November, 2010 – The FDIC recently released a list of orders of administrative enforcement actions taken against banks in October, including 1 cease and desist order, 16 consent orders (formerly called “cease and desist consent orders”), 18 civil money penalties and 1 Prompt Corrective Action.
Formal enforcement actions are publicly disclosed by regulators and used to address severe deficiencies or when regulators have limited confidence in an institution’s ability to implement required changes. Under Section 38 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) regulators must take increasingly severe supervisory actions as capital levels deteriorate. Generally, regulators are required to close critically undercapitalized institutions within 90 days.
A cease and desist order (consent order) is issued when the FDIC has “determined that it had reason to believe that the Bank engaged in unsafe or unsound banking practices and violations of law and/or regulations.” A prompt corrective action directive by the FDIC is a “formal action that requires an institution to take one or more specified actions to return to required minimum capital standards”.
Under a Consent Order, a bank executes a “Stipulation to the Issuance of a Consent Order” under which a bank has consented to the issuance of the Consent Order “without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulations relating to weaknesses in asset quality, capital adequacy, earnings, management effectiveness, liquidity, and sensitivity to market risk”.
It is highly likely that banks issued consent orders, cease and desist orders or prompt corrective actions are on the Problem Bank List. The Problem Bank List contains the names of institutions that have weak capital positions caused by large loan losses or operational deficiencies that usually lead to failure. The FDIC does not publicize the list for fear of causing depositor withdrawals and bad publicity which would only serve to hasten the bank’s closing.
The third quarter 2010 FDIC Quarterly Banking Profile showed an increase in the number of Problem Banks from 829 to 860. The number of banks on the Problem Bank List now represents 11% of all FDIC insured institutions. Total assets of Problem Banks decreased slightly from $403 billion to $379 billion in the quarter.
Given the serious financial issues cited by the FDIC for the banks listed below, expect many of these institutions to wind up on the Failed Bank List. Banking depositors with balances in excess of the FDIC deposit insurance limit should consider this list as “fair warning” from the FDIC and take appropriate action to avoid potential losses.
FINAL ORDERS ISSUED PURSUANT TO SECTION 8(b), 12 U.S.C. § 1818(b)
(Cease-and-Desist)
Savoy Bank, New York, NY; FDIC-09-118b; Issued 10/25/10 – PDF
FINAL ORDERS ISSUED PURSUANT TO SECTION 8(b), 12 U.S.C. § 1818(b)
(Consent Orders)
Heritage First Bank, Orange Beach, AL; FDIC-10-636b; Issued 10/22/10 – PDF
Sanibel Captiva Community Bank, Sanibel, FL; FDIC-10-502b; Issued 10/1/10 – PDF
Farmers State Bank, Lumpkin, GA; FDIC-10-407b; Issued 10/26/10 – PDF
Brimfield Bank, Brimfield, IL; FDIC-10-554b; Issued 10/27/10 – PDF
McHenry Savings Bank, McHenry, IL; FDIC-10-739b; Issued 10/29/10 – PDF
Town & Country Bank and Trust Company, Bardstown, KY; FDIC-10-560b; Issued 10/8/10 – PDF
American Founders Bank, Inc., Lexington, KY; FDIC-10-444b; Issued 10/12/10 – PDF
