Mississippi bank assessed penalty for failure to obtain flood insurance on loans

A civil money penalty (CMP) assessed against a Mississippi bank for failing to obtain flood insurance coverage on loans it made was among the enforcement actions taken in June, the Federal Deposit Insurance Corp. (FDIC) said Friday.

The agency said it assessed a $7,000 CMP against The Bank of Holly Springs of Holly Springs, Miss., for failing to obtain flood insurance coverage at or before loan origination or renewal on seven loans secured by a building or mobile home located, or to be located, in a special flood hazard area. The bank consented to the issuance of the order, the agency said.

Other enforcement actions taken last month, the FDIC said, included:

  • A removal and prohibition order against James D. Huddleston Jr., an assistant vice president of The First Bank of Alabama in Talladega, Ala., who entered into a stipulation and consent to the issuance of the order of prohibition from further participation with the bank. According to the consent order, Huddleston “engaged or participated in unsafe or unsound banking practices and breaches of fiduciary duty” by “orchestrating at least 18 fraudulent, unauthorized withdrawals from the account of a non-profit organization to which he had access, and deposited the monies into the account of an unrelated non-profit organization, or into his own personal accounts,” according to the order. His practices, the agency said, resulted in a loss to the bank of more than $28,000 and a financial gain for Huddleston.
  • A “prompt corrective action” directive against Civis Bank of Rogersville, Tenn., for being significantly undercapitalized, with (as of its March 31 call report filing) a total capital ratio of 5.90%, Tier 1 capital ratio of 4.64%; common equity tier 1 capital ratio of 4.64%; and tier 1 leverage capital ratio of 3.08%. “The Bank’s capital condition continues to rapidly deteriorate,” the FDIC said in the directive. “Further, Bank management has not demonstrated the ability to return the Bank to a safe and sound condition.” The bank has been ordered (among other things) to increase its volume of capital “to a level sufficient to restore the Bank to an “Adequately Capitalized” within 45 days, including through the sale of common or preferred stock.
  • Approval of Section 19 order applications restoring the ability of individuals to be employed by or affiliated with a bank, for: Scott Monroe Harkless of California; David A. Bednarski of Wisconsin; Patricia M. Thornton (Nee Barriteau); and Omar Essam of Idaho.
  • Three terminations of consent orders for: McHenry Savings Bank of McHenry, Ill.; Indus American Bank of Edison, N.J.; and Branch Banking and Trust Company of Winston-Salem, N.C.

FDIC Makes Public June Enforcement Actions