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OCC Identifies Risk Management and Compliance Failures in Three Banks

The Office of the Comptroller of the Currency (OCC) has cited three banks for unsafe and unsound business practices reminiscent of issues that contributed to last year's banking crisis. The OCC announced its formal agreements with the banks in a press release on Thursday.

OCC Identifies Risk Management and Compliance Failures in Three Banks

First FS & LA, a community bank based in Lorain, Ohio, was cited for its failure to develop and implement an appropriate strategic plan, manage liquidity and interest rate risks effectively, and implement robust Bank Secrecy Act/anti-money laundering (BSA/AML) internal controls. The bank was also found to have neglected to appoint a BSA officer with sufficient expertise. The OCC ordered First FS & LA to hire a BSA officer with the necessary independence, authority, and resources to ensure compliance with BSA requirements.


Heritage Bank, headquartered in Minnesota and described as an employee-owned, digital-first bank with $590 million in total assets, agreed to a cease-and-desist order concerning issues related to capital adequacy, capital and strategic planning, credit review, ongoing credit portfolio monitoring, liquidity, and allowance methodology.


The bank was instructed to implement a strategic plan to enhance its identification, measurement, monitoring, and control of liquidity risk exposure, especially during stress events.



Minnstar Bank, also subject to a formal agreement with the OCC, faced scrutiny over concentrations of credit in its lending portfolio. The bank will be required to develop limits on certain types of lending and formulate a plan to reduce credit concentration.


Both liquidity management and concentration risk were identified as key factors contributing to the downfall of three mid-sized banks—Silicon Valley Bank, First Republic Bank, and Signature Bank—last year. The OCC emphasized in a June 2023 semiannual risk assessment the importance for banks not to become complacent regarding risk management.


Representatives from First FS & LA, Heritage, and Minnstar did not provide immediate responses to requests for comment.




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