Federal banking regulators have issued a “cease-and-desist” order to an Oregon bank they say was engaged in “unsafe” banking practices.
The Federal Deposit Insurance Corp. and the state Division of Finance and Corporate Securities found the Silver Falls Bank to be operating with inadequate capital, having a large number of “poor-quality” loans and engaging in “unsatisfactory” lending and collection practices, according to a Jan. 7 article in the Oregon Statesman Journal.
The charges stem from a routine evaluation conducted by the FDIC and state officials in April.
The order, dated Nov. 24, notes the termination of an employee who received a bonus based on total dollar amount of loans generated, the Statesman Journal said, and that investigators found the worker didn’t adequately assess risk. That arrangement was nixed and future incentives must take into account the quality and risk associated with each loan, the paper said.
Richard Renken, program manager for banks and trusts in Oregon, told the paper it was the first time Silver Falls Bank has faced such charges.
The bank’s President and Chief Executive Officer Stephen Way said many of the stipulations already have been addressed, and that many of them were handled voluntarily.
“The economy changed very quickly at the beginning of the year,” Way told the Statesman Journal. “Homes just stopped selling. And we had a fair amount of construction loans.”
He also noted about 80 percent of the bank’s bad loans derived from the loan officer who was fired in June.
“We’ve made substantial reductions in past-due loans, by approximately a third since November,” Way said, adding that despite the stipulations, business was running as usual and they were making loans and raising capital.
The bank’s deposits are insured by the FDIC for as much as $250,000 per individual account.
This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to email@example.com.