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The Federal Deposit Insurance Corporation has charged that Clay County Bank was operating with a large volume of poor-quality loans.
The FDIC also alleged the Clay bank was engaging in hazardous lending and poor collection practices, and operating with inadequate internal controls.
Problems came to light after J. D. Morris, the President of the bank, pleaded guilty to embezzling $172,000 from the bank. He made restitution and was sentenced to 18 months in federal prison.
Morris, a longtime employee of the bank and Clay County political leader, was also serving as President of the State Board of Education.
Sources close to the bank have reported loans where made to local individuals and businessmen who were extended special considerations.
Last month, regulators ordered the bank to stop the practices and improve management systems.
The bank has consented to the order without admitting to any of the allegations.
Clay Bank President Scott Legg says everything has been addressed.
Legg became president in February after serving on an interim basis since April 2002, when former President J.D. Morris retired.
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