The FDIC, Federal Deposit Insurance Corporation, contends John Kilby engaged in “recklessly unsafe or unsound practices and breaches of fiduciary duties” in 2015. The FDIC issued a consent order for the assessment of $15,000 civil money penalty in May of 2020.
According to a three-page Order to Pay, the FDIC found Kilby:
- misused an interest reserve account to cure an overdraft of a borrower whose loan was classified as substandard by the FDIC.
- approved an unsecured nominee loan, the proceeds of which were used to pay off a previous loan and to pay business expenses for the same adversely classified borrower
- directed bank personnel to repurpose a bank general ledger account to pay maintenance expenses for the adversely classified borrower in contravention of the bank’s Memorandum of Understanding with the FDIC, which resulted in significant loss to the bank.
Kilby, who retired in 2015, neither admits nor denies the charges, according to bankersonline.com. “I haven’t told anybody,” Kilby told The Roanoke Times. “It’s between me and my family.”
FDIC investigators first notified Kilby of the investigation in 2018. Calls to the FDIC went unreturned last week.
County officials said Kilby didn’t tell them about the civil money penalty and didn’t find out until a reporter started asking questions,
“As far as [the] question asking if Mr. Kilby has addressed this issue with the EDA Board or county officials, you will have to ask Mr. Kilby that. Personally, I had no knowledge of this until The Roanoke Times reporter contacted me. I have known Mr. Kilby for several years and have a great deal of respect for him. From my perspective this is a private situation, and it was not a requirement that Mr. Kilby provide any information to the county or EDA,” Botetourt County Board of Supervisors Chairman Billy Martin said in a statement.
Ken McFadyen, director of the county EDA, responded in a similar fashion. “I have personally known John Kilby for almost five years and have found Mr. Kilby to be very forthright and diligent in his service to the community through the EDA. He has made many meaningful contributions to the benefit of our community. I admire John,” he wrote in a statement.
As chairman of the EDA, Kilby’s duties are to run EDA meetings and provide coordination of the EDA’s activities between the authority and county. Also, as chair, Kilby provides one of two signatures on each of the EDA’s checks, explained McFayden. Invoices and documents are gathered by county staff and approved by County Administrator Gary Larrowe first, then sent to the EDA account to prepare checks, he said. The last step in the process, McFayden said, is “…Kilby and one other board member signs checks after a final review.
Martin further explained Kilby is one of six EDA board members. Any recommendations, suggestions or motions made on this board must have approval of the majority of the board members. No one individual on the EDA can control the board.
“Again, any decision or action would require a majority of the board members,” said Martin, adding that when Kilby was at The Bank of Fincastle, he made unilateral decisions dealing with the bank’s business.
County officials praised Kilby’s results as an EDA member, bringing in hundreds of millions in investments and creating upwards of 870 jobs.
Reports state that between 2015 and 2017 were lean years for the bank, as a number of land deals and development loans went south. In a 2011 interview with the Spilman Law Firm. Kilby explained the bank is refocusing and diversifying its portfolio. “We are now moving to smaller commercial loans, doing some automobile loans and will do construction loans for our customers that are building their own homes. We are staying away from shopping centers and gas stations.”
The Bank of Fincastle’s current President and CEO Scott Steele said repayment responsibility falls on Kilby, not the bank. Steele is credited for turning the bank around financially, to where it is now considered one of the strongest banks in Virginia with approximately $276 million in assets.
“No depositors lost any money and we are unable to comment on what losses were tied to specific activities mentioned in the FDIC enforcement action,” he said in a statement.
Steele said The Bank of Fincastle has high standards for safe and sound operations and its management team takes those responsibilities very seriously.
“Our board of directors provides oversight to ensure that the bank is operating in a safe and sound manner, and is acting in a manner that is in the best interest of our shareholders. Various board committees have been established to provide direct oversight of management including our Audit Committee and Enterprise Risk Management Committee. In addition, our Audit Committee contracts with internal audit firms who independently audit our activities and report their findings directly to the board,” the statement reads.
The Bank of Fincastle is the second oldest business in Botetourt County, behind The Fincastle Herald.
