FDIC: Pickin' on the small fries again; Otsego bank ordered to clean up its practices

The Federal Deposit Insurance Corp. disclosed early Friday that it issued a cease and desist order to Riverview Community Bank of Otsego, for "unsound banking practices" and violation of federal bank laws.

By CHRIS SERRES, Star Tribune

Last update: May 29, 2009 - 10:35 AM
The Federal Deposit Insurance Corp. disclosed early Friday that it issued a cease and desist order to Riverview Community Bank of Otsego, for "unsound banking practices" and violation of federal bank laws.
Riverview, which has branches in Otsego and Anoka and $127 million in assets, was cited by the FDIC for engaging in "hazardous lending and lax collection practices," as well as operating with excessive loan losses and inadequate capital and reserves. The FDIC also claims Riverview violated federal rules on real estate appraisals, among other allegations.

Rick Anderson, president of Riverview, was not immediately available for comment.

Some 11.9 percent of the bank's loan portfolio was classified as "noncurrent," or at least 90 days or more past due and not accruing interest, as of March 31, according to FDIC data. That's nearly four times the average among 429 banks statewide. Riverview's Tier 1 capital, a key measure of its ability to absorb future loan losses, was a mere 4.5 percent of assets -- just above the federal regulatory minimum of 4 percent.

The FDIC ordered Riverview to cease paying any dividends without the authority of the government, and to increase its Tier 1 capital ratio to at least 8 percent. The bank must also develop a written plan for reducing and monitoring its portfolio of loans.

More than 15 banks in Minnesota have received cease-and-desist orders from federal regulators since early 2008. Many of the loans community banks in this state made during the housing boom are turning sour at an accelerating rate, eating into banks' capital and cash reserves.

Riverview consented to the enforcement action, which was issued on April 7 but made public today, without admitting or denying the allegations.

Chris Serres • 612-673-4308




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