Botetourt County Official Pays Civil Fine to Resolve Allegations of Bank Misconduct | Local company


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A former senior executive at the Bank of Fincastle who runs an economic development organization in Botetourt County paid $ 15,000 last year to resolve allegations of misconduct dating back to his time at the bank.

According to the Federal Deposit Insurance Corp., John Kilby engaged in “dangerous or unhealthy reckless practices and breaches of fiduciary duty” in the late summer of 2015, shortly before leaving the bank. A civil sanction was imposed on him in May 2020.

Kilby, 69, said he disagreed with the allegations but consented to the sanction which ended the case because he wanted to “back out” of the case as efficiently as possible.

Kilby is chairman of the Botetourt County Economic Development Authority – and has a fiduciary duty to the county – although he said he did not notify Botetourt County officials of the review of the FDIC. They were not aware of the case until contacted by a reporter and did not indicate what action, if any, they intended to take. The Roanoke Times recently learned of the FDIC matter from an anonymous tip.

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“I didn’t tell anyone,” Kilby said. “It’s between me and my family.

According to the FDIC, in 2015, while chairman and CEO of the bank, Kilby “abused” an interest reserve account to “remedy” an overdraft for a borrower with a substandard loan , which means the bank could lose money on it. That same month, it approved a loan to a third party, the proceeds of which were used to pay off a previous loan and pay for the same borrower’s business expenses, the FDIC said. In September 2015, while only serving as president, he ordered bank staff to “reallocate a bank ledger to pay for the maintenance expenses of the unfavorably classified borrower,” the FDIC said. .

The FDIC’s single publicly available document on the matter says the bank lost money as a result of Kilby’s actions. No figures have been released, nor are regulators identifying the borrower who allegedly helped Kilby defy banking rules.

Billy Martin, chairman of the supervisory board, said by email that he viewed the matter as an issue between Kilby and the bank and not a concern for the county authority. Martin said the EDA only acts with the consent of the majority of its members, currently six with a vacant seat. The members sit on appointment by the supervisory board.

“If you suggest that Mr. Kirby [sic] may affect the EDA with something similar that happened at the bank, I would dismiss that thought immediately, ”Martin said in the post.

County staff did not respond to a request for comment.

The Bank of Fincastle said it cooperated with government investigators and that no bank agent or employee other than Kilby was part of the enforcement action. The bank is profitable and is growing under the leadership that came after Kilby left.

Kilby retired in September 2015, the month he turned 65, in accordance with a long-standing plan of the bank and not because of events cited by regulators, he said. Investigators first contacted him about this in 2018, he said.

“These are the examiners. I suspect they saw something they didn’t like, ”he said.

The FDIC declined to comment on the matter, which it brought in its role as the bank’s primary federal regulator.

Economic development authorities undertake financial and real estate transactions to stimulate private economic development. They can buy and sell real estate, lease facilities, issue bonds and grant grants, to name just a few key powers that they exercise in strategic alliance with the government agencies that establish them.

Kilby’s involvement in Botetourt’s EDA dates back to before he left the bank. His presidency coincided with a number of important EDA-backed deals, including those that attracted new employers like Ballast Point Brewing, Eldor Corp. and Pratt Industries and supported the expansion of Altec Industries, Arkay Packaging, Canatal Steel USA and Metalsa Structural Products, according to a county report covering 2016 to 2019.

During that time, companies and other parties have announced plans to invest $ 201 million and create 871 jobs, according to a report.

Lyn Hayth, president and CEO of Bank of Botetourt and current member of the EDA, said he only recently learned of the FDIC’s action against Kilby. When asked if the affair surprised him, he replied, “Yes, of course it did.” He declined to comment further.

John Williamson, former EDA member and former county supervisor, supported Kilby.

“I have known John Kilby since 1986 and have always considered him a friend and colleague. He has done a lot for the Botetourt community and still does, ”Williamson said in an email. “Whether he made mistakes in the aftermath of the Great Recession in trying to deal with the stress it placed on community banks and their troubled customers is a matter between John and the FDIC. It does not affect my perception of him as a contributor to the community or his integrity as a friend. “

The 2015 to 2017 period was loss-making years for the Bank of Fincastle, which previously said a number of land acquisition and development loans had gone wrong. An injection of funds in 2017 helped turn the tide. Kilby’s successor Scott Steele oversaw a period in which the bank went from one of the state’s lowest-rated banks to one of the highest-rated by Bauer Financial, a research firm on private banks and Florida-based credit unions. Bauer gives Bank of Fincastle five stars, the maximum possible score.

The bank had nearly $ 267 million in assets, 60 employees and six branches as of September. It ranks 10th out of 15 banks for deposit market share in Metro Roanoke, but is one of only three banks based in Metro Roanoke.

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