SEC Charges Bank and Two Bank Executives for Failure to Disclose Probable Loss on Troubled Loan

The SEC charged two former bank executives with failing to recognize in financial statements a probable loss on one of the bank's largest troubled loans.

The SEC alleged that, prior to the end of the third quarter in 2010, one of the executives knew that the borrower in a shared national credit loan for a large residential real estate development which was to be built in Colorado Springs was unwilling or unable to contribute the necessary funds to complete the project, which served as collateral for the loan. According to the SEC, the executive also knew that the collateral had declined significantly in value, and that the borrower missed a loan payment and declared bankruptcy weeks before Mercantile's quarterly report was filed; however, Mercantile failed to report the loan loss in its third-quarter financial statements. The SEC's complaint charges the bank and the executives with violations of Securities Act Section 17(a)(3), and Exchange Act Section 10(b) ("Manipulative and Deceptive Devices") and Section 13 ("Periodical and Other Reports"), among other violations.

See: SEC Complaint; SEC Press Release.