The Federal Reserve Board released a sweeping agreement Wednesday with a $720 million-asset Minneapolis holding company and its largest subsidiary to improve asset quality, loan administration, and other areas of concern.
The Aug. 2 agreement orders BankFirst, a $641.2 million-asset state member institution in Sioux Falls, S.D., to limit the size of its loan portfolio, improve underwriting standards, require "presale" levels for construction project loans, and submit loan syndication procedures to regulators.
The bank also agreed to charge off all loans classified as "loss" and half of the loans classified as "doubtful" and develop a new capital plan. Under the agreement, BankFirst may not make any loans without Fed approval that are then sold to third parties or require their participation.
Several provisions of the agreement, which was drafted by the Federal Reserve Bank of Minneapolis and the South Dakota Department of Revenue and Regulation, also target the holding company, Marshall BankFirst Corp.
The boards of the bank and its parent are required to intensify their oversight of management and banking operations and must engage independent counsel to review service contracts with third parties to ensure compliance with Fed restrictions on affiliate transactions.
