The Federal Reserve Board entered into a written agreement Tuesday with Mid America Bank & Trust Co. that would impose new lending requirements and steep hurdles to paying dividends.
Mid America, a bank with $96 million of assets in Dixon, Mo., agreed to implement lending standards that would address underwriting rules, procedures for renewing or modifying loans and separate the duties of lending, credit administration and loan operations. The bank must also determine the status of guarantees on loans backed by the Small Business Administration.
The bank must submit a written plan that addresses its management of credit risk, internal control systems, information systems, and internal audit functions, among other things.
The agreement also requires Mid America to hire a chief lending officer within 60 days and develop a plan to strengthen the board of director's oversight within 90 days.
To ensure the stability of the bank, the Fed is also requiring it to develop a capital plan within 90 days that would consider the volume of adversely classified loans and the adequacy of the loan loss reserve.
Other elements of the plan would require the bank to update its policies on allowances for loan losses.
Moreover, the bank may not pay any dividends without written permission from several Fed officials.