Holbrook Co-operative Bank, Holbrook, MA; FDIC-10-744b; Issued 10/6/10 – PDF
Border State Bank, Greenbush, MN; FDIC-10-640b; Issued 10/27/10 – PDF
West One Bank, Kalispell, MT; FDIC-10-592b; Issued 10/27/10 – PDF
Nantahala Bank & Trust Company, Franklin, NC; FDIC-10-501b; Issued 10/21/10 – PDF
The Delaware County Bank and Trust Company, Lewis Center, OH; FDIC-10-559b; Issued 10/27/10 – PDF First Capital Bank, Guthrie, OK; FDIC-10-591b; Issued 10/7/10 – PDF
First Century Bank, Tazewell, TN; FDIC-10-653b; Issued 10/18/10 – PDF
D’Hanis State Bank, D’Hanis, TX; FDIC-10-662b; Issued 10/29/10 – PDF
Nixon State Bank, Nixon, TX; FDIC-10-504b; Issued 10/12/10 – PDF
FINAL ORDERS ISSUED PURSUANT TO SECTION 8(i), 12 U.S.C. § 1818(i)
(Civil Money Penalties)
EvaBank, Eva, AL; FDIC-10-363k; in the amount of $15,000.00; Issued 10/5/10 – PDF
Valley Bank, Fort Lauderdale, FL; FDIC-10-440k; in the amount of $22,000.00; Issued 10/1/10 – PDF
Sunshine State Community Bank, Port Orange, FL; FDIC-10-600k; in the amount of $4,000.00; Issued 10/12/10 – PDF
First Bank of Dalton, Dalton, GA; FDIC-10-683k; in the amount of $5,500.00; Issued 10/29/10 – PDF
BankOrion, Orion, IL; FDIC-10-503k; in the amount of $3,950.00; Issued 10/8/10 – PDF
The Farmers and Merchants Bank, Boswell, IN; FDIC-10-664k; in the amount of $4,000.00; Issued 10/27/10 – PDF
Kentucky Farmers Bank Corporation, Catlettsburg, KY (f/k/a Kentucky-Farmers Bank of Catlettsburg, Kentucky); FDIC-10-527k; in the amount of $2,650.00; Issued 10/27/10 – PDF
Kalamazoo County State Bank, Schoolcraft, MI; FDIC-10-487k; in the amount of $2,500.00; Issued 10/27/10 – PDF
New Millennium Bank, New Brunswick, NJ; FDIC-10-712k; in the amount of $10,045.00; Issued 10/12/10 – PDF
American Heritage Bank, Clovis, NM; FDIC-10-638k; in the amount of $12,750.00; Issued 10/27/10 – PDF
The Bank of Clovis, Clovis, NM; FDIC-10-652k; in the amount of $18,825.00; Issued 10/21/10 – PDF
American Community Bank, Glen Cove, NY; FDIC-10-741k; in the amount of $5,405.00; Issued 10/26/10 – PDF
Mountain 1st Bank & Trust Company, Hendersonville, NC; FDIC-10-257k; in the amount of $10,395.00; Issued 10/28/10 – PDF
Riverhills Bank, New Richmond, OH; FDIC-10-594k; in the amount of $2,100.00; Issued 10/19/10 – PDF
United-American Savings Bank, Pittsburgh, PA; FDIC-10-556k; in the amount of $5,500.00; Issued 10/19/10 – PDF
The First State Bank, Huntsville, TX; FDIC-10-573k; in the amount of $58,900.00; Issued 10/26/10 – PDF
International Bank of Commerce, Laredo, TX; FDIC-10-572k; in the amount of $10,000.00; Issued 10/27/10 – PDF
Integrity First Bank, Wausau, WI; FDIC-10-525k; in the amount of $5,550.00; Issued 10/28/10 – PDF
FINAL ORDERS ISSUED PURSUANT TO SECTION 38, 12 U.S.C. § 1831o
(Prompt Corrective Action)
First Vietnamese American Bank, Westminster, CA; FDIC-10-691PCAS; Amended Supervisory Prompt Correction Action; Issued 10/13/10 – PDF
Is a Cease & Desist Order the same as a Consent Order?
A Consent Order and Cease and Desist Order have the same legal implication. A Cease and Desist is imposed in an involuntary manner. Under a Consent Order, an institution consents to the issuance of a Consent Order without without admitting or denying any charges of unsafe or unsound banking practices.
90 days is a very less time to react for larger organizations. Need to see how long it takes to get implemented thoroughly.