The Federal Reserve Board said Civitas BankGroup Inc. of Franklin, Tenn., has signed an enforcement order in which it agreed to strengthen internal audit functions and hire a consultant to review its management and board.
The order, announced Monday, also instructs the $843 million-asset company to submit plans to strengthen its credit administration and capital structure and review its loan portfolio.
Richard Herrington, Civitas' chief executive officer, said the problems that prompted the order stem from two bank subsidiaries in west Tennessee that Civitas has since sold, and that Civitas is already working to resolve the issues addressed in the order.
In August it was discovered that Mr. Herrington's son, Jason, who was also Civitas' investment officer, had signed off on $500,000 of fraudulent loans. Civitas has charged off the loans and fired the younger Mr. Herrington.
