Grand Bankshares in West Palm Beach, Fla., has been ordered by the Federal Reserve Board to serve as a source of strength for its struggling bank subsidiary.

The Fed said Tuesday that the $319 million-asset Grand Bankshares must use all of its available resources to ensure that its Grand Bank & Trust unit operates in a safe manner and complies with a 2010 regulatory order that requires it to shrink its portfolio of problem loans and increase its capital levels.

It also bars the company from paying out dividends or making interest payments on debt without Fed approval.

Grand Bank & Trust's capital levels have eroded in recent years as its loan troubles have escalated. The bank is considered to be adequately capitalized following losses of $9 million last year and close to $20 million in 2010 and it is under orders from the Federal Deposit Insurance Corp. and its state regulator to return to well-capitalized status as quickly as possible.

Grand Bankshares has a deal pending to sell four of its branches to the $153 million-asset Harbor Community Bank in Indiantown, Fla. The South Florida Business Journal reported Tuesday that Grand does not expect compensation from the sale but that its executives believe that reducing its overhead will improve its overall capital ratios.

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