Independence Federal Savings Bank in Washington, D.C., has agreed to improve its practices in return for a promise by regulators to refrain from further enforcement action.
Under a consent order between the $83 million-asset bank and the Office of the Comptroller of the Currency signed in August but released Friday, Independence will submit a written plan that covers its expected risk profile, earnings, assets and liabilities, capital and business goals for a period of two years.
Independence also will, by the end of this year, achieve a total risk-based capital ratio of at least 12% and a Tier 1 capital ratio of at least 8%. The bank had a total risk-based capital ratio of 8.36% and a Tier 1 capital ratio of 7.09% as of June 30, according to the Federal Deposit Insurance Corp.
The bank may not declare or pay a dividend until it achieves and maintains the capital ratios and shows that it is adhering to a capital plan.
It also agreed to revise its practices for identifying and assessing risks associated with concentrations of credit, other real estate owned and troubled loans, as well as to obtain complete credit information for all loans. The bank also agreed to review and update its policies governing interest rate risk and liquidity risk, as well as procedures for managing its loan portfolio.
The bank will appoint a compliance committee of three directors, two of whom must lack any ties to the company or its controlling shareholders, to oversee the company's adherence to the order.
Independence, which has been struggling with elevated levels of problem loans for several years, has been steadily shrinking assets to preserve capital. The bank is roughly half the size it was in 2005, according to FDIC data.
