Dive Brief:

• The Federal Deposit Insurance Corp. and the Indiana Department of Financial Institutions have issued a consent order to Bloomfield, Indiana-based Farmers and Mechanics Federal Savings Bank related to unsafe or unsound banking practices and weaknesses in capital, management, earnings and sensitivity to market risk.
• The bank was ordered to maintain a minimum Tier 1 capital ratio of 8.5% and a minimum total risk-based capital ratio of 12%. If the bank can’t meet those levels, it needs to come up with a written plan to obtain sufficient capital, regulators said in the consent order, made public Friday.
• Farmers and Mechanics Federal was also directed to implement a written plan for improving the bank’s profitability and identify when the bank expects to become profitable, according to the order. The lender reported a $55,000 loss for the first quarter, after losses of $308,000 last year and $3.5 million in 2024, according to FDIC data.

Dive Insight:

The $116 million-asset bank, founded in 1892, has four locations in Indiana: two in Bloomfield, one in Bloomington and an administrative location in Jasonville, according to FDIC data. Farmers and Mechanics Federal consented to the issuance of the order, without admitting or denying the regulatory charges. 

Bank President Joshua Riggins said the enforcement action is tied to the lender’s performance as interest rates rose sharply, which resulted in “earnings pressure across our balance sheet.” The bank last recorded an annual profit – $77,000 – in 2023.

“The document references information from June 2025, and we believe the 11-month delay indicates both the bank’s comparative stability and the agencies’ observance of established procedures, rather than any concern about the bank’s ability to continue operating,” Riggins said in an email. “The bank remains well capitalized under regulatory standards, margins have continued to improve, and we are taking steps to strengthen the balance sheet in line with regulatory expectations.”

Riggins also said the bank has addressed a late filing and a loan modification that regulators flagged as technical violations. The lender “continue[s] to work constructively with our regulators,” he said. 

Under the consent order, dated April 15, the lender was directed to retain qualified management that restores and operates the bank in a safe and sound manner and complies with all regulations. The lender also has to obtain approval from regulators before hiring any senior executive officer or adding anyone to the board. 

Farmers and Mechanics Federal also must “develop thresholds to identify when actual performance is considered to have materially deviated from the written profit plan,” regulators wrote. 

After the plan is created, the bank’s board must evaluate the lender’s actual performance in relation to the plan and its budget and note any material deviations, as well as the bank’s actions to address those, according to the order.

The bank was also directed to draft and adhere to a liquidity improvement plan that identifies sources of liquid assets to meet the bank’s contingency funding needs over one-month, two-months and three-month spans. And a plan to improve controls over financial reporting must be created, after a September 2025 exam identified related weaknesses. 

Regulators also ordered Farmers and Mechanics Federal to assess staffing needs “to ensure adequate and appropriate accounting resources are in place at all times.” If weaknesses are found, the bank must come up with a plan to develop or hire added talent or consultants with the ability to ensure accounting compliance, according to the consent order.

The lender must furnish progress reports within 30 days of the end of each quarter, the order said.