Security State Bank branch under FDIC orderSecurity State Bank in Iron River is under a cease-and-desist order from the Federal Deposit Insurance Corporation.
By: Andy Greder , Duluth News Tribune
Security State Bank in Iron River is under a cease- and-desist order from the Federal Deposit Insurance Corporation.
The FDIC and the Wisconsin Department of Financial Institutions said they “have reason to believe that the bank had engaged in unsafe and unsound banking practices and/or violations of law, rule or regulation,” according to a legal agreement dated Jan. 20.
Financial statements from Security State Bank show that 17 percent of its $73 million in loans and leases are non-accrued assets or are in threat of default. If those $12.3 million in loans are not repaid, Security State Bank has only $2.3 million in reserves set aside to cover those defaults.
A source in the financial industry said banks want to have a percentage of non-accrued assets in the single digits and reserves of up to 100 percent to back up non-accrued assets.
Security State Bank, which has about $115 million in total assets, defended its 98-year reputation and assured customers that deposits are insured.
“We are proud to say that Security State Bank continues to be a well-
capitalized institution with experienced and qualified management that continues to make prudent loans to qualified individuals and businesses,” said a bank news release.
FDIC spokeswoman LaJuan Williams-Young said she could not comment on specific rulings, but said that cease-and-desist orders are a cooperative agreement between FDIC and the bank.
“The FDIC, in their examination, will find certain issues that they want the bank to address and those are written up in the order,” Williams-Young said. “And the bank will address it in a time frame that they must adhere to.”
Security State Bank said it has consented to the FDIC order.
“This order details certain changes in the bank’s operations,” the release said. “We have been working closely with the regulators and have employed highly experienced banking consultants and many of the actions required in this order have been completed. Nonetheless, we continue to work closely with the regulators to ensure that Security State Bank meets the highest standards of strength, security and performance.”
Security State Bank, with offices in Iron River, Brule and Port Wing, was one of 35 banks nationwide to receive the orders.