A former senior Bank of Fincastle executive who heads an economic development organization in Botetourt County paid $15,000 last year to resolve misconduct allegations dating back to his time at the bank.
According to the Federal Deposit Insurance Corp., John Kilby engaged in “recklessly unsafe or unsound practices and breaches of fiduciary duty” in late summer of 2015, shortly before he left the bank. A civil penalty was assessed against him in May 2020.
Kilby, 69, said he disagreed with the allegations but consented to the penalty that ended the case because he wanted “out” of the matter as efficiently as possible.
Kilby is chairman of the Botetourt County Economic Development Authority — and is under a fiduciary duty to the county — though he said he did not notify Botetourt County officials of the FDIC review. They were not aware of the matter until contacted by a reporter and have not said what action, if any, they intend to take. The Roanoke Times recently learned of the FDIC matter from an anonymous tip.
“I haven’t told anybody,” Kilby said. “It’s between me and my family.”
According to the FDIC, in 2015, while he was chairman and CEO of the bank, Kilby “did misuse” an interest reserve account to “cure” an overdraft for a borrower with a loan that was substandard, meaning the bank could lose money on it. The same month, he approved a loan to a third party whose proceeds were used to pay off a previous loan and pay business expenses of the same borrower, the FDIC said. In September 2015, while serving only as chairman, he directed bank personnel to “repurpose a bank general ledger to pay maintenance expenses for the adversely classified borrower,” the FDIC said.
The single publicly available FDIC document on the matter says the bank lost money as a result of Kilby’s actions. No figures were released, nor do regulators identify the borrower that the allegations said Kilby aided in defiance of bank rules.
Billy Martin, chairman of the board of supervisors, said by email that he considers the matter an issue between Kilby and the bank and not a concern for the county authority. Martin said the EDA acts only with the consent of a majority of its members, currently six with one seat vacant. Members serve by appointment by the board of supervisors.
“If you are suggesting 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 message.
County staff members did not respond to a request for comment.
Bank of Fincastle said that it cooperated with government investigators and that no bank officer or employee other than Kilby was part of the enforcement action. The bank is profitable and growing under leadership that arrived after Kilby’s departure.
Kilby retired in September 2015, the month he turned 65, according to a longstanding plan at the bank and not because of the events cited by regulators, he said. Investigators first contacted him about the matter in 2018, he said.
“They’re the examiners. I suspect they saw something they didn’t like,” he said.
The FDIC declined to comment on the case, which it brought in its role as the bank’s primary federal regulator.
Economic development authorities undertake financial and real estate transactions to spur private economic development. They can buy and sell real estate, rent facilities, issue bonds and make grants, to name a few key powers that they exercise in strategic alliance with the government agencies that establish them.
Kilby’s participation on the Botetourt EDA dates back to before he left the bank. His chairmanship coincided with a number of significant EDA-assisted deals, including those that landed such new employers as Ballast Point Brewing, Eldor Corp. and Pratt Industries and supported expansion at Altec Industries, Arkay Packaging, Canatal Steel USA and Metalsa Structural Products, according to a county report covering 2016 through 2019.
During that period, companies and other parties announced plans to invest $201 million and create 871 jobs, a report said.
Lyn Hayth, president and CEO of Bank of Botetourt and a current EDA member, said he learned only recently of the FDIC action against Kilby. Asked if the matter surprised him, he said, “Yes, of course it did.” He declined to comment further.
John Williamson, a former EDA member and a former county supervisor, stood by 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 during the aftermath of the Great Recession trying to manage the stress it put on community banks and their troubled loan customers is a matter between John and the FDIC. It does not impact my view of him as a contributor to the community or his integrity as a friend.”
The period of 2015 through 2017 were money-losing years for the Bank of Fincastle, which has previously said a number of land acquisition and development loans went bad. A cash infusion in 2017 helped turn things around. Kilby’s successor, Scott Steele, oversaw a period in which the bank went from being one of the worst-rated banks in the state to among the best-rated by Bauer Financial, a private bank and credit union research firm based in Florida. 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 of 15 banks in deposit market share in the Roanoke metro area, but is one of only three banks based in the Roanoke metro.