DSB falls under federal oversight

— Decatur State Bank’s shrinking capital and increasing losses prompted it to fall under federal oversight.

The bank agreed tothe Federal Deposit Insurance Corporation’s consent order on Oct. 27, but the agreement was not publicly released until Friday.

The bank’s most recent report, covering the first three quarters of the year, showed itsuffered $12.13 million in losses and had $7.02 million of capital. The bank had $23.27 million in capital a year earlier.

The 22-page order states the bank must add $6.13 million for possible loan losses.

In its Sept. 30 filing with the FDIC, the bank had $18.3 million in loans seriously past due, triple the amount from a year earlier.

John Dominick, analyst and banking professor at the University of Arkansas, said he expected the bank to fall under federal oversight.

“They have a lot of problem loans like a lot of other banks in Northwest Arkansas,” he said.

The order means the regulators will tell bank leaders what steps to take to raise capital, includingreducing assets classified as loss by the FDIC, identifying loans with credit weakness and collecting delinquent loans.

“One way to do that is to shrink assets,” Dominick said.

Mark Londagin was named president andboard chairman of Decatur State Bank in June, replacing longtime president Vernon Austin. He did not return a message left Friday and the bank was closed for the New Year’s holiday on Monday. In late November, Londigan said that new management was working closely with its board to reverse the recent trend that caused large losses.

On Nov. 18, Londagin wrote in an email to the Arkansas Democrat-Gazette that the bank’s third quarter “reflects the implementation of new policies and proceduresdesigned to aggressively address problems, which new management identified.”

The Decatur State Bank is locally owned and operated by Peterson Holding Co., with the Bank of Siloam Springs and Gentry Bank part of the financial group. Blake Evans, CEO of Peterson Holding Co. and grandson of founder Lloyd Peterson, could not be reached for comment on Monday.

The Decatur company also owns Grand Savings Bank of Grove, Okla., with $229 million in assets, where Londagin also serves as president and CEO.

The FDIC does not comment on specific orders, but David Barr, FDIC spokesman, has said consent orders are the agency’s most common action.

The agency issued 72 orders in November, with 13 being consent orders and 28 terminating consent orders.

Consent orders are agreed on by both the FDIC and the bank. The order states the bank has consented without admitting or denying any charges of unsafe or unsound banking practices.

School News, Pages 12 on 01/04/2012