High Desert Bank in Bend is the latest area bank to be the subject of a regulatory enforcement action after it received a cease-and-desist order last week from the federal Office of Thrift Supervision.

The Dec. 29 order requires the bank to temporarily cease making any new commercial real estate loans, stop purchasing brokered deposits and maintain its capital levels. Brokered deposits are funds banks “purchase” to shore up their balance sheets.

The bank also is required to submit a new budget and business plan for review by regulators by March 31.

High Desert Bank, whose sole branch opened in Bend in September 2007, has roughly $45 million in assets, according to the OTS. It is a nationally-chartered savings association, also known as a thrift.

The order “sounds a lot worse than it is,” said Larry Snyder, the bank’s president and CEO. He said the bank is in no danger of failing and remains “well-capitalized” by regulatory standards.

“The regulators are deathly afraid of this market and the commercial real estate market, and it’s just got them extremely concerned,” Snyder said.

Some of the bank’s commercial real estate borrowers have defaulted, Snyder said, but he described the losses as symptomatic of the region’s depressed economy rather than risky lending.

“Banks have had some problem loans and I’m not immune to that,” Snyder said. “I don’t think we made poor decisions; they were very good decisions when we made the loans. But the market has deteriorated so much, the borrower can’t pay. What is he going to do?”

Commercial real estate in many parts of the country is suffering from an oversupply that is driving down rental income, potentially putting banks at more risk for loan losses.

Snyder said he anticipates his bank’s commercial real estate lending restrictions will be lifted after High Desert’s new budget and business plan are approved by regulators, but he doesn’t anticipate the bank will resume commercial real estate lending until the region’s economy strengthens.

The OTS order also requires High Desert Bank to maintain a Tier 1 Capital Ratio of at least 8 percent and a Total Risk-Based Capital Ratio of at least 12 percent.

High Desert Bank had a Tier 1 Capital Ratio of 8.84 percent and a Total Risk-Based Capital Ratio of 12.21 percent, according to its last financial report filed Sept. 30, 2009, with the OTS.

Snyder argued that the inclusion of language requiring the bank to maintain certain capital levels even though the bank is not in violation of them is indicative of a stepped-up, proactive approach regulators are now taking to try to stem mounting bank failures.

There were 140 bank failures in the nation in 2009, including Prineville-based Community First Bank, which was seized by the Federal Deposit Insurance Corp. last August and sold to Nampa, Idaho-based Home Federal Bank.

Additionally, the FDIC’s list of troubled banks stood at 552 at the end of the third quarter.

“We took some loan losses in 2009, but I feel we have addressed our problems and they are gone,” Snyder said. “But (regulators) look at the losses my bank has taken and also our region and look at this market and its future and they have some great concerns. They think commercial real estate might be the next shoe to fall, so they look at that going forward and are saying there’s potential problems for High Desert Bank but also other banks, so they come in and give us this order.”

Bill Ruberry, a Washington, D.C.-based spokesman for the OTS, could not comment on specific enforcement actions, but he said enforcement actions have risen sharply.

“Lots of these actions are needed to make thrifts improve the safety and soundness of their operations, but when the economy goes down, the number of enforcement actions go up,” Ruberry said.

High Desert Bank was the seventh bank in Central Oregon to receive an enforcement order last year.

Other banks with branches in Central Oregon that received cease-and-desist orders in 2009 include Bank of the Cascades, based in Bend; Columbia River Bank, based in The Dalles; the former Community First Bank, based in Prineville; Sterling Savings Bank, based in Spokane, Wash.; and West Coast Bank, based in Lake Oswego.

Also in 2009, Eugene-based LibertyBank received a consent order, which is roughly the same as a cease-and-desist order, said Lisa Morawski, a spokeswoman for the Oregon Department of Consumer and Business Services.

Morawski couldn’t comment on High Desert Bank since it’s not a state-chartered institution, but she said Central Oregon remains “a tough environment for banks” primarily due to the region’s depressed real estate market.