EARLIER: FDIC, state examine CUB

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By Lisa King

The Federal Deposit Insurance Corporation and state banking officials have filed a cease and desist order against Citizens Union Bank of Shelbyville concerning its loan practices and financial structure.

Charles A. Vice, commissioner of the Kentucky Department of Financial Institutions, said the order is a joint action by the FDIC and his department designed to keep banks from getting into serious financial difficulty.

"It's really just a corrective course of action for the bank to help solve its problem," he said. "They've just run into some difficult financial situations, and this is a regulatory action to help them try to resolve this."

LaJuan Williams-Young, spokesperson for the FDIC, defined a cease and desist order as an injunctive order put into place when a bank has engaged in unsafe banking practices.

"It is an agreement between the bank and the regulator," she said. "This is not something that should alarm customers. If anything, if we catch something early, it can help them on down the line. It just means they have issues they need to address."

Bank officials declined to comment Thursday but have scheduled a meeting today with reporters to discuss details of the order.

The order was issued Jan. 15 and gives the bank a specific timetable to take specific steps, such as restricting dates for writing off debt.

The order also states that the bank shall not extend any additional credit to any borrower who is already obligated to the bank on extensions of credit that has been classed as a loss by the bank, as long as credit remains uncollected.

Neither Vice nor FDIC officials commented on the specific situation with CUB, except that Vice did say that the action was not the result of a complaint against the bank, and that this type of action by the FDIC is not a punitive situation for a bank.

"It's just when a bank gets into a financial condition that we deem warrants special attention," he said. "This is a regulatory course of action. There are no fees associated with it."

Vice added that the order does require that a bank undertake some measures specified by the FDIC in order to get back on track.

"It does spell out certain things that the bank will have to do going forward, such as submit regulatory reports and things like that," he said.