Westsound Bank in Bremerton, Wash., has been slapped with a cease-and-desist order that requires it to strengthen its lending practices and replace its chief executive officer.
Its parent, the $490 million-asset WSB Financial Group, said Wednesday that David K. Johnson resigned as the bank's CEO on March 7, and that Mark D. Freeman has been appointed the interim CEO until a permanent successor is named. Mr. Freeman is also the company's chief financial officer.
The Federal Deposit Insurance Corp. and the Washington Department of Financial Institutions issued the order after conducting a review of problematic residential construction loans that examiners detected last spring.
Westsound said it has completed or started taking actions required under the order, which include beefing up its loan-loss provision, retaining an outside consultant to review its loan portfolio, strengthening collection and recovery efforts, and monitoring individual lender relationships with borrowers within its residential construction loan program.
The bank also was ordered to develop a capital management plan to maintain strong ratios.
For the third quarter, WSB recorded a $13.9 million loan-loss provision that resulted in a loss of $7.8 million for the quarter, compared with earnings of $1.1 million a year earlier.
The company reported only preliminary fourth-quarter results, estimating that earnings rose 41%, to $1.1 million.
