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Century Bank enters ‘cease and desist’ deal with FDIC

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Officials: Bank can still lend money, accept deposits

By The Staff

Bad loans during a bad economy resulted in Century Bank entering a cease and desist arrangement with the Federal Deposit Insurance Corporation, the Lawrenceburg-based bank announced last week.

Bank officials were quick to point out that the order doesn’t mean customers can no longer borrow money, nor does it place in jeopardy money they have on deposit.

“It doesn’t mean we have to stop being a bank,” said Tom Smith, who was named chief executive officer as part of last week’s announcement. “We can still take deposits and we can still make loans.”

Smith, who also serves as chairman of the bank’s board of directors, emphasized that deposits in the bank are secure and backed up to $250,000 by the FDIC.

The cease and desist order means that the bank must make improvements in the way it operates, including taking a more cautious approach when loaning money.

“This order identifies steps to revise portions of our lending operations. We have already made great strides in correcting these issues. The board and management are completely committed to this process,” Smith said.

The bank agreed to the terms of the order following a routine examination of the bank. The examination covered the period that ended June 30, 2008.

“Century Bank has enjoyed significant growth since it was organized in 2000,” said Smith.

“We have 35 percent of the market share in Anderson County, based on deposit data available with FDIC, and ended 2008 with over $130 million in total assets. “With this growth, however, we experienced some problems, most notably in the loan area.”

Century is the second bank in Lawrenceburg now operating under such an order. The other, American Founders Bank, opened its local branch about two years ago under similar circumstances.

Smith said the sagging economy has taken its toll on banks across the country, many of which have accepted money from the federal government’s Troubled Assets Relief Program or “TARP” funds.

“We didn’t take TARP money. It was offered but we decided to use our own capital in the bank and didn’t take it,” Smith said, adding that the decision not to accept federal funds did not result in the cease and desist order.

Smith said the order does not preclude the bank from making commercial and private loans, nor does it come with stringent federal rules that dictate criteria for making such loans.

“It’s still our decision,” Smith said.

He did acknowledge that the bank has put in place a better system to oversee that it is making sound loans, including several personnel changes.

Along with Smith taking over as CEO, the bank has named Donna Herrick as its new president and Darin Young as its executive vice president and senior lender.

“We are very pleased to have Donna as our new president,” Smith said. “She has 30 years of experience and the right amount of experience and common sense to be the president.”

Young, a 1986 graduate of Anderson County High School, has about a decade of banking experience and has worked in the Louisville market for Fifth Third Bank and others.

“His experience and local connections will strengthen our loan department,” Smith said.

In the past, the responsibilities of the CEO and president had been combined at the bank. Bank Director David Taylor said in a news release that dividing the two positions between Smith and Herrick made perfect sense.

“Tom and Donna bring unique talents to these positions and are able to work well as a team,” Taylor said in the news release. “They were with the bank when it opened for business in 2000 and share our vision of the bank’s future as Lawrenceburg’s only locally owned and locally managed bank.”

“Century Bank is a strong community bank with a solid foundation, and we believe that we will be an even stronger institution because of this experience,” Herrick said in the release.

The bank also announced the following personnel changes: Kathy White was named vice president, loan administration; Brandi Caldwell was named deposit operations manager; and Natalie Young was named assistant controller.

Smith said bank officials met with employees before the announcement was made. He said he anticipates no job losses as a result of the announcement.

E-mail Ben Carlson at bcarlson@theandersonnews.com.