Fed Slaps Two Midwest Banks with Enforcement Orders

The Federal Reserve Board has hit two Midwest banks with enforcement orders.

Directors at Freedom Bank in Tulsa, Okla., have agreed to detail in writing plans to sharpen their oversight of the $41.5 million-asset bank, including hiring a chief credit officer with sufficient know-how in lending and collection, and strengthening practices for managing credit risk.

The agreement gives the bank 60 days to detail plans to maintain sufficient capital, to document its loan and credit administration practices and to correct shortcomings in its loan files that examiners flagged in September. The bank also agreed to refrain from extending further credit to any borrower whose loan examiners criticized, to detail plans to reduce its number of loans worth $100,000 or more that are past due, and to lay out plans for managing risks for an economic downturn or changes in interest rates.

Freedom has one month to charge off loans that examiners classified as losses. The bank also pledged to file a business plan for the coming year and to refrain from paying dividends or reducing capital without permission from regulators.

Separately, Freedom Bancorp. in Lindstrom, Minn., has agreed to serve as a source of strength for its $276.3 million-asset Lake Area Bank subsidiary. The company has agreed to refrain from paying dividends or redeeming stock or debt without the Fed's permission.

The Fed and Freedom Bank signed their pact on April 16, while the agreement between Freedom Bancorp. and the Fed was signed Monday. The Fed released both orders on Thursday.