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FDIC orders First State Bank to reduce troubled loans

First State Bank was one of five state banks that were hit with special orders Friday, according to federal regulators.

The Federal Deposit Insurance Corp. said consent orders have been issued to First State Bank in New London, Park Bank in Madison, Community Business Bank in Sauk City; Cambridge State Bank, and Securant Bank & Trust in Menomonee Falls.

The orders allege “unsafe or unsound banking practices” and outline steps to improve.

While the orders indicate regulators were concerned with loan problems at Community Business Bank, First State Bank and Securant, the orders to the Park Bank and Cambridge State focus on compliance with banking rules.

First State Bank, which lost $1.3 million in the first six months of this year after recording a $1.2 million loss in 2009, also was told to maintain capital above normal levels and to reduce troubled loans. Harry Radix, president of First State Bank, said the issue stemmed from real estate loans.

“This is a situation that we have been working to rectify for some time now,” said Radix, noting that the problem loans were tied to the bank’s traditional real estate lending role. “Our board and management team continue to take the necessary steps to reduce our problem loans and assure our capital remains significantly above the ‘well capitalized’ threshold established by the regulators.”

In the last two years, more than 30 banks based in Wisconsin have received special orders from regulators to make improvements.

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