Following what appeared to be some problems with its commercial-loan portfolio, at least in the eyes of federal regulators, Charter Bank Santa Fe received an order to "cease and desist" from certain practices from the Office of Thrift Supervision.

Banks around the country have faced or are experiencing similar OTS demands following the collapse of many financial institutions because of the credit crunch last year.

Among other charges, the OTS determined that Charter failed to classify assets and establish allowances in accordance with generally accepted accounting principles and failed to properly administer commercial real-estate loans.

But in a second OTS document, entitled Stipulation and Consent to Issuance of Order to Cease and Desist, Charter Bank has admitted only to a failure to pursue financial policies that are consistent with the purposes of savings associations and to maintain sufficient liquidity and failure to maintain accurate and complete books and records.

By doing that, Charter Bank has apparently avoided other OTS actions. Throughout this process, Charter Bank has remained open for business.

A spokesperson for the OTS in Washington, D.C., said regulatory officials are not allowed to talk about an open institution, as Charter Bank is.

When asked what further steps the OTS might take in regards to Charter Bank, she said, "different enforcement actions were possible," none of which she would elaborate.

A statement of condition for the period ending June 30, 2009, in the bank's Washington Avenue office indicated Charter bank has listed under assets cash and cash equivalents of $41.3 million and mortgage-backed securities of $229.2 million.

The bank's repossessed real estate, known as other real estate owned, was $9.2 million.

Total assets came to $1.33 billion.

On the equity side, the statement indicated Charter Bank had deposits of $849.2 million and "other borrowed money" of $382.3 million. Total liabilities were $1.2 billion.

Charter Bank officials would not answer questions, but a spokeswoman e-mailed a statement about the OTS' action against Charter Bank.

"Charter Bank, like many other banks, has experienced challenges caused by the economic downturn and the affect the economic crisis has had on many of our customers," the statement said.

In addition, "Charter is working intently to meet new, more stringent federal government regulatory requirements and to ensure the integrity and viability of our operations," the statement said.

Glenn Wertheim, Charter Bank and Mortgage CEO, said in the statement that the agreement provides for "certain changes in operational policies to reduce the affects of problem loans and to increase capital levels."

"We have been working closely with OTS on these issues and had addressed some of them even before the agreement was signed," he said. "The changes have included increasing set asides for problem loans, increasing capital levels and streamlining operations."

Wertheim also said that Charter Bank maintains the maximum amount of FDIC insurance. "Last year's increase in FDIC insurance has given our depositors the highest level of coverage ever, $250,000, and more in some instances for interest-bearing accounts and unlimited coverage for accounts that don't earn interest."

Banks that have received "orders to cease and desist" have complained about the harshness of the language and the damage the orders can cause their reputations.

An article in American Banker published Nov. 16, 2009, said that the Federal Deposit Insurance Corp., has "toned down the harsh wording of orders it issues," a move that helps avoid "public relations fiascoes."

Among the demands that banks faced under the original orders were a daily liquidity report, a contingency plan describing how the bank would merge with another institution or even shut down through a "voluntary liquidation" and a reduction of the bank's commercial loans.

The FDIC has not made any of the new, less harsh orders public, but some attorneys said they have worked with clients on the new orders, according to the American Banker article.