Federal Reserve Imposes Strict Oversight on Pedcor Financial Entities Amid Risk Management Concerns

The Federal Reserve Bank of Chicago has entered into a Written Agreement with Pedcor Financial, LLC, Pedcor Financial Bancorp, and Fidelity Federal Bancorp. This action comes in response to concerns about the financial soundness and risk management practices of these entities, which control United Fidelity Bank, FSB in Evansville, Indiana.

The agreement, signed on June 18, 2024, outlines several key requirements for the Companies:

1. Source of Strength: The Companies must take steps to fully utilize their financial and managerial resources to serve as a source of strength to United Fidelity Bank, FSB.
2. Board Oversight: Within 60 days, the Companies must submit a plan to strengthen board oversight, including improved risk management, reporting, and supervision of major operations.
3. Strategic Planning: A written strategic business plan and budget for the remainder of 2024 must be submitted within 60 days, with subsequent annual plans required.
4. Cash Flow Projections: The Companies must provide detailed cash flow projections for debt service, operating expenses, and other purposes.
5. Capital Conservation: Immediate restrictions have been placed on dividends, share repurchases, and other capital distributions without prior approval from the Federal Reserve.
6. Debt Limitations: The Companies are prohibited from incurring, increasing, prepaying, or guaranteeing any debt without prior written approval.

This agreement follows a Consent Order issued by the Office of the Comptroller of the Currency to United Fidelity Bank on October 31, 2023, addressing unsafe or unsound banking practices related to capital planning, risk management, and oversight.

The Federal Reserve's action underscores the ongoing regulatory scrutiny of financial institutions and holding companies, emphasizing the importance of sound risk management practices and strong board oversight in the banking sector. The Companies are required to submit quarterly progress reports detailing their compliance with the agreement. This Written Agreement will remain in effect until stayed, modified, or terminated by the Federal Reserve Bank of Chicago.

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