Community National Bank in North Branch, Minn., has been ordered by the Office of the Comptroller of the Currency to overhaul its management, change its loan policies, and begin an independent review of its loan portfolio.
In a consent order and adjoining cease-and-desist notice, the OCC said that the $110 million-asset bank had allowed "unsound banking practices relating to commercial lending and weak internal controls."
The regulator also said that the 27-year-old bank is in a "troubled condition" and required it to submit monthly progress reports.
The order was handed down in September and made public last week. It was first reported by the Minneapolis/St. Paul Business Journal.
Along with adding directors and senior lenders, the bank was also ordered to raise capital minimums to at least 11% of adjusted total assets and 14% of risk-weighted assets.
At June 30, Community National's ratio of noncurrent loans to total loans was 9.33%, compared with an industry average of less than 1% for commercial banks with $100 million to $300 million of assets, according to Federal Deposit Insurance Corp. data. Its share of nonperforming construction and development loans more than quadrupled from the year-earlier period, to 20.89%.
The bank consented to the enforcement order without admitting or denying wrongdoing.
