Northwestern Bank, which is based in Traverse City and has 28 offices throughout northern lower Michigan, has entered into a consent order with the Federal Deposit Insurance Corporation (FDIC) and the State of Michigan’s Office of Financial and Insurance Regulation (OFIR). As part of the consent agreement, Northwestern has agreed to increase management and board oversight and education, add new board members, and tighten lending and collection controls. Bank management is quick to point out that unlike many consent orders in the banking sector, this one focuses primarily on non-financial matters, and the few financial requirements stipulated in the order have either always been, or are already, in place. 

So how did the consent order come about? Northwestern Bank President and CEO Scrub Calcutt says that the FDIC, during its routine annual examination, identified a group of related nonperforming loans that it felt should be accounted for differently. "This triggered a deeper review of our management, operations, and lending practices, and ultimately led to this consent order," he says. "Though we do not agree with all its provisions, our board is committed to cooperate fully and to see it to completion. We remain proud of our financial stability, profitability, and role as northern Michigan's leading community bank." 

Northwestern bank officials contend that Northwestern is one of the few Michigan banks that has remained profitable every year, and that its capital ratio (its equity as a percentage of its assets) has always exceeded the regulatory requirements. They note that its current ratio is the highest it has ever been. The consent order will remain in effect until it is modified or terminated by the FDIC and the OFIR. Northwestern’s investment, trust, and 401(k) accounts are separate from bank assets and are not affected by the order.