Bank agrees to improve its operations

The Federal Reserve has announced an enforcement action between that agency, the North Carolina Commissioner of Banks and the Moyock-based Bank of Currituck.

The action consists of a written agreement between bank management and the two regulatory agencies that requires the bank to implement certain procedures and submit detailed plans for how business will be conducted in the future.

In the current environment, many banks nationwide are operating under such agreements. While serious, an enforcement action by itself does not indicate a bank is in danger of failing, and all deposits continue to be insured by the FDIC.

In this case, the agreement requires bank management to submit a plan to strengthen board oversight. The bank also must assess the qualifications of its senior officers and devise a way to strengthen credit risk management practices, ensure sufficient capitalization and manage troubled loans, among other things.

The bank has several reporting benchmarks to meet deadlines ranging from 30 to 90 days. The full agreement is located at the Federal Reserve Board’s website.

A written agreement is one of many disciplinary actions the Federal Reserve can use to deal with troubled banks. Bank of Currituck is a state-chartered bank governed by the North Carolina Commissioner of Banks, although almost all commercial banks also come under the jurisdiction of the FDIC since deposits are insured by that entity.

Typically, such enforcement actions are turned over to the Federal Reserve for monitoring and compliance. Bank of Currituck is not publically traded, so the effect of the announcement on its shareholder values is not known.

A reading of the agreement for Bank of Currituck indicates operation of the bank remains in the hands of its senior management, meaning the regulatory authorities are not assuming operation of the bank or directly managing its affairs. Thus, the bank will continue to operate normally, maintain its usual business hours and conduct most business as before.

Bank of Currituck operates two offices in Dare County, one in Kill Devil Hills and one in Southern Shores, as well as other offices in Camden, Corolla, Grandy and Moyock.