RICHMOND, VA-As the latest news from the TreasuryDepartment makes clear, US financial institutions arestill struggling with the after-effects of the real estate crashand deep recession. For the most part, the largest money banks haveregained their equilibrium and in fact are posting profits. Secondand third tier institutions, however, are not nearly in such goodstanding.

The bad news is that regulators are stepping up their scrutinyof all banks, healthy or not, to make sure their exposure tocommercial real estate is within strict guidelines. The good newsis that it appears they are willing to take a flexible approach. Atleast five local institutions have agreed to a memorandum ofunderstanding with the FDIC and the Virginia Bureau of FinancialInstitutions, the latest being Midlothian, VA-based Village Bank,according to Richmond Biz Sense.

Village Bank has been posting profits, and according to newsaccounts, is a healthy operation. However the regulatoryagencies want to ensure that certain types of lending andassessment practices that led to non performing loans werecorrected. This step is an informal agreement that does not imposerestrictions.