Heritage Community Bank of Glenwood, Ill., has been ordered to increase its capital, clean up its loan portfolio, and overhaul its management.

The cease-and-desist orders from the Federal Deposit Insurance Corp. and the Illinois Department of Financial and Professional Regulation said the $263 million-asset bank had been "engaging in hazardous lending and lax collection practices."

The orders, which were issued Oct. 10 but made public this week, give Heritage 30 days to achieve Tier 1 capital of 9% and a minimum total risk-based capital of 14%. The orders said it could raise the capital through the sale of stock or by writing off assets classified as losses.

At midyear Heritage had a Tier 1 capital ratio of 6.72% and a total risk-based capital ratio of 7.98%, according to data from the FDIC. It had nearly $30 million of land and residential construction loans that were no longer accruing interest, and 14.4% of its loans were delinquent, according to FDIC data.

Over the next 60 days, Heritage must also come up with an assessment of the its management and staffing and, from there, make any necessary management changes that would "restore all aspects of the bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness and liquidity" within 90 days.

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