. In June 2009, the agency entered a cease and desist order to Manhattan-based Savoy Bank, to stop its risky lending practices.

Earlier this month, The Real Deal reported that Park AvenueBank Was Being Sued By Park Avenue Funding, a firm that provided more than $3.9 million in funding to the bank. Park Avenue Funding alleged that Park Avenue Bank was forgiving millions of dollars in overdue loans to reduce its concentration of commercial real estate loans and appease federal regulators. The lawsuit cited a $2.27 million loan for a condominium in Hartford, Conn., and a $3 million loan to Pascal Realty over a small residential building at 608 West 177th Street in Manhattan.

Park Avenue 
officials were not immediately available for comment. Valley National officials said they would not have a comment until Monday.