FDIC gives Wells bank cease-desist order
Paragon Bank in Wells isn’t closing its doors anytime soon despite a recent Federal Deposit Insurance Corporation citation.
Pat Hart, the bank’s CEO and chairman of the board, says the FDIC’s cease-and-desist order is ‘a bump in the road’ that will have no affect on their customers.
“We are not in any danger of failing or anyone losing their money or assets,” he says. “We have been in the community for 80 plus years and plan to be for future years to come.”
The FDIC, which insures the nation’s bank deposits, issued the orders to Paragon Bank and Horizon Bank of Pine City because they were engaging in what it termed “unsafe or unsound business practices.”
A published news report states the citations were issued in January, however, they were made public on Feb. 27.
Hart says Paragon has been working with the federal agency the past several months to resolve the matter.
The bank was given 30 days to submit a plan on how it will meet the FDIC’s requirements and must update the federal agency until it is satisfied the bank is operating properly.
“We still have some things we have to do. It takes time, but things are getting resolved,” Hart says.
Both banks accepted the consent orders without admitting or denying any unsafe bank practices.
Paragon, which had $34 million in assets as of Dec. 31, must not pay cash dividends without the FDIC’s approval. In addition, bank officials must write off all loans classified as ‘losses’ and stop extending credit to borrowers who have problem loans.
“Part of that (bad loans) had to do with the ag economy of last spring and summer,” Hart says.
Paragon and Horizon also must increase their capital ratios and replenish reserves to cover loan losses.
According to the federal agency, both banks were operating with inadequate capital and failed to set aside adequate allowances for possible loan losses.
The FDIC says Paragon extended credit without getting proper loan documentation, extended credit without obtaining adequate collateral and failed to establish and enforce adequate loan-repayment programs.
Paragon also was cited for violating a number of banking laws and regulations, including the Federal Reserve’s restrictions on loans to executive officers.
Since September, five banks in Minnesota have received federal or state cease-and-desist orders. The number of troubled banks in the state reached 51 from 26 over the past 18 months.