New managers address problems at Bank of Bonifay

By Deborah Buckhalter

Published: July 10, 2008

The Bank of Bonifay has brought in a new management team to address problems cited in a state-issued “cease and desist”order calling for changes in certain practices at the bank that regulators deemed “unsafe and unsound.”
After the order was issued, bank officials signed a consent order agreeing to make several changes, but “without admitting or denying any violations of laws, regulations, or rules, and without admitting or denying having engaged in any unsafe or unsound practices,” the document states.
Leading the new management tearm are Mike Medley and his father, Guy F. Medley. The two are not really new to the bank; they owned it from 2001 to 2005. The elder Medley came out of retirement to take on the challenge.
Both men say they came back, in part, for sentimental reasons but also because they believe they can lead a turn around to put the bank back on a profitable and healthy track.
“We’re not casting stones, but we’re coming in to fix the problems. We have safe and sound management, we have the liquidity we need to have, we’ve recapitalized, and everyone’s money is safe and sound,” Guy Medley said.
Many changes have already been made, they said, to satisfy the most serious problems cited by the state.
For instance, regulators cited the bank for being undercapitalized; since then, the Medleys and stockholders have pumped at least $4.1 million to recapitalize the bank.
Inadequate liquidity, or cash on hand, was also cited by regulators.
Liquidity has increased to $41 million, with roughly $20 million coming into play from the sale of some loan participation.
The new managers have also been able to establish a line of credit for $15-20 million if it is needed. The committment has satisfied the regulators’ concerns on that point, they say.
The Medleys are also completely revamping the management systems at the bank and have put in a strategic plan and new loan policies. They’re also working to reduce the amount of commercial loans.
They say some of the loan policy adjustments they’re making are in response to the sudden real estate slump that helped put the bank in the position it’s trying to work its way out of. Although the bank had no subprime mortgages on the books, the loan policies did need to be more stringent in light of the real estate down turn, the Medleys said.
They predict that many other banks around the state and nation will find themselves in the dilemma because of the real estate downturn.
The real estate crises can negatively affect banks which have loaned money on properties whose value subsequently sharply declines. The owners of such properties often find themselves unable to repay the loans on schedule or to sell at a least to a break-even level and the bank is left holding the bag.
Mike Bean is an accountant brought on as part of the new management team established by the Medleys.
Former executive management team member Steve Thames, although he left the bank to take a job at another finanical institution in Georgia, is staying on as a consultant to the Bank of Bonifay. The Medleys say his departure from the staff had nothing to do with the problems cited by the regulators and that he is considered a valuable member of the team in his new advisory role.