The dividends stop immediately at a 116-year-old Illinois bank, under an agreement that runs from loan grading to anti-money-laundering
The dividends stop immediately.
That is the sentence with a date on it in the written agreement the Federal Reserve published on Thursday morning. Iuka Bancshares and The Iuka State Bank, both of Salem, Illinois, may not declare or pay a dividend, buy back a share, or make any other capital distribution without written approval from three separate authorities. The same paragraph reaches interest payments on subordinated debentures. The next one stops new debt on the same terms.
Everything else in the sixteen pages is a deadline.
What the examiners found
The recitals are the closest the document comes to describing a condition. The most recent examination of the bank is dated 27 May and was conducted by the Federal Reserve Bank of St. Louis. It identified deficiencies in internal controls, in credit risk management, in lending and credit administration, in capital, and in liquidity and funds management. A second recital adds deficiencies in risk management and in compliance with the Bank Secrecy Act and the anti-money-laundering rules made under it, naming customer due diligence, beneficial ownership, and suspicious activity monitoring and reporting.
That is close to the full supervisory surface of a small commercial bank. The report of examination itself is not public.
Thirty days, sixty days, then every quarter
Within 30 days the bank owes the supervisors a credit risk management plan, lending and credit administration policies running to seven items, a loan grading programme, an independent loan review programme, a revised methodology for the allowance for credit losses, and an improvement plan for every loan or asset above $200,000 that is more than 90 days past due. Within 60 days it owes a board oversight plan, a joint capital plan with the holding company, a contingency funding plan and a plan to fix the anti-money-laundering programme. After that, a written progress report within 45 days of the end of every quarter.
There is also a ceiling on the balance sheet itself. No agreement to buy or sell loans or other assets adding up to more than 5 percent of the bank's total assets at the prior quarter end, without prior written approval.
The institution
The Iuka State Bank was established on 10 December 1910 and operates four offices. At 31 March it held $136.2m of assets and $115.8m of deposits, according to the FDIC. Carson Smith, the president and chief executive, signed for both the bank and the holding company. Megan E. Kahlenberg signed for the St. Louis Reserve Bank and Susana Soriano for the Illinois Department of Financial and Professional Regulation.
A written agreement is a supervisory contract entered into by consent. It asserts no violation of law by any individual, and nothing in it says the bank is failing. It says three regulators want the next several quarters documented.
